I'm not anti-social. I'm just not social."― Woody Allen
We take our first look at Kaleyra, Inc. (NYSE:KLR) in today's feature article. The company came public in June of 2020 at $4.50 a share. The shares quickly quadrupled but have been in a downward spiral ever since and are now firmly in Busted IPO territory. So, Is KLR a falling knife or now in oversold status? An analysis follows below.
Kaleyra, Inc. is based in Milan, Italy. The company's platform and Application Programming Interface (APIs) help manage multi-channel integrated communication services globally consisting of messaging, push notifications, e-mail, voice services, video capabilities, and chatbots. Kaleyra's clients include financial institutions, e-commerce players, software companies, logistic enablers, healthcare providers, retailers as well as customers in other industries. Basically the company's platform enables businesses to connect with their customers via different methods (emails, texts, voice, video, WhatsApp, etc..).
Currently the stock trades just below $1.50 a share and sports an approximate market capitalization of $65 million.
Second Quarter Results:
On August 8th, the company posted second quarter numbers. Kaleyra broke even on a Non-GAAP basis, 16 cents a share below the consensus. Revenues rose 50% on a year-over-year basis to just over $81 million, roughly in line with expectations. Kaleyra had a dollar-based net expansion rate of 103% during the quarter. The company delivered 13.4 billion billable messages and connected 1.8 billion voice calls during the quarter. This represents 58% and 32 growth over 2Q2021, respectively.
Management then ratcheted down forward guidance for both the third quarter and for FY2022, which the company said was due to the following on its earnings press release:
A slowing global economy with contraction in the United States and major European economies, increased caution from enterprise executives weighing new initiatives, and consumers who are facing food and energy costs that consume more disposable income than before. When combined with pressure from a strengthening U.S. dollar and industry-wide demand and pricing considerations, we believe that it is prudent to revise our revenue for the third quarter and full year to reflect the current global economic and geopolitical environment."
The new guidance is as follows:
Since mid-July, Northland Securities ($9 price target, down from $18 previously), Oppenheimer ($6 price target) and Cowen & Co. ($10 price target) have reissued Buy/Outperform ratings while Craig-Hallum ($2.75 price target) have maintained their Hold rating on KLR.
Approximately seven percent of the outstanding float is current held short. Insiders have been frequent but usually small sellers of the shares throughout 2022. So far in the third quarter they have disposed of approximately $400,000 worth of stock in aggregate. After posting a net loss of $15.8 million in the second quarter, the company ended the first half of this year with approximately $75 million worth of cash and marketable securities on its balance sheet. The net loss was up from $4.5 million in 2Q2021 and was attributable mainly to the amortization of acquired intangibles and the accrued interest on convertible notes. It should be noted that the company has just over $200 million of long term debt.
The current analyst consensus has the company losing just over $1.10 a sharer in FY2022 as revenues rise to just under $350 million, in line with recent company guidance. Sales growth is projected to slow further to 13% in FY2023 as the company narrows its annual loss to some 75 cents a share.
One can argue that the stock is cheap on a price to sales basis even as the enterprise is still unprofitable at this point. One article on Seeking Alpha did so earlier this summer before the company posted earnings and reduced guidance. The stock is cheaper still now on that metric than it was then thanks to the decline in the shares since second quarter results and forward guidance came out.
With headwinds increasing both in Europe and the United States, a relatively high debt load, and continued unprofitability on the horizon, discretion is the better part of valor I think around Kaleyra at this time.
Politeness is organized indifference."― Paul Valéry
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The Busted IPO Forum founded by Bret Jensen, is a hypothetical $200K portfolio built of stocks that have been public for 18 months to five years that are significantly under their offering price. Many times after the initial analyst hyperbole has died and lockups have expired, these same companies can be had for .30 to .50 cents on the dollar from when the shares went public. As lucrative as this niche has been for my portfolio over the years, a service or newsletter has not existed that covered this segment of the market -- until now! The goal in creating the Busted IPO Forum is to build a portfolio of 15-20 small cap and mid cap busted IPOs which consistently outperform the Russell 2000 over time. As of 07/02/2021 our model portfolio has generated an overall return of 73.84% substantially above the 52.37% gain from the Russell 2000 over the same time frame.
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Specializing in profiling high beta sectors, Bret Jensen founded and also manages The Biotech Forum, The Insiders Forum, and the Busted IPO Forum model portfolios. Finding “gems” in the biotech and small-cap stock sectors, these highly volatile spaces proven hugely successful have empowered Bret Jensen's own investing portfolio.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: "Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum and Insiders Forum.