KALTURA INC

Previous wording

Reflected below is a summary of reportable segment revenue and reportable segment gross profit for the three months ended March 31, 2024 and 2023.

Current wording

Reflected below is a summary of reportable segment revenue and reportable segment gross profit for the three and six months ended June 30, 2024 and 2023.

Previous wording

We employ a "land and expand strategy" with the aim of having our customers increase their usage of our offerings and/or purchase additional offerings over time. Our Net Dollar Retention Rate (as defined below) measures our success in retaining and growing recurring revenue from our existing customers over a given period. For the three months ended March 31, 2024 and 2023, our Net Dollar Retention Rate was 98% and 103%, respectively. We grew our Annualized Recurring Revenue (as defined below), by 2% in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, demonstrating our ability to land new customers with higher spending levels and increase revenue from our existing customers.

Current wording

We employ a "land and expand strategy" with the aim of having our customers increase their usage of our offerings and/or purchase additional offerings over time. Our Net Dollar Retention Rate (as defined below) measures our success in retaining and growing recurring revenue from our existing customers over a given period. For the three months ended June 30, 2024 and 2023, our Net Dollar Retention Rate was 98% and 100%, respectively. We grew our Annualized Recurring Revenue (as defined below) by 1% in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, demonstrating our ability to land new customers with higher spending levels and increase revenue from our existing customers.

Previous wording

We focus our selling efforts on large organizations and sell our solutions primarily through direct sales teams and account teams. In addition, we are investing in low-touch and self-serve offerings for smaller customers.

Current wording

We focus our selling efforts on large organizations and sell our solutions primarily through direct sales teams and account teams. In addition, we are continuing to expand our ability to serve smaller customers with our self-serve offerings, as well as focusing on inside sales for the SMB segment.

Previous wording

Remaining Performance Obligations represents the amount of contracted future revenue that has not yet been delivered, including both subscription and professional services revenues. Remaining Performance Obligations consists of both deferred revenue and contracted non-cancelable amounts that will be invoiced and recognized in future periods. As of March 31, 2024, our Remaining Performance Obligations was $165.2 million, which consists of both billed consideration in the amount of $54.1 million and unbilled consideration in the amount of $111.1 million that we expect to invoice and recognize in future periods. We expect to recognize 57% of our Remaining Performance Obligations as revenue over the next 12 months and the remainder thereafter, in each case, in accordance with our revenue recognition policy.

Current wording

Remaining Performance Obligations represents the amount of contracted future revenue that has not yet been delivered, including both subscription and professional services revenues. Remaining Performance Obligations consists of both deferred revenue and contracted non-cancelable amounts that will be invoiced and recognized in future periods. As of June 30, 2024, our Remaining Performance Obligations was $177.8 million, which consists of both billed consideration in the amount of $55.5 million and unbilled consideration in the amount of $122.2 million that we expect to invoice and recognize in future periods.

Previous wording

We define EBITDA as net profit (loss) before interest expense, net, provision for income taxes and depreciation and amortization expenses. Adjusted EBITDA is defined as EBITDA (as defined above), adjusted for the impact of certain non-cash and other items that we believe are not indicative of our core operating performance, such as non-cash stock-based compensation expenses, facility exit and transition costs, restructuring charges and war-related expenses.

Current wording

We define EBITDA as net profit (loss) before financial expenses (income), net, provision for income taxes and depreciation and amortization expenses. Adjusted EBITDA is defined as EBITDA (as defined above), adjusted for the impact of certain non-cash and other items that we believe are not indicative of our core operating performance, such as non-cash stock-based compensation expenses, facility exit and transition costs, restructuring charges and other non-recurring operating expenses

Previous wording

EBITDA and Adjusted EBITDA are supplemental measure of our performance, are not defined by or presented in accordance with GAAP, and should not be considered in isolation or as an alternative to net profit (loss) or any other performance measure prepared in accordance with GAAP. EBITDA and Adjusted EBITDA are presented because we believe that they provides useful supplemental information to investors and analysts regarding our operating performance and are frequently used by these parties in evaluating companies in our industry. By presenting EBITDA and Adjusted EBITDA, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance. We believe that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Additionally, our management uses Adjusted EBITDA as a supplemental measure of our performance because it assists us in comparing the operating performance of our business on a consistent basis between periods, as described above.

Current wording

EBITDA and Adjusted EBITDA are supplemental measure of our performance, are not defined by or presented in accordance with GAAP, and should not be considered in isolation or as an alternative to net profit (loss) or any other performance measure prepared in accordance with GAAP. EBITDA and Adjusted EBITDA are presented because we believe that they provide useful supplemental information to investors and analysts regarding our operating performance and are frequently used by these parties in evaluating companies in our industry. By presenting EBITDA and Adjusted EBITDA, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance. We believe that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Additionally, our management uses Adjusted EBITDA as a supplemental measure of our performance because it assists us in comparing the operating performance of our business on a consistent basis between periods, as described above.

Previous wording

(a)The three months ended March 31, 2024 and 2023, include $704 and $803 respectively, of interest expenses.

Current wording

(a)The three months ended June 30, 2024 and 2023, and the six months ended June 30, 2024 and 2023 include $702, $808, $1,406 and $1,611, respectively, of interest expenses.

Previous wording

(c)The three months ended March 31, 2023 includes employee termination benefits incurred in connection with the 2023 Reorganization Plan.

Current wording

(c)The three and six months ended June 30, 2023 include one-time employee termination benefits incurred in connection with the 2023 Reorganization Plan.

Previous wording

(d)The three months ended March 31, 2024 includes costs related to conflicts in Israel, attributable to temporary relocation of key employees from Israel for business continuity purposes, purchase of emergency equipment for key employees for business continuity purposes, and charitable donation to communities directly impacted by the war.

Current wording

(d)The three and six months ended June 30, 2024 include costs related to conflicts in Israel, attributable to temporary relocation of key employees from Israel for business continuity purposes, purchase of emergency equipment for key employees for business continuity purposes, and charitable donation to communities directly impacted by the war.

Previous wording

Cost of revenue increased in absolute dollars from the three months ended March 31, 2023 to the three months ended March 31, 2024. For the three months ended March 31, 2023 and 2024, our cost of revenue was $15,987 and $16,173, respectively.

Current wording

For the three months ended June 30, 2024 and 2023, and for the six months ended June 30, 2024 and 2023, our cost of revenue was $15,356, $15,278, $31,529 and $31,265, respectively.

Previous wording

For our EE&T segment, gross margins for the three months ended March 31, 2024 and 2023 were 73% (79% for subscriptions and (35)% for professional services) and 73% (78% for subscriptions and (40)% for professional services), respectively.

Current wording

For our EE&T segment, gross margins for the three months ended June 30, 2024 and 2023, were 74% (81% for subscription and (87)% for professional services), and 74% (79% for subscription and (88)% for professional services), respectively. For the six months ended June 30, 2024 and 2023, our gross margins for our EE&T segment were 73% (80% for subscriptions and (56)% for professional services) and 73% (79% for subscriptions and (58)% for professional services), respectively.

Previous wording

The following table summarizes key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

Current wording

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

Previous wording

•Enterprise, Education & Technology (72% and 72% of revenue for the three months ended March 31, 2024 and 2023, respectively): Our EE&T segment represents revenues from all of our products, industry solutions for education customers, and Media Services (except for M&T customers), as well as associated professional services for those offerings.

Current wording

•Enterprise, Education & Technology (70% and 71% of revenue for the three months ended June 30, 2024 and 2023, respectively, and 71% and 72% for the six months ended June 30, 2024 and 2023): Our EE&T segment represents revenues from all of our products, industry solutions for education customers, and Media Services (except for M&T customers), as well as associated professional services for those offerings.

Previous wording

•Media & Telecom (28% and 28% of revenue for the three months ended March 31, 2024 and 2023, respectively): Our M&T segment primarily represents revenues from our TV Solution and Media Services sold to media and telecom customers.

Current wording

•Media & Telecom (30% and 29% of revenue for the three months ended June 30, 2024 and 2023, respectively, and 29% and 28% for the six months ended June 30, 2024 and 2023): Our M&T segment primarily represents revenues from our TV Solution and Media Services sold to media and telecom customers.

Previous wording

Net cash flows used in financing activities decreased by $0.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

EE&T gross profit decreased by $0.1 million, or 1%, to $22.9 million for the three months ended June 30, 2024, from $23.1 million for the three months ended June 30, 2023. This decrease was mainly due to the decrease in revenue.

Previous wording

M&T professional services revenue increased by $0.4 million, or 28%, to $1.8 million for the three months ended March 31, 2024, from $1.4 million for the three months ended March 31, 2023.

Current wording

M&T professional services revenue decreased by $0.4 million, or 19%, to $1.8 million for the three months ended June 30, 2024, from $2.3 million for the three months ended June 30, 2023.

Previous wording

EE&T subscription gross profit increased by $0.8 million, or 3%, to $24.2 million for the three months ended March 31, 2024, from $23.4 million for the three months ended March 31, 2023.

Current wording

M&T subscription gross profit increased by $0.3 million, or 4%, to $6.2 million for the three months ended June 30, 2024, from $5.9 million for the three months ended June 30, 2023.

Previous wording

Research and development expenses decreased by $2.1 million, or 15%, to $12.0 million for the three months ended March 31, 2024, from $14.1 million for the three months ended March 31, 2023. The decrease was primarily due to a $1.9 million decrease in compensation expenses, which mainly related to lower headcount, and a $0.5 million decrease in IT related expenses, partially offset by a $0.2 million increase in subcontractors and consultants expenses as a result of outsourcing part of the efforts related to specific projects.

Current wording

Research and development expenses decreased by $0.9 million, or 7%, to $12.0 million for the three months ended June 30, 2024, from $13.0 million for the three months ended June 30, 2023. The decrease was primarily due to a $0.9 million decrease in compensation expenses, mainly attributed to a lower headcount.

Previous wording

Sales and marketing expenses decreased by $0.3 million, or 2%, to $11.8 million for the three months ended March 31, 2024, from $12.1 million for the three months ended March 31, 2023. The decrease was primarily due to a $0.4 million decrease in compensation related to lower headcount partially offset by a $0.1 million increase related to marketing expenses, and a $0.1 million increase in amortization of deferred commission expenses driven by accumulated higher bookings from previous years being amortized in 2024.

Current wording

Sales and marketing expenses decreased by $1.0 million, or 7%, to $11.8 million for the three months ended June 30, 2024, from $12.7 million for the three months ended June 30, 2023. The decrease was primarily due to a $0.7 million decrease in compensation related to lower headcount and a $0.4 million decrease in marketing related expenses mainly due to more efficient advertising spending.

Previous wording

Financial income, net increased by $3.3 million, or 184%, to $1.5 million income for the three months ended March 31, 2024, from $1.8 million income for the three months ended March 31, 2023. The increase was primarily due to exchange rate differences.

Current wording

Financial income, net decreased by $0.2 million, or 13%, to $1.0 million for the three months ended June 30, 2024, from $1.2 million for the three months ended June 30, 2023. The decrease was primarily due to $0.7 million related to exchange rate differences, partially offset by $0.2 million interest income associated with our investments.

Previous wording

Total EE&T revenue increased by $1.1 million, or 4%, to $32.4 million for the three months ended March 31, 2024, from $31.3 million for the three months ended March 31, 2023. This increase was due to a $1.5 million increase in revenue from new customers, partially offset by a $0.4 million decrease in revenue from existing customers.

Current wording

Total EE&T revenue increased by $0.9 million, or 1%, to $63.4 million for the six months ended June 30, 2024, from $62.5 million for the six months ended June 30, 2023. The increase is mainly attributable to a $2.5 million increase in revenue from new customers partially offset by a $1.6 million decrease in revenue from existing customers.

Previous wording

Total M&T gross profit increased by $0.6 million, or 12%, to $5.1 million for the three months ended March 31, 2024, from $4.5 million for the three months ended March 31, 2023. This increase was mainly due to a revenue increase of $0.4 million.

Current wording

EE&T gross profit increased by $0.6 million, or 1%, to $46.5 million for the six months ended June 30, 2024, from $45.9 million for the six months ended June 30, 2023. This increase was mainly due to a $0.9 million increase in revenue.

Previous wording

M&T professional services gross loss decreased by $0.8 million, or 61%, to $0.5 million for the three months ended March 31, 2024, from $1.4 million for the three months ended March 31, 2023.

Current wording

M&T professional services gross loss decreased by $0.8 million, or 45%, to $1.0 million for the six months ended June 30, 2024, from $1.7 million for the six months ended June 30, 2023.

Previous wording

General and administrative expenses slightly decreased to $12.1 million for the three months ended March 31, 2024, from $12.1 million for the three months ended March 31, 2023. The decrease was primarily due to a $1.0 million decrease in compensation expenses, mainly attributed to reduced stock-based compensation costs arising from executive departures, a $0.1 million decrease in professional fees and insurance and a $0.2 million decrease in subcontractors and consultants expenses, partially offset by $1.3 million one-time expense associated with terminating commitments with a cloud hosting service provider.

Current wording

General and administrative expenses increased by $1.0 million, or 4%, to $25.5 million for the six months ended June 30, 2024, from $24.5 million for the six months ended June 30, 2023. The increase was primarily due to $1.3 million ofunused one-time expense associated with terminating commitments with a cloud hosting service provider and a $0.4 million increase in compensation costs mainly driven by the acceleration of expenses associated with the cancellation of unvested market-based equity awards granted to the Chief Executive Officer, partially offset by reduced cost arising from executive departures, and a $0.4 million decrease in professional fees and insurance mainly due to lower insurance costs.

Previous wording

Borrowings under the Credit Facilities bear interest, determined as follows: (a) SOFR loans accrue interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus 0.10% per annum plus a margin of 2.50% (the Adjusted Term SOFR (as defined in the Credit Agreement) is subject to a 1.00% floor), and (b) ABR loans accrue interest at a rate per annum equal to the ABR plus a margin of 1.50% (ABR is equal to the highest of (i) the prime rate and (ii) the Federal Funds Effective Rate plus 0.50%, subject to a 2.00% floor). As of March 31, 2024, the current rate of interest under the Credit Facilities was equal to a rate per annum of 7.95%, consisting of 5.35% (the 3-month SOFR rate as of March 28, 2024), 0.10% credit spread adjustment and the margin of 2.50%.

Current wording

Borrowings under the Credit Facilities bear interest, determined as follows: (a) SOFR loans accrue interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus 0.10% per annum plus a margin of 2.50% (the Adjusted Term SOFR (as defined in the Credit Agreement) is subject to a 1.00% floor), and (b) ABR loans accrue interest at a rate per annum equal to the ABR plus a margin of 1.50% (ABR is equal to the highest of (i) the prime rate and (ii) the Federal Funds Effective Rate plus 0.50%, subject to a 2.00% floor). As of June 30, 2024, the current rate of interest under the Credit Facilities was equal to a rate per annum of 7.93%, consisting of 5.33% (the 3-month SOFR rate as of June 27, 2024), 0.10% credit spread adjustment and the margin of 2.50%.

Previous wording

As of March 31, 2024, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million remains available for future borrowings. As of March 31, 2024, we had approximately $34.1 million of borrowings outstanding under the Term Loan Facility.

Current wording

As of June 30, 2024, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million remains available for future borrowings. As of June 30, 2024, we had approximately $33.7 million of borrowings outstanding under the Term Loan Facility.

Previous wording

Net cash flows used in operating activities decreased by $6.3 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Net cash flows used in operating activities decreased by $8.8 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Previous wording

Net cash used in operating activities of $1.1 million for three months ended March 31, 2024 was primarily due to $11.1 million incremental net loss, adjusted for non-cash charges of $10.4 million, and net cash outflows of $0.2 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $1.3 million, stock-based compensation expenses of $6.5 million, amortization of deferred contract acquisitions and fulfillment costs of $2.9 million partially offset by non-cash interest income, net of $0.3 million. The main drivers of net cash outflows were derived from the changes in operating assets and liabilities and were related to a decrease in deferred revenue of $8.6 million, increase in deferred contract acquisition and fulfillment cost of $1.1 million, an increase of $0.6 million in prepaid expenses and other current assets and other assets and net change in operating lease right of use assets and lease liabilities of $0.4 million, partially offset by increase in trade payables of $4.4 million, a decrease in trade receivables of $5.5 million and an aggregate increase in employees accruals, and accrued expenses and other liabilities of $0.6 million.

Current wording

Net cash used in operating activities of $2.8 million for the six months ended June 30, 2024, was primarily due to $21.1 million incremental net loss, adjusted for non-cash charges of $23.2 million, and net cash outflows of $4.9 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $2.6 million, stock-based compensation expenses of $15.4 million and amortization of deferred contract acquisitions and fulfillment costs of $5.7 million. The main drivers of net cash outflows were derived from the changes in operating assets and liabilities and were related to an increase in deferred contract acquisition and fulfillment cost of $2.5 million, decrease in deferred revenue of $7.2 million and net change in operating right-of-use asset and lease liability of $0.9 million, offset by an increase in trade receivables of $1.2 million, an increase in trade payables of $3.4 million and an aggregate decrease in employees accruals, and accrued expenses and other liabilities of $1.1 million.

Previous wording

Net cash used in operating activities of $7.4 million for the three months ended March 31, 2023, was primarily due to $12.8 million incremental net loss, adjusted for non-cash charges of $10.9 million, and net cash outflows of $5.4 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $1.0 million, stock-based compensation expenses of $7.2 million, amortization of deferred contract acquisitions and fulfillment costs of $3.0 million partially offset by non-cash interest income, net of $0.2 million. The main drivers of net cash outflows were derived from the changes in operating assets and liabilities and were related to a decrease in deferred revenue of $9.6 million, increase in deferred contract acquisition and fulfillment cost of $1.6 million, decrease in trade payables of $1.5 million, an aggregate decrease in employees accruals, and accrued expenses and other liabilities of $2.4 million, an increase of $0.8 million in prepaid expenses and other current assets and other assets, noncurrent and net change in operating lease right of use assets and lease liabilities of $0.4 million, partially offset by a decrease in trade receivables of $10.6 million.

Current wording

Net cash used in operating activities of $11.6 million for the six months ended June 30, 2023, was primarily due to $23.6 million incremental net loss, adjusted for non-cash charges of $22.2 million, and net cash outflows of $9.7 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $2.2 million, stock-based compensation expenses of $14.6 million and amortization of deferred contract acquisitions and fulfillment costs of $5.9 million. The main drivers of net cash outflows were derived from the changes in operating assets and liabilities and were related to an increase in deferred contract acquisition and fulfillment cost of $3.3 million, an aggregate decrease in employees accruals, and accrued expenses and other liabilities of $2.8 million, decrease in deferred revenue of $3.2 million and an increase in trade receivables of $1.0 million, offset by an increase in trade payables of $1.1 million.

Previous wording

Net cash used in investing activities of $3.5 million for the three months ended March 31, 2024 was related mainly to purchases of marketable securities of $15.4 million, and $0.1 million of capital expenditures, partially offset by proceeds from maturities of marketable securities of $12.0 million.

Current wording

Net cash provided by investing activities of $1.8 million for the six months ended June 30, 2024 was related to proceeds from maturities of available-for-sale marketable securities of $21.5 million, offset by investment in available-for-sale marketable securities of $19.4 million and $0.3 million of capital expenditures.

Previous wording

Net cash provided by investing activities of $5.1 million for the three months ended March 31, 2023 was related to proceeds from maturities of marketable securities of $9.2 million, offset by purchases of marketable securities of $2.9 million, $0.4 million of capitalized internal use software and $0.9 million of capital expenditures.

Current wording

Net cash provided by investing activities of $7.7 million for the six months ended June 30, 2023 was related to proceeds from maturities of available-for-sale marketable securities of $26.2 million, offset by $1.2 million of capitalized internal use software, investment in available-for-sale marketable securities of $14.6 million, $1.6 million of capital expenditures and $1.0 million of investment in restricted bank deposit.

Previous wording

Net cash used in financing activities of $0.9 million for the three months ended March 31, 2023 was primarily due to repayment of long-term loans of $1.5 million, offset by $0.6 million due to proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities of $1.3 million for the six months ended June 30, 2024 was primarily due to repayment of long-term loans of $1.3 million, $0.1 million repurchase of common stock and $0.1 million payments on account of repurchase of common stock, offset by $0.2 million due to proceeds fromthe exercise of stock options.

Previous wording

Net cash used in financing activities of $0.8 million for the three months ended March 31, 2024 was primarily due to repayment of long-term loans of $0.9 million, offset by $0.1 million due to proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities of $2.2 million for the six months ended June 30, 2023 was primarily due to repayment of long-term loans of $3.0 million, offset by $0.8 million due to proceeds from the exercise of stock options.

Previous wording

Our principal commitments consist of obligations under operating leases, purchase obligations with third-party providers for the use of cloud hosting and other services and outstanding debt. There were no material changes to our commitments and contractual obligations during the three months ended March 31, 2024 from the commitments and contractual obligations disclosed in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our 2023 10-K. For further information on our commitments and contractual obligations, refer to Note 7, Note 8 and Note 14 of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Current wording

Our principal commitments consist of obligations under operating leases, purchase obligations with third-party providers for the use of cloud hosting and other services and outstanding debt. There were no material changes to our commitments and contractual obligations during the six months ended June 30, 2024 from the commitments and contractual obligations disclosed in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our 2023 10-K. For further information on our commitments and contractual obligations, refer to Note 7, Note 8 and Note 14 of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Previous wording

Our critical accounting policies and estimates were disclosed in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our 2023 10-K. There have been no significant changes to these policies and estimates during the three months ended March 31, 2024.

Current wording

Our critical accounting policies and estimates were disclosed in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our 2023 10-K. There have been no significant changes to these policies and estimates during the six months ended June 30, 2024.