Kaltura, Inc.

Good morning, everyone, and welcome to the Kaltura third quarter 2021 earnings call. For opening remarks and instructions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

Thank you, and good morning. With me today from Kaltura are Ron Yekutiel, co-founder, chairman, and chief executive officer, and Yaron Gamazi, chief financial officer. Ron will begin with a brief recap of Kaltura's mission and market opportunity and with a summary of the business results for the third quarter ended September 30, 2021. Yaron will then review the financial results for the third quarter, followed by the company's outlook for the fourth quarter and full year of 2021. We will then open the call for questions. Please note that this call will include forward-looking statements within the meaning of the federal securities laws. including but not limited to statements regarding Kaltura's future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Important factors could cause actual results to differ from forward-looking statements can be found in Risk Factors section of Kaltura's quarterly report on Form 10Q, for the period ended June 30, 2021, and other periodic SEC filings, including the quarterly report on Form 10-Q for the period ended June 30, 2021 to be filed with the SEC. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Kaltura assumes no obligation to update or revise them Whether as a result of new developments or otherwise, accept as required by law. All materials contained in the webcast is a sole property and copyright of Kaltura, with all rights reserved. Please note, this presentation describes a non-GAAP measure, adjusted EBITDA, which is not prepared in accordance with U.S. GAAP. For a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric, please refer to our earnings release. Now, I'd like to turn the call over to Ron.

Thank you, Erica, and thanks to everyone for joining us on the call this morning. We're excited to report quarterly earnings for the second time as a public company. We'll start this morning with just a few opening financial highlights from the third quarter. Then, because some of you may still be new to the Cultura story, I want to provide a brief recap of our mission and market opportunity, after which I will provide more details on the passing quarter. We reported a strong third quarter. Revenue for the quarter was $43 million, up 40% year over year, and above the high end of our guidance of $42.5 million. Subscription revenue for the quarter reached $37.7 million, an increase of 40% from the prior year, and represented approximately 88% of total revenue. Our annualized recurring revenue grew to $151.7 million, up 41% year-over-year, and our net dollar retention rate was 117%, up from 111% one year ago. We also continued improving our gross margins across both reported segments and achieved a gross margin of 65% in the quarter. Our adjusted EBITDA was negative $2.3 million, also ahead of the high end of our guidance. As we look to the future of customer experiences, work, learning, and entertainment in a world reshaped by the pandemic, video technology and video experiences continue to emerge as a primary facilitator for change. Video technology now serves as a foundation for remote work, remote learning, virtual events, and online entertainment, replacing travel, in-person meetings, Office Space, Classrooms, Event Venues, and much more, enabling everyone to participate from everywhere. Altura's mission is to power any video experience for any organization. Our video experience cloud drives communication, collaboration, learning, virtual events, and entertainment experiences for millions of people at work, at home, and at school. We cater today to four main markets. Enterprises from all major industries, including more than 25% of the US Fortune 100, to whom we deliver our video portal, town halls, video messaging, webinars, and virtual events, powering internal communication and learning, as well as digital marketing and customer experiences. Education institutions. including more than 50% of the top US research educational institutions and seven of the eight Ivy League schools to whom we deliver video solutions for in-class and remote teaching and learning, including video extensions for learning management systems, a lecture capture solution, and a virtual classroom solution. Technology companies to whom we provide our media services, which are a broad set of on-demand live and real-time video APIs and experience components that enable them to launch new video products or add rich video workflows to their existing products. And lastly, media and telecom companies, for which we provide streaming media and cloud TV solutions for both subscription-based and ad-supported services. We sell our solutions primarily through direct sales teams and account teams that are also organized based on these four customer markets and report based on two segments, the EENT segment, which combines the first three markets, and the M&T segment, which represents the last market, which often involves longer sales and deployment cycles. In recent years, we've been accelerating our revenue growth rates and I've also improved our adjusted EBITDA without materially increasing our sales and marketing spend. We achieved this through an increase in sales efficiency fueled by our growing product portfolio and by heavier adoption of video experiences across our markets. In recent months, we started expanding our sales force and expected to continue to fuel our future growth along with a planned increase in our marketing spend. Our growth is also supported by the increased adoption of our most recent product releases, including virtual events, webinars, and virtual classrooms, and is expected to also be boosted by our plan move down market to power smaller organizations with low touch and self-serve products, coupled with an associated expected increase in sales through channel partners. We are pursuing an inspiring and timely mission. Believe we have unique sustainable advantages and are very excited for the future. I'm now returning to the third quarter of 2021. From a go-to-market perspective and starting with our E&T segments, in the third quarter, we continue to see an increase in the average ARL per customer and in the average size of new deals. We also continued with our global expansion with a greater portion of new bookings coming from EMEA and APAC compared to last quarter and last year though North America remains our largest market. We saw continued growth in the percentage of new business that is coming from channels as well as continued reduction in the proportion of both new professional services versus subscriptions as our new ENT offerings continue to mature and require shorter deployment cycles. We secured new customers, including Fortune 500 companies and universities that purchased a wider array of our products including our newest product and solution editions of webinars, virtual classroom, and virtual events. Pertaining to our year offerings, this quarter Gartner issued their 2021 Magic Quadrant for Meeting Solutions and the 2021 Critical Capabilities for Meeting Solutions Companion Report, which included Kultura for the second time since we launched a real-time conferencing offering last year. We were excited to be recognized as a visionary in the magic quadrant and to be ranked fourth in the critical capabilities report in the external presentation use case and fifth in the webinars as well as the training and learning use cases. Altera has a unique approach to meeting solution markets. We address the complexities of meetings that go beyond the standard video call, which we refer to as meetings with purpose, such as virtual events, Webinars and Virtual Classrooms, using our powerful tools for content management and integration with enterprise workflows based on our underlying market-leading video content management platform. Futura was previously named the leader in the Gartner Magic Quadrant for Enterprise Video Content Management research reports since 2013 for five consecutive times and ranked highest in all use cases in the last published critical capabilities for enterprise video content management reports. Gartner discontinued the publication of these reports by 2019. Our strength in addressing meetings with purpose helped us secure new customers and expand our business with existing customers in the third quarter, such as one of the largest global accounting firms in the world that replaced its existing solution with Kultura to power their remote employee training and development all across the globe. We also signed up new universities in the U.S. and worldwide but sought to address their media content management and virtual classroom needs with a single platform. Our virtual event platform that builds on our broad video technology stack combining live, simulive, real-time, and on-demand video enables us to successfully power complex virtual events and become a leading central virtual events platform for enterprises for all of their events, large and small. We're continuing to onboard new customers and upsell to existing one in this very exciting market. While on the topic of virtual events, we are thrilled about our upcoming virtually live event on November 9th, where we will host a tremendous lineup of marketing executives from Microsoft, SAP, Oracle, YouTube, Accenture, DocuSign, Drift, HubSpot, NASDAQ, Atlesian, and many more. This virtual event will talk about the future of marketing and virtual events and also showcase the latest and greatest of Cultura's virtual event platforms. Be sure to register and attend virtually live and to also read our State of Virtual Events 2022 report, which we're releasing tomorrow, covering user and buyer preferences in this market based on feedback from more than 1,200 responses to a survey we put out. Continuing with the ENT, Oracle announced in the third quarter that they are expanding the strategic agreement that they had signed with us in 2019 to add video capabilities into their products using our media services. This original OEM agreement with Oracle included only our video content management capabilities, and the extended agreement covers all of our capabilities, including live, semi-live, and real-time video experiences. Oracle has been a customer of Kultura since 2012, using our video portal, AIM Town Halls, for internal employee engagement, as well as external customer education. As part of the partnership expansion with Oracle, we've also undertaken to host all of Oracle-related workloads on the Oracle Cloud infrastructure. This will enable Oracle salespeople to sell Kultura products and solutions hosted on Oracle Cloud. We're extremely excited about the huge potential of this partnership. We also plan to continue growing our strong partnership with AWS, our cloud provider and go-to-market partner that has been powering all of our SaaS customers. For example, we powered virtual events for a leading ATM platform, as well as a Fortune 500 consumer electronics company running on AWS. In regards to our go-to-market efforts in the M&T segment, we're continuing our shift from mainly targeting larger telcos who are also targeting smaller telcos, broadcasters, and media companies with direct-to-consumer offerings. The majority of our new business in the third quarter came from these markets. It is a healthy shift because it increases our addressable market, shortens our sales and deployment cycles, and continues reducing the amount of required professional services. Also, the third quarter's new bookings come in from all regions, including a bigger part than usual from Latin America. M&T is still tracking to lead our segments in 2022 in terms of percentage of growth of uBookings compared to 2020. But because of the lengthier deployment cycles, in some cases, the impact on our revenue will not be recognized until late 2022. For both ENT and M&T, we continued building up our sales force in the third quarter, including new sales reps, customer success managers, and sales support staff. We are slightly behind our internal hiring plan, but expect to catch up in the coming quarters. Our forecasted average productivity per salesperson for the year remains at the anticipated levels, which is great considering our growing sales force. From a technology development perspective, we are continuing to ramp up developers in order to accelerate our product roadmap. Our five primary activities in the past quarter and near future are as follows. One, to launch our comprehensive second-generation virtual events platform that includes a user-friendly orchestration and management layer for marketers to easily set up and manage their events. This platform is well-suited for all marketers who nowadays need to execute on a large number of virtual and hybrid events of all sizes. This platform is designed to shorten our sales and deployment cycles and reduce required professional services in an effort to help increase gross margins. Two, to continue advancing our recently added real-time conferencing engine to best support our fast-growing meetings and event products in an effort to improve unit costs and gross margins. Three, to continue development towards launching our self-serve media services, webinars, and virtual classroom offerings in the first half of next year. This move is expected to increase our target market to include small and medium enterprises, smaller schools, and startups, and also to reduce required professional services, again, in an effort to increase gross margins. Or, to enable our services and products to run an OCI as discussed previously. And lastly, five, for the M&T sector to continue working on a more simplified end-to-end version of our offering for media companies and smaller telcos that would enable us to launch services quicker and without the need to procure separately individual tech stack components. This is expected to broaden our target market and reduce required professional services, again, in an effort to increase gross margins. Our product investment areas are aligned with important market trends related to the adoption of video technology across all of our products and use cases, and we're excited about our upcoming launches and continued market disruption. In summary, we had a great quarter with strong growth, retention rates, and growth margins, and we're already hard at work on the next quarter. We're continuing to increase our sales and marketing spend and to ramp up additional sales staff, We continue to be excited about the strong traction that we're seeing for our recent new product and solution releases and are excited to launch important enhancements and additions to these offerings, including lower touch and self-serve products that we expect will open up our target market to include also small organizations to which we could sell and deploy faster with less services and at higher gross margins. With that, I'll turn it over to Yaron, our CFO, to discuss our financial results in more detail. Yaron.