Kaltura, Inc.

Good morning, everyone, and welcome to the Kaltura Second Quarter 2022 Learnings Call. Please note that this event is being recorded. All material contained in the webcast is sole property and copyright of Kaltura, with all rights reserved. For opening remarks and introductions, 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 Gamarzi, chief financial officer. Ron will begin with a summary of the results for the second quarter ended June 30, 2022, and the trends and areas of focus that are expected to impact the remainder of 2022. Liron will then review in greater detail the financial results for the second quarter followed by the company's outlook for the third quarter and full year of 2022. 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 expected 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 that could cause actual results to differ from forward-looking statements can be found in the risk factors section of Kaltura's annual report on Form 10-K for the fiscal year ended December 31, 2021 and other periodic SEC filings, including the quarterly report on Form 10-Q for the quarterly period ended June 30, 2022 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, except as required by law. Please note, we will be discussing a non-GAAP financial measure, adjusted EBITDA during this call. For reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric, please refer to our earnings release, which is available on our website at www.investors.caltura.com. 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. Today, we reported total revenue for the second quarter of 2022 of $42 million, up 1% year-over-year. and subscription revenue of $38 million, up 4% year-over-year. Adjusted EBITDA for the quarter was negative $8.5 million. In the second quarter, we resumed sequential growth across a number of metrics, including total revenue, subscription revenue, ARR and RPO, and saw leading indicators such as conversion of longer sales cycle deals, Salesforce productivity, and new subscription bookings which we believe support an expected increase in growth in quarter four. One of the drivers of this increase in demand is the recent commercialization of our event platform. This product transcends our initial event offering that powered mainly large flagship events along with event services to now also power centrally all events of all sizes across the organization with minimal ongoing event services. As an example, During the quarter, we signed several important events deals, including with one of the big four accounting firms. We chose to use our platform to power thousands of internal and external events globally. Elevating and tracking the level of engagement in virtual events is very important for them, as they're digitizing their internal and external communication to increase efficiency and productivity, reduce costs, and to achieve their net zero emissions goal. In this multimillion-dollar deal, Our event platform is consolidating and replacing several existing webcasting technologies while providing a high-quality engaging experience with brand consistency across regions and departments and providing insightful and actionable analytics. Beyond our event offering, we also close video and TV content management and live streaming deals across all of our markets. For example, a major U.S. bank selected Kaltura signing a multi-million dollar contract to manage their internal video content and support corporate communication, and two other existing major bank customers purchased additional offerings. Returnow powers video content management and live streaming for five of the six largest U.S. banks. On the product development front, we had another busy quarter, adding to our event platform new and improved templates, support for custom URLs, We continue to boost our video quality, optimize our end-user interface, and further consolidate our on-demand, live, and real-time components into a single, comprehensive, and streamlined offering that is simple, intuitive to use, and cost-effective. And we'll continue to advance towards the release of the new advanced version of our self-serve webinar product, which, among other things, includes full integration with our powerful video content management and publishing capabilities. We continue to gain market recognition for our product leadership, including winning the Digital or Hybrid Event Platform of the Year Award at the annual B2B Marketing MarTech Awards and being included as a representative vendor in the 2022 Gartner Market Guide for Event Technology Platforms Report. On November 15th, we plan to host our second annual virtually live event Focusing on the future of events, be sure to save the date, and you're also invited to tune in to a recently launched virtually live podcast, which includes weekly episodes of leading marketeers from around the globe and across industries. While the growth engines that we discussed at the beginning of the year are producing results, given the macroeconomic outlook, IT budgets are being re-evaluated, presenting headwinds to the slope of a rebound. While this delay reduces our forecasted revenue for the full fiscal year of 2022, we still expect a return to growth in quarter four and stronger year-over-year growth in 2023. It's important to note that most of the forecasted growth in Q4 of this year is a result of already booked deals, not future ones. Moving on to discuss our bottom line. Earlier this year, we took certain preliminary saving actions and reduced our hiring. And now, given the fluid market outlook, we're adjusting our spending accordingly. Today, we announced a cost reduction and reorganization plan that includes, among other things, downsizing approximately 10% of our current employees. The plan is heavily focused on realigning our operations to further increase our efficiency and productivity. Given the maturity of the ENT and M&T business units, including how their sales cycles, deployment cycles, and margins continue to converge, we've decided to merge the two segments together and take advantage of operational overlaps. Going forward, we will have a single horizontal structure with mostly cross-company functions in product development, marketing, sales, and professional services. Through years of incubating these business units separately, we could benefit from great synergies by merging them together. When you consider the cuts and their path back to profitability, remember that even before COVID, in 2019, we achieved positive adjusted EBITDA and cash flow from operations, and then continued delivering positive adjusted EBITDA and cash flow from operations in 2020. In 2019 and 2020, we also accelerated our year-over-year revenue growth rate. We have done it before, and we believe we can do it again. Translating the cash flow, while we experienced high operational spend in the first half, we expect to see a reversal in the second half of the year, throughout which we expect to post a single-digit cash flow from operations loss. In summary, while it has been a challenging year for the tech world, video industry, and Kultura, we're encouraged to enter the second half of the year with increased booking levels, a fully commercialized event platform, and new self-serve products on the way, and a more nimble and agile organization that we believe will bring us back to profitable growth. With that, I'll turn it over to Yaron, our CFO, to discuss our financial results in more detail. Yaron.