Kaltura, Inc.

Good morning, everyone, and welcome to the Kaltura fourth quarter and full year 2022 earnings call. All material contained in the webcast is the 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 Gamazi, Chief Financial Officer. Ron will begin with a summary of the results for the fourth quarter ended December 31, 2022, and the company's plans and expected trends for 2023. Liron will then provide details of the financial results for the fourth quarter and full year 2022, followed by the company's outlook for the first quarter and full year of 2023. 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 quarterly report on Form 10-Q for the quarterly period ended September 30, 2022 and other periodic SEC filings including the annual report on Form 10-K for the fiscal year ended December 31, 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 fourth quarter of 2022 of $44.1 million, up 3% year-over-year, and subscription revenue of $39.6 million, also up 3% year-over-year. Adjusted EBITDA for the quarter was negative $4.2 million. In our last two earning calls, we made three important financial forecasts. An expected return to revenue growth in the fourth quarter of 2022, expected quarterly improvements in adjusted EBITDA towards a single-digit dollar loss in 2023, and then expected significant improvement in cash flows with a forecasted single-digit aggregate cash flow from operation dollar loss during the second half of 2022. Today we announce that we have achieved these goals for 2022 and that we are once again reaffirming them for 2023. Regarding revenue in the fourth quarter of 2022, we achieved record numbers for both subscription and total revenue and the sequential quarter-over-quarter revenue growth rate for both revenues were at levels that we have not seen since the first half of 2021. It was also the first time since that same period that we grew our quarterly year-over-year subscription in total revenue growth rates. While revenues from professional services are expected to be volatile and to continue to decrease overall, we expect the quarterly year-over-year subscription revenue growth rates in 2023 to be higher than those that we posted in the last three quarters of 2022. As for adjusted EBITDA profitability, we achieved the lowest adjusted EBITDA loss of the last five quarters, and despite a very turbulent year, have attained our original annual guidance for 2022. We continue to take proactive action to adjust our spending levels to achieve our return to profitable growth. To that end, in early January, we announced that due to the macroeconomic climate, we're downsizing 11% of our workforce. We are once again reaffirming today our goal to continuous quarterly improvements towards a single-digit adjusted EBITDA dollar loss in 2023 and to breaking even during 2024. And lastly, regarding cash flows, we achieved during the second half of 2022 the single-digit cash flow from operations loss that we had forecasted. We are also reaffirming today our intent to materially reducing our annual cash burden in 2023 with most of the losses expected in the first quarter of the year due to typical seasonality and the limited impact of our January cost reductions in this quarter. We expect to achieve cash flow from operations break-even during 2024 with sufficient cash reserves. The company was adjusted EBITDA and cash flow operations profitable in 2019 and in 2020, and we believe we will be there again soon. Moving on to a business update. In the fourth quarter, we close new business across all of our segments. We see a continuation of the trends that shape 2022 with employee and partner communication and training, customer engagement, internal and external facing events and student learning, all continuing to transform to online video-centric experiences that Kaltura's products are designed to power. Companies also increasingly value their ability to consolidate their currently fragmented video needs around Kotura's single, flexible, tightly integrated, and engaging enterprise-grade platform. This enables them to avoid disjointed workflows and content silos and to reduce technical and operational complexities and costs. On the media and telecom front, in the fourth quarter, we closed an upsell agreement with one of our largest telecom customers, that uses Koterra's Cloud TV platform to power its multinational TV service in Europe. Our annual revenue from this customer based on forecasted usage is expected to grow by over $2 million in 2023 as compared to 2022. This quarter, we also completed delivery of Cloud TV projects for two other large telecom customers, and we'll start to recognize subscription revenues for these projects. We continue to expand our business with one of the world's largest brokerage houses, who now also relies on Kultura for their outbound marketing activities. We have strong success in pharma with two of the top ten largest pharmaceutical companies in the world, one a new customer choosing Kultura to power its internal video use cases, and another an existing Kultura customer to now also enable its internal and external events. We also continue to expand the use cases we power with our event platform, and one of the largest global technology companies was an early adopter of our product. We continue to see growing demand for our events offering across many industries, including financial services, pharma, and tech, as mentioned, but also in healthcare, manufacturing, market research, and education. While on the topic of events, last November we hosted our second annual virtually live event where over 5,000 event professionals, marketing leaders, and digital experience creators Registered to hear leaders from Accenture, Lenovo, AWS, SAP, Salesforce, Oracle, Adobe, Microsoft, Google, Cisco, IBM, Airbnb, VMware, and many others. The event also allowed us to showcase our event platform to a wider array of potential buyers, generating more than 1,000 qualified leads that are now fueling our pipeline. On the product development front, this quarter we continue to evolve our events platform and our new webinars products. These products allow organizations of any industry and any scale to host a wide array of branded events, from simple webinars to multi-track, multi-day, fully branded online or hybrid events. During the quarter, we invested in more advanced user authentication and management, in improving our user experience on mobile, in our new virtual meeting room and chat experiences, and in more advanced analytics. We also continued advancing our integration with third parties, including an updated integration with WebEx App Hub, that enables customers to easily port over a recording of WebEx meetings automatically to our platform as they're already able to do with Zoom and Teams recordings. Lastly, we rolled out the new version of our Player-in-Player Studio, which includes enhanced functionality and interface and additional third-party integrations. While the products are highly modular, they're continuously demanding less and less cultural services to launch and customize, and new releases like our webinars products are already offered fully self-serve. to help us in our efforts to expand from high-tech sales to low-patch and self-serve powered product-led growth. In January, we also welcome to our board of directors a new member, Eyal Manoor. Mr. Manoor is the chief product officer at Twilio, where he is leading product and engineering for the company. Before that, he spent 14 years at Google, where he was a general manager at Google Cloud. Prior to that, he was vice president of engineering at YouTube, and before joining Google, he founded a voice and video staff streaming startup. We are fortunate to benefit from Mr. Menor's wealth of product and business experience. As we look forward into 2023, we're excited about our broadening product offering, our expansion down market and our strong position as a provider of a horizontal platform that addresses multiple use cases in our market. On the other hand,