Kaltura, Inc.

Greetings and welcome to the Kaltura third quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Erica Mann, Kaltura Investor Relations. You may begin.

Thank you, operator, and good morning. I'm joined by Ron Yucatel, Kaltura's co-founder, chairman, president, and chief executive officer, and John Doherty, chief financial officer. Ron will begin with a summary of the results for the third quarter ended September 30, 2024, and provide a business update. John will then review the financial results for the third quarter of 2024 in greater detail, followed by the company's outlook for the fourth quarter and full year 2024. 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, 2023 and other SEC filings including the quarterly report on Form 10-Q for the quarter ended September 30, 2024 to be filed with the SEC. Any forward-looking statements made during 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.caltora.com. Now, I am pleased to hand the call over to Ron.

Thank you, Erica, and welcome everyone to our third quarter earnings call. We reported today total revenue for the third quarter of 2024 of $44.3 million, up 2% year-over-year, and record subscription revenue of $42.1 million, up 3% year-over-year. In the third quarter, we also posted a record ARR for the second consecutive quarter, as well as a record RPO. As for our bottom line, in the third quarter, we posted adjusted EBITDA of $2.4 million, representing our fifth consecutive quarter of adjusted EBITDA profitability, and the highest result since the second quarter of 2020, fueled in part by a record gross margin. In the third quarter, we also generated a record cash flow from operations of $10.7 million, a significant improvement from $1.7 million in the third quarter of 2023. In light of these results, we're once again increasing our full-year revenue and adjusted EBITDA guidance and are expecting to post positive cash flow from operations in the fourth quarter as well as for the full year in 2024. Moving on to the business updates. In the third quarter, we posted both year-over-year and sequential growth in new subscription bookings for the second consecutive quarter. These new bookings were at the highest level since the fourth quarter of 2022 and came from two seven-digit deals and 22 six-digit deals across a diverse array of industries, use cases, and geographies. New customers included a Fortune 500 automotive manufacturer, that is now using our video portal and content management system for internal live and on-demand communication and collaboration, a leading training and certification provider that is now using our virtual events and webinars for internal learning and development, a leading visual discovery engine that is now using our virtual events and webinars for marketing, sales, and customer success, and a North American TV company that is now using our streaming platform for entertainment and monetization. The majority of our new bookings came again from providing additional solutions, empowering new use cases for our existing customers, including, for example, providing marketing, sales, and customer success solutions to an S&P 500 health insurance company, to a leading provider of an employee experience platform, to a Fortune 100 bank, and to a top-ranked music college. from providing communication and collaboration solutions to a Fortune 100 tech company and to a leading healthcare software company, from providing teaching, training, and certification solutions to universities in the U.S. and Europe, and from providing entertainment and monetization solutions to telcos. Upsales to our customers continue to be fueled by an increased interest to consolidate around Kultura across multiple internal and external use cases. which is also evident through our increased average subscription revenue per customer, which was also at an all-time high in the third quarter. In addition to growing new bookings, worth retention in the third quarter of 2024 continued to improve year over year, and net dollar retention, which, as we stated in the past, is a lagging indicator, started reacting to the recent improvements, bouncing back to 101% after posting 98% in the last three quarters. The combination of increased growth new subscription bookings and continued improved growth retention rates has yielded, for the first time since the second quarter of 2021, two consecutive quarters with a year-over-year increase in net new subscription bookings, which is fueling the pickup in our year-over-year subscription revenue growth. On the product front, in the third quarter, we continued boosting events and webinars with automated email scheduling, and enhance our chat and collaboration widget and integration with a third-party marketing platform, further enabling our customers to run their marketing automations via their preferred MarTech partner or directly in Kultura. On the video content management and portal side, we completed our integration with Microsoft Teams, and together with our other Zoom and WebEx integrations, now offer a comprehensive archiving solution that enables organizations using multiple conferencing tools to seamlessly and flexibly access, manage, and share video content across these leading platforms with a unified workflow. We launched an updated VPAT for our video player as part of our continued commitment to accessibility, enhanced content layout in our conferencing room, in our Cloud TV platform, enhanced subscription management capabilities, and furthered security and protection around operator workflows. On the AI front, We are continuing to move toward the future where video content will be created and modified seamlessly for the benefit of each individual viewer. Over the prior quarters, we conducted successful pilots for content repurposing, where GenAI was used to analyze video captions and viewership engagement data of existing videos to create new clips, highlight reels, and other immersive experiences in real time that are hyper-personalized and hyper-contextualized. This functionality is designed to address individual end-user wants and needs at the right time and context and to achieve heightened engagement and interactivity and boost business results at a fraction of the current time and costs. In the third quarter, we started productizing this functionality by adding it into our video content management system in a new component called Cultura Content Lab. We also showcased a beta version of our GenAI offerings for media and telecom at the IBC 2024 conference in Amsterdam. Among the features presented to excited customers and prospects were AI-generated metadata enrichment, subtitles, dubbing, chaptering, highlights, and content recommendations for live streaming, VOD assets, and user-generated content. Over the next few quarters, we plan to further enhance Kaltura Content Lab and integrate it into our product portfolio, including streamlining with our other GenAI developments, such as our transcription engine, quiz generator, sentiment analyzer, notification engine, and GenAI assistance for events. Our product leadership was recently recognized with the receipt of two additional industry awards, the Best Overall Event Management Solution Award and the 7th Annual International Martech Breakthrough Award Program, and the Best Video Management Platform Award in the 2024 Digiday Technology Awards. We are pleased to have posted a record quarter across many top line and bottom line parameters. We continue to see both sequential and year-over-year growth in new subscription bookings and a growth retention rate that materially improves over last year, both resulting in an uptick in year-over-year subscription revenue growth. In addition, we saw continued expansion of our growth and net margins, as well as cash flow, leading us to forecast for the year a positive annual adjusted EBITDA and cash flow from operations for the first time since 2020. And we plan to continue expanding our growth margin, adjusted EBITDA margin, and cash flow from operations in 2025 and beyond. In recent years, we and our entire industry have experienced strong downward pressure on bookings, retention, and revenue growth that was induced by post-COVID and economic downturn headwinds. To that end, while we are not content with our slower revenue growth, we do appreciate the fact that unlike many other companies in our industry, our quarterly subscription revenue always continued to grow year over year. And with the exception of only the third quarter of 2022, our year over year total revenue has also grown every quarter, despite the purposeful decline in our revenue from professional services in order to accelerate our deployment time and increase gross margin. In summary, we believe the tide is gradually turning on the industry in KOTORA, and the improved booking and retention trend we began to see in recent quarters will continue and strengthen in 2025 and beyond, fueled by renewed industry and macroeconomic tailwinds, as well as product enhancements like GenAI that are expected to bring about further digital transformation and proliferation of video experiences. We are excited about the opportunities ahead, especially since we believe Kultura's flexible and extendable platform uniquely caters to the widest array of enterprise video experiences while also providing the tightest integrations with their mission-critical workflows. We expect that as the market gradually recovers, customers will further accelerate the consolidation of their video needs around Kultura to boost all of their employee and customer experiences across communication and collaboration, training, teaching, and learning, marketing, sales, and customer success, and entertainment and monetization. Kaltura's single platform is designed to help our customers avoid unnecessary content and data silos, broken workflows, complexities, and costs that can result from using many disparate point solutions and increase their productivity in AI-infused insights, engagement, and business results. With that, I'll turn it over to John, our CFO, to discuss our financial results in more detail. John.