Kaltura, Inc.

Good morning, everyone, and welcome to the Calterra Second Quarter 2025 Earnings Call. All material contained in the webcast is the sole property and copyright of Calterra 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, Erica.

Thank you, Operator, and good morning. I am joined by Ron Yucatel, Calterra's Co-Founder, Chairman, President, and Chief Executive Officer of and John Doherty, Chief Financial Officer. Ron will begin with a summary of the results for the second quarter ended June 30, 2025, and provide a business update. John will then review the financial results for the second quarter of 2025 in greater detail, followed by the company's outlook for the third quarter and full year 2025. 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 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, 2024, and other SEC filings, including the quarterly report on Form 10-Q for the quarter ended June 30, 2025, 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 non-GAAP financial measures, adjusted EBITDA, non-GAAP net loss, and non-GAAP gross margin during this call. For reconciliation of these measures 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'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 of $44.5 million for the second quarter of 2025, up 1% year-over-year, and subscription revenue of $42.4 million, up 3% year-over-year. Our ARR and RPO grew by 3% and 6% year-over-year, respectively. Our year-over-year revenue growth this quarter was fueled by ENT and curtailed, as expected, by M&T due to the delayed M&T churn for 2024, as discussed in the last two earnings call. Consequently, while ENT total revenue grew in the second quarter by 7% year-over-year, its highest growth rate since the first quarter of 2022, M&T total revenue declined in the second quarter by 14% year-over-year, It's sharp at decline ever. With that said, as we look ahead, we expect to post sequential growth in M&T revenue in the fourth quarter, fueled by an expected improvement in M&T growth retention, and also an increase in new bookings, as also discussed in previous earning calls. A recently announced extension and expansion of our long-term contract with Vodafone, a global telecom leader and our largest customer throughout the last decade, supports that, and highlights our continued leadership in the cloud TV market. In the second quarter, we posted a record non-gap net profit of $2.5 million. Adjusted EBITDA was $4.1 million, consistent with our record first quarter, and represented our eighth consecutive quarter of adjusted EBITDA profitability. This was driven by a strong non-gap gross margin of 70%, up from 66% in the same quarter last year. Cash flow from operations was 2.7 million, the highest second quarter results since 2020. Moving on to the business update. New subscription bookings in the second quarter grew sequentially and comprised 21 six-digit deals, including with technology providers such as AWS and Xbox, which we can name, and with an employee experience platform provider, and a leading financial services platform provider. Our six-digit deals also included two of the largest U.S. banks, a top pharmaceutical company, a leading medical organization, one of the largest automakers, one of the leading global professional services firms, and several education institutions and media and telecommunications companies. Customers continue to consolidate around Cultura, and our average ARR per customer once again reached a record high. I am pleased to update that in the second quarter, we closed our first three AI deals, which included sales of our exciting new offerings, Content Lab and Genie. Over the last few quarters, we progressed rapidly from initial product vision to development, proofs of concepts, beta releases, and full commercialization. Use cases included automation of manual workflows for video creation, enrichment, delivery, and measurement, as well as providing end users interactive, hyper-personalized, video-first onboarding and upscaling experiences. Among the first customers is a leading professional services and consulting powerhouse with over 750,000 employees worldwide. We expect many more and bigger deals to follow in the quarters ahead. as our growing sales pipeline already includes over 100 additional qualified opportunities with companies from all our target industries, including technology companies, regulated industries, including banking, insurance, healthcare and pharma, education institutions, and media and telecom companies. I'll discuss the AI opportunity further in my upcoming product updates. On the growth retention front, noted, we anticipated a lower rate of retention in the first and second quarters of the year due to delayed media and telecom trends from last year. That said, our gross retention rate in ENT continued to be very strong in the second quarter, reaching again its best level since the fourth quarter of 2022. We continue to forecast an annual ENT gross retention rate in 2025 that is better than that of the previous four years and for M&T growth retention rates to improve in the fourth quarter, as stated earlier. We were also pleased that despite the strong temporary median telecom headwinds, our net dollar retention in the second quarter was above 100% for the fourth quarter in a row. Moving on to the product front, let's begin with our continued and growing investment in our AI offerings. In the second quarter, We enhanced our Content Lab agent to support multilingual video metadata, summaries, and quizzes, making video more accessible, discoverable, and impactful across a diverse user base globally. We also integrated Content Lab natively into our virtual events offerings designed to help event organizers generate clips and video summaries, repurpose content, boost discoverability, and increase engagement. As for our family of Genie agents, work, class, and TV genies that power hyper-personalized video experiences for end users. In the passing quarter, we enabled them to pull insights and generate content not only from videos, but also from additional data sources such as documents, making their output much more rich, contextualized, and personalized. We also enabled them to support anonymous and unauthenticated users which is intended to broaden the reach and usability to external public websites and portals while maintaining privacy and compliance. Lastly, regarding our homegrown AI-based automatic speech recognition transcription engine, in the second quarter, we launched our live captioning service and seamlessly integrated it into our live video workflows. Our previously released video on demand AI-based automated transcription engine We added support for additional languages and a dictionary feature, which allows customers to define custom word substitutions and rules that improve accuracy and quality of captions, particularly for company-specific language and frequently used terms. As we look forward to our planned AI developments in the second half of the year, we intend to expand Genie to include enhanced response formats beyond flashcards and videos, add conversational memory to increase response quality and enable a more natural flowing dialogue, and enable users to utilize Genie directly on any individual videos to extract deeper insights and information and drive deeper engagement. Beyond Genie enhancements, in the second half of this year, our planned roadmap includes a new AI agent for content publishing that would automate related manual processes including complex repetitive tasks for content and metadata moderation and approval, accessibility, enrichment, repurposing, captioning, clipping, and quiz insertion. We believe these updates will help enable content to be published at scale faster and cheaper with higher consistency and better compliance. Looking further down the road beyond the second half of the year, Our vision is to transform our AI agents from reactive, prompt-based agents into proactive, automated, ambient agents that will anticipate needs and take actions to optimize impact across the content lifecycle of all our use cases, including marketing, sales, and customer success, teaching, learning, and training, communication and collaboration, and entertainment and monetization. We plan for our agents to not only drive productivity, but to become intelligent enough to replicate human rules and automate tasks, acting as AI twins, and to gradually further evolve into AI specialists that are intended to be role-aware, use case specific, and ultimately also industry specific, as we plan to launch, for example, specific agents that will cater to video-first employee, and customer experiences in the financial services, pharma, or education markets. Moving beyond our AI innovation. In the second quarter, we rolled out powerful updates across the Kaltura AI Video Experience Cloud, making video creation, management, and engagement more intelligent, inclusive, and scalable. We enhanced our self-serve event platform to also support multi-track events without requiring professional services from Kaltura, and also enabled more personalized notifications based on session interest, improving event participation and engagement. We also expanded our events APIs, making them easier to integrate with external systems and to manage events at scale efficiently while generating more data and insights. On the video portal front, we've expanded the theme module to enable more consistent, professionally branded experiences and introduce a content tab web page that increases discoverability of public content. We also enhanced our LMS and CMS extensions with a modern folder structure that enables users to better manage large volumes of videos. Lastly, in regard to our virtual classroom product, we enabled hosts to add audio files to their session storyboards to be used, for example, for narrations, guided instructions, and shared music. Our product leadership continued to earn us strong industry recognition in the second quarter, with our new class genie winning the e-learning innovation of the year award in the seventh annual EdTech Breakthrough Awards, and our virtual events and webinars offering sweeping five golds at the 2025 EventX Awards. earning us top honors in every category where it competed in, including Best Event AI Technology, Best New Event Technology, Best Audience Engagement Technology, Best Data Collection and Event Analytics Technology, and Best Virtual Event Platform. In the passing quarter, we were also recognized by IDC as a leader in their first-of-its-kind marketscape research and vendor assessment for AI-enabled enterprise video platforms. Reports stated that we were named a leader due to our intelligent automation extensible workflows and advanced analytics and that our full-spectrum platform built for both internal and external use cases stands out due to its modular API-first architecture, both service capabilities and support for content reuse. It further states that a key factor in our strong positioning was the recent launch of our agentic AI offerings including Content Lab and Genie, which are designed to boost productivity and maximize content value. We're honored to be recognized and awarded time and again as leaders by so many industry experts and are excited to see the buzz around our new AI products. Moving beyond product. In the passing quarter, we hosted our Cultura Connect On The Road 2025 events in New York, San Francisco, and London. Hundreds of marketing, communication, and video tech leaders from top organizations came together to discuss how AI-infused video can transform organizational knowledge and employee and customer experiences. Speakers included leaders from leading corporations such as AWS, YouTube, Adobe, Salesforce, IBM, Visa, AstraZeneca, Pinterest, Vanguard, Bloomberg, and many more. You can view recordings of these events on our website, In the second quarter, we also launched our Cultura Connect in Education 2025 series of events, with the first event in the Netherlands. Four additional events have already been held in the third quarter across the U.S., and another two events are planned to be held later this year in Europe and Asia Pacific. Information about these events is available on our website.