Kaltura(KLTR) - 2025 Q2 - Quarterly Report

Forward-Looking Statements Forward-looking statements are subject to risks including volatile economic climate, political/military conditions, customer dependency, profitability, evolving markets, technological competition, AI/GenAI, and data privacy concerns - Forward-looking statements are subject to risks including volatile economic climate, political/military conditions in Israel/Ukraine, customer dependency, inability to achieve profitability, evolving markets, technological competition, AI/GenAI risks, and data privacy concerns[12][13][18] PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) Kaltura, Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2025 are presented, prepared under U.S. GAAP and SEC interim rules - The financial statements are unaudited and prepared under U.S. GAAP for interim reporting, with results for Q2 and H1 2025 not necessarily indicative of full-year performance[41][43] - The Company operates in two main segments: Enterprise, Education, and Technology (EE&T) and Media and Telecom (M&T), offering SaaS and PaaS video solutions[40][89] - A cost-reduction and reorganization plan was approved on August 4, 2025, involving a 10% workforce reduction, expected to incur $687 thousand in pre-tax charges in Q3 2025 and result in $8.5 million in annualized cost savings[118][255] Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $169,447 | $181,305 | | Total Liabilities | $152,493 | $156,918 | | Total Stockholders' Equity | $16,954 | $24,387 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $44,462 | $44,032 | $91,446 | $88,813 | | Gross profit | $31,219 | $28,676 | $63,955 | $57,284 | | Operating loss | $(2,757) | $(8,550) | $(4,334) | $(15,840) | | Net loss | $(7,750) | $(10,004) | $(8,869) | $(21,100) | | Net loss per share, basic and diluted | $0.05 | $0.07 | $0.06 | $0.14 | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(7,750) | $(10,004) | $(8,869) | $(21,100) | | Other comprehensive income (losses) | $3,859 | $(685) | $2,947 | $(1,430) | | Comprehensive loss | $(3,891) | $(10,689) | $(5,922) | $(22,530) | Condensed Consolidated Statement of Stockholders' Equity - Total stockholders' equity decreased from $24,387 thousand as of January 1, 2025, to $16,954 thousand as of June 30, 2025, primarily due to net loss ($8,869 thousand) and common stock repurchases ($9,595 thousand), partially offset by stock-based compensation ($8,447 thousand) and other comprehensive income ($2,947 thousand)[33] Condensed Consolidated Statement of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $1,610 | $(2,751) | | Net cash provided by investing activities | $11,625 | $1,763 | | Net cash used in financing activities | $(11,335) | $(1,296) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $2,387 | $(2,416) | | Cash, cash equivalents and restricted cash at end of period | $35,546 | $34,368 | Notes to Condensed Consolidated Interim Financial Statements NOTE 1: General - Kaltura, Inc. was incorporated in October 2006 and operates in two main segments: Enterprise, Education, and Technology (EE&T) and Media and Telecom (M&T), providing a platform for video creation, management, and collaboration through SaaS and PaaS offerings[40] NOTE 2: Basis of Presentation and Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, with certain disclosures condensed or omitted compared to annual reports[41][42] - The Company, as an "emerging growth company," has elected to use the extended transition period for new accounting pronouncements[50] - New ASUs on income tax disclosures (ASU 2023-09, effective after Dec 15, 2024) and expense disaggregation (ASU 2024-03, effective after Dec 15, 2026) are being evaluated for impact[51][52] NOTE 3: Revenues from Contracts with Customers Disaggregated Revenue by Segment (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | H1 2025 Revenue | H1 2024 Revenue | | :------ | :-------------- | :-------------- | :-------------- | :-------------- | | EE&T | $33,242 | $30,965 | $67,658 | $63,405 | | M&T | $11,220 | $13,067 | $23,788 | $25,408 | | Total | $44,462 | $44,032 | $91,446 | $88,813 | Disaggregated Revenue by Region (in thousands) | Region | Q2 2025 Revenue | Q2 2024 Revenue | H1 2025 Revenue | H1 2024 Revenue | | :----- | :-------------- | :-------------- | :-------------- | :-------------- | | US | $24,182 | $23,547 | $48,372 | $46,737 | | EMEA | $16,987 | $16,884 | $35,755 | $34,404 | | Other | $3,293 | $3,601 | $7,319 | $7,672 | | Total | $44,462 | $44,032 | $91,446 | $88,813 | - Remaining performance obligations totaled $188.1 million as of June 30, 2025, with 61% expected to be recognized as revenue over the next 12 months[56] NOTE 4: Marketable Securities Available-for-Sale Marketable Securities (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :------- | :----------------------- | :--------------------------- | | Current | $35,756 | $48,275 | | Long-term | $4,132 | $3,379 | | Total | $39,888 | $51,654 | NOTE 5: Fair Value Measurements - Cash equivalents and marketable securities are measured at fair value using the market approach (Level 1 or Level 2 inputs), while foreign currency derivative contracts are classified as Level 2[64] Fair Value of Assets (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Money market funds | $21,719 | $12,212 | | Short-term marketable securities | $35,091 | $48,275 | | Long-term marketable securities | $4,132 | $3,379 | | Restricted bank deposits (current) | $3,507 | $3,507 | | Options and forward contracts (hedging) | $3,884 | $960 | | Restricted bank deposit (noncurrent) | $1,103 | $1,020 | NOTE 6: Derivatives and Hedging - The Company uses forward contracts to hedge forecasted payroll costs denominated in NIS against USD exchange rate fluctuations, with outstanding notional amounts of $38.5 million as of June 30, 2025[67][68] - Gains from hedging instruments reclassified from accumulated other comprehensive income were $817 thousand for Q2 2025 and $1,143 thousand for H1 2025[68] NOTE 7: Leases - The Company leases office facilities with agreements expiring through November 2027, with an estimated lease term extending to November 2032 due to a probable extension option[71] Operating Lease Costs (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | Total Operating Lease Cost | $754 | $721 | $1,716 | $1,439 | - As of June 30, 2025, total operating lease liabilities were $17.8 million, with a weighted-average remaining term of 6.90 years and a weighted-average discount rate of 4.71%[72][73] NOTE 8: Commitments and Contingencies Future Non-Cancelable Purchase Commitments (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2025 (Remainder) | $16,056 | | 2026 | $29,177 | | Total | $45,233 | - The Company is occasionally involved in legal proceedings but does not believe any pending litigation will have a material adverse effect on its business[76] NOTE 9: Condensed Consolidated Balance Sheet Components Prepaid Expenses and Other Current Assets (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------- | :------------ | :---------------- | | Prepaid expenses | $3,984 | $4,085 | | Derivative instrument | $3,884 | $960 | | Restricted bank deposits | $3,507 | $3,507 | | Other current assets | $931 | $929 | | Total | $12,306 | $9,481 | Property and Equipment, Net (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------- | :------------ | :---------------- | | Cost | $25,118 | $24,873 | | Accumulated depreciation | $(10,839) | $(8,683) | | Depreciated cost | $14,279 | $16,190 | - Depreciation expenses for H1 2025 were $2,156 thousand, down from $2,343 thousand in H1 2024[78] NOTE 10: Goodwill and Intangible Assets - Goodwill remained unchanged at $11.1 million[21][81] Intangible Assets, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Technology | $0 | $97 | | Customer relationship | $89 | $115 | | Total | $89 | $212 | - Estimated future amortization expense for intangible assets is $27 thousand for the remainder of 2025, $50 thousand for 2026, and $12 thousand for 2027[82] NOTE 11: Income Taxes Income Tax Expense (in thousands) | Period | Income Tax Expense | Effective Tax Rate | | :----- | :----------------- | :----------------- | | Q2 2025 | $424 | (8)% | | Q2 2024 | $2,464 | (33)% | | H1 2025 | $1,769 | (36)% | | H1 2024 | $4,772 | (29)% | - The effective tax rates differ from the U.S. statutory rate primarily due to U.S. losses with no benefit and tax rate differences in foreign countries; the Company has a full valuation allowance on its net deferred tax assets[83][84] NOTE 12: Net Loss Per Share Attributable to Common Stockholders Net Loss Per Share (Basic and Diluted) | Period | Net Loss Per Share | Weighted-Average Shares Outstanding | | :----- | :----------------- | :---------------------------------- | | Q2 2025 | $0.05 | 153,536,740 | | Q2 2024 | $0.07 | 147,607,504 | | H1 2025 | $0.06 | 153,771,875 | | H1 2024 | $0.14 | 145,939,847 | - As of June 30, 2025, 28,870,136 outstanding stock options and RSUs were excluded from diluted EPS calculation as their inclusion would have been anti-dilutive[87] NOTE 13: Reportable Segments and Geographical Information - The Company operates in two segments: Enterprise, Education and Technology (EE&T) and Media and Telecom (M&T), with EE&T representing 75% of Q2 2025 revenue and M&T 25%[170] Segment Revenue and Gross Profit (Q2 2025, in thousands) | Segment | Revenue | Cost of Revenue | Gross Profit | | :------ | :------ | :-------------- | :----------- | | EE&T | $33,242 | $7,375 | $25,867 | | M&T | $11,220 | $5,868 | $5,352 | | Total | $44,462 | $13,243 | $31,219 | Segment Revenue and Gross Profit (H1 2025, in thousands) | Segment | Revenue | Cost of Revenue | Gross Profit | | :------ | :------ | :-------------- | :----------- | | EE&T | $67,658 | $15,223 | $52,435 | | M&T | $23,788 | $12,268 | $11,520 | | Total | $91,446 | $27,491 | $63,955 | NOTE 14: Long-Term Loan - The Company has a Credit Agreement with a Term Loan Facility and a Revolving Credit Facility, which has been amended multiple times, most recently in March 2025, to increase permitted Restricted Payments[100][102] - As of June 30, 2025, the Term Loan Facility had an outstanding balance of approximately $31.0 million, with an interest rate of 6.90% per annum[103][222] - The Company was in compliance with all loan covenants as of June 30, 2025[105] NOTE 15: Stockholders' Equity and Equity Incentive Plans - The number of shares authorized under the 2021 Incentive Award Plan increased by 7,602,857 shares on January 1, 2025[107] - Total unrecognized stock-based compensation cost was $28.1 million as of June 30, 2025, expected to be recognized over approximately two years[110] - A new $15.0 million stock repurchase program (2025 Repurchase Program) was approved in March 2025, superseding the 2024 program; during Q2 2025, 3,468,731 shares were repurchased for $2.07 per share, with $6.9 million remaining authorization[112][113] NOTE 16: Selected Statements of Operations Data Financial Expense (Income), Net (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | Financial income | $737 | $1,858 | $1,632 | $1,608 | | Financial expenses | $5,306 | $848 | $4,398 | $2,096 | | Financial expense (income), net | $4,569 | $(1,010) | $2,766 | $488 | NOTE 17: Accumulated Other Comprehensive Income Changes in Accumulated Other Comprehensive Income (Loss) (H1 2025, in thousands) | Component | Balance Dec 31, 2024 | Other Comprehensive Income (Loss) before reclassifications | Net realized losses reclassified | Balance June 30, 2025 | | :-------- | :------------------- | :--------------------------------------------------------- | :------------------------------- | :-------------------- | | Net Unrealized Gains (Losses) on Available-for-Sale Securities | $23 | $(1) | $0 | $22 | | Net Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments | $936 | $4,091 | $(1,143) | $3,884 | | Total | $959 | $4,090 | $(1,143) | $3,906 | NOTE 18: Subsequent Events - On August 4, 2025, the Board approved a cost-reduction and reorganization plan, including a 10% workforce reduction, expected to incur $687 thousand in pre-tax charges in Q3 2025[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis covers Kaltura's financial condition and operational results, focusing on performance drivers, financial metrics, and liquidity - Kaltura is a market-leading provider of AI-infused video offerings for enterprises, focusing on enhancing customer and employee engagement[121] - The Company's 2025 Reorganization Plan, approved in August 2025, includes a 10% workforce reduction to increase efficiency and productivity, with expected annualized cost savings of $8.5 million and pre-tax charges of $0.7 million in Q3 2025[124] Overview - Kaltura provides live, real-time, and on-demand video offerings, leveraging AI to create hyper-personalized video experiences for organizations[121] - The company's Video Experience Cloud includes platforms for Enterprise Video Content Management System and TV Content Management System, powering various AI-infused video products[121] - Revenue is primarily generated from SaaS subscriptions, platform usage licenses, and associated professional services, targeting medium to large enterprises, educational institutions, technology providers, and media/telecom companies[123] Key Factors Affecting Our Performance - Key performance drivers include expanding the platform with Gen AI features, acquiring new customers across verticals (direct sales, channel partnerships, self-serve for SMEs), and increasing revenue from existing customers through cross-selling and upselling[131][132][133] - The company plans continued investment in growth, expecting cost of revenue and operating expenses to fluctuate[134] Key Financial and Operating Metrics Key Financial and Operating Metrics (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Annualized Recurring Revenue | $170,364 | $165,167 | | Net Dollar Retention Rate | 101% | 98% | | Remaining Performance Obligations | $188,124 | $177,751 | - Remaining Performance Obligations as of June 30, 2025, were $188.1 million, with 61% expected to be recognized as revenue over the next 12 months[142][143] Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA are non-GAAP measures used to evaluate performance, excluding items like financial expenses, taxes, depreciation, amortization, stock-based compensation, war-related expenses, and strategic initiative costs[145] EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(7,750) | $(10,004) | $(8,869) | $(21,100) | | EBITDA | $(1,663) | $(7,271) | $(2,055) | $(13,255) | | Adjusted EBITDA | $4,060 | $1,632 | $8,201 | $2,196 | Components of Our Results of Operation - Revenue is primarily from SaaS and PaaS subscriptions, recognized ratably, with professional services revenue recognized upon rendering or ratably if considered setup activities[150][151][152] - Gross margins improved year-over-year, with Q2 2025 at 70% (77% for subscriptions, (73)% for professional services) compared to Q2 2024 at 65% (74% for subscriptions, (49)% for professional services)[158] - M&T segment gross margins are lower than EE&T due to higher implementation costs and a greater proportion of private cloud/on-premise deployments[157] Results of Operations Consolidated Results of Operations (in thousands, except percentages) | Metric | Q2 2025 | Q2 2024 | Q2 YoY Change (%) | H1 2025 | H1 2024 | H1 YoY Change (%) | | :-------------------------- | :------ | :------ | :---------------- | :------ | :------ | :---------------- | | Total Revenue | $44,462 | $44,032 | 1% | $91,446 | $88,813 | 3% | | Total Gross Profit | $31,219 | $28,676 | 9% | $63,955 | $57,284 | 12% | | Total Operating Expenses | $33,976 | $37,226 | -9% | $68,289 | $73,124 | -7% | | Operating Loss | $(2,757) | $(8,550) | -68% | $(4,334) | $(15,840) | -73% | | Financial expense (income), net | $4,569 | $(1,010) | -552% | $2,766 | $488 | 467% | | Net Loss | $(7,750) | $(10,004) | -23% | $(8,869) | $(21,100) | -58% | - EE&T revenue increased by 7% for both Q2 and H1 2025, driven by new and existing customers, while M&T revenue decreased by 14% in Q2 and 6% in H1 2025 due to existing customer decline[172][178][189][195] - Operating expenses decreased across R&D, Sales & Marketing, and G&A for both Q2 and H1 2025, primarily due to lower compensation costs (including stock-based compensation) and reduced subcontractor use[183][184][185][199][200][202] - Financial expense (income), net shifted from income to expense, increasing by $5.6 million in Q2 2025 and $2.3 million in H1 2025, primarily due to exchange rate differences[186][203] Liquidity and Capital Resources - The Company's liquidity is primarily from operating activities, cash on hand ($35.5 million as of June 30, 2025), and a $25.0 million Revolving Credit Facility with no outstanding balance[205][222][223] - Net cash provided by operating activities improved significantly to $1.6 million in H1 2025 from $(2.8) million in H1 2024[223][224] - Net cash used in financing activities increased to $(11.3) million in H1 2025, primarily due to $9.6 million in common stock repurchases and $3.1 million in cash settlement of equity awards[223][231] Critical Accounting Policies and Estimates - The preparation of financial statements requires management to make estimates and judgments, which are believed to be reasonable, and there have been no significant changes to these policies during H1 2025[234][235] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, including foreign currency, interest rate, and inflation, and the strategies for their management - The Company is exposed to foreign currency exchange risk, primarily from NIS and Euro-denominated expenses and revenues, and uses hedging programs to mitigate this risk[237][238] - A hypothetical 10% change in foreign currency exchange rates would impact H1 2025 results by $0.8 million due to NIS (after hedges) and $2.6 million due to Euros[239] - With $31.0 million in floating rate debt, a hypothetical 10% change in interest rates would impact H1 2025 interest expense by $0.1 million[240] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the Company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[244] - No material changes in internal control over financial reporting occurred during the period[245] PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal proceedings, but none are expected to have a material adverse effect on its financial condition or operations - The Company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, operating results, cash flows, or financial condition[247] Item 1A. Risk Factors This section updates risk factors, highlighting new risks from the 2025 Reorganization Plan, such as unrealized cost savings, operational disruption, personnel attrition, and management distraction - New risk factors include the potential for the 2025 Reorganization Plan to not fully achieve expected cost savings or benefits, incur higher-than-forecasted costs, lead to employee attrition or reduced morale, and divert management's focus[249] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's common stock repurchases during Q2 2025 under the 2025 Repurchase Program, confirming no material change in IPO proceeds use Common Stock Repurchases (Q2 2025) | Period | Shares Purchased | Average Price Per Share | | :----- | :--------------- | :---------------------- | | April | 1,505,827 | $1.93 | | May | 1,135,743 | $2.20 | | June | 827,161 | $2.14 | | Total | 3,468,731 | $2.07 | - The 2025 Repurchase Program, approved in March 2025, authorizes repurchases up to $15.0 million, with approximately $6.9 million remaining as of June 30, 2025[251] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[253] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Not applicable[254] Item 5. Other Information The 2025 Reorganization Plan's approval, 10% workforce reduction, and financial impacts are reiterated, with no Rule 10b5-1 trading arrangements noted for directors or officers - The 2025 Reorganization Plan, approved August 4, 2025, involves a 10% workforce reduction, aiming for $8.5 million in annualized cost savings and incurring $0.7 million in pre-tax charges in Q3 2025[255] - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025[256] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, such as organizational documents, incentive plans, certifications, and XBRL documents - The report includes various exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Kaltura Severance Plan, CEO/CFO certifications, and Inline XBRL documents[258][259] Signatures This section contains the signatures of Ron Yekutiel (Chairman, President, and CEO) and John Doherty (CFO), certifying the report's filing on August 7, 2025 - The report was signed by Ron Yekutiel (Chairman, President, and CEO) and John Doherty (CFO) on August 7, 2025[265]