Summary
Kaltura closed the third quarter of 2023 with total revenue of $43.5 million, up 6% from $41.1 million in the prior-year quarter. Subscription revenue grew 8% year over year, and Annualized Recurring Revenue was $163.1 million, up 7% from $152.9 million. Management called it the fourth consecutive quarter of record subscription revenue and the highest year-over-year total revenue growth rate since the first quarter of 2022. Year to date, total revenue was $130.7 million, up 5% from $124.7 million. The company said demand for consolidation around Kaltura continued across on-demand, live and real-time video use cases, driving larger deals with new customers and expansions with existing ones.
Profitability improved sharply. GAAP gross profit was $27.7 million, up from $26.4 million, while gross margin slipped to 63.6% from 64.2%. GAAP operating loss narrowed to $8.3 million from $14.9 million, and operating margin rose to negative 19.1% from negative 36.2%. GAAP net loss narrowed to $10.7 million from $19.4 million. Diluted EPS was $0.08, down from $0.15. On a non-GAAP basis, operating loss was $0.8 million versus $7.6 million, and Adjusted EBITDA was positive at $0.3 million compared with negative $7.2 million, the first adjusted EBITDA profit since 2020. Research and development expenses fell 10% and sales and marketing expenses fell 22%, both driven by lower headcount.
Cash generation also improved. Net cash provided by operating activities was $1.7 million for the quarter, up from $1.1 million a year earlier. For the nine months, operating cash flow was negative $9.9 million, up from negative $41.0 million. Capital expenditures were $0.2 million in the quarter, down from $0.24 million. The company had no balance outstanding under its Revolving Credit Facility. Its credit facilities come due on January 14, 2024, and management said it expects to amend the Credit Agreement to extend the term. Kaltura reported compliance with its ARR and liquidity covenants as of September 30, 2023.
Segment results diverged. Enterprise, Education and Technology revenue grew 3% and its gross margin rose 2 percentage points to 73%. Media and Telecom revenue grew 13%, but its gross margin fell to 40% from 47%. That decline reflected higher production costs as a percentage of subscription revenue and depreciation of internal use software. Net Dollar Retention Rate was 101%, compared with 96%. Remaining performance obligations were $164.0 million, down 3.1% from $169.2 million, and current deferred revenue was $59.2 million, up 1.7% from $58.3 million. The company expects to recognize 59% of remaining performance obligations as revenue over the next 12 months. Kaltura closed three seven-digit deals and twelve six-digit deals during the quarter, and Salesforce used Kaltura for its Dreamforce event. The company also launched an AI assistant for webinars and events and kicked off an AI Accelerator Program with 15 Gen-AI startups working with 10 large customers.
Guidance points to a softer fourth quarter. For the fourth quarter of 2023, Kaltura expects total revenue to decrease by 7% to 4% year over year and subscription revenue to grow by negative 3% to positive 1%. Adjusted EBITDA is expected to be negative in the range of $1.1 million to $0.6 million. For the full year ending December 31, 2023, the company expects total revenue to grow by approximately 2% year over year and subscription revenue to grow by 5% to 6%, with Adjusted EBITDA negative in the range of $4.5 million to $4.0 million. Kaltura has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net loss. The 2023 Reorganization Plan cut 11% of the workforce and is expected to deliver roughly $16 million in annualized cost savings, with about $1 million in pre-tax charges recorded as of September 30, 2023. Management flagged lower demand, spend and available budgets across its market segments, along with the uncertain macroeconomic climate, as the main risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $43.5M | $43.9M | -0.8% | $41.1M | +6.1% |
| Gross profit | $27.7M | $28.6M | -3.2% | $26.4M | +5.0% |
| Gross margin | 63.6% | 65.2% | -1.6 pp | 64.3% | -0.6 pp |
| Research & development | $12.6M | $13.0M | -3.2% | $13.9M | -9.6% |
| Sales & marketing | $11.7M | $12.7M | -8.3% | $15.0M | -22.3% |
| General & administrative | $11.8M | $12.4M | -5.3% | $11.4M | +3.1% |
| Total operating expenses | $36.0M | $38.2M | -5.6% | $41.2M | -12.6% |
| Operating income (loss) | -$8.3M | -$9.6M | +13.0% | -$14.9M | +44.0% |
| Operating margin | -19.1% | -21.8% | +2.7 pp | -36.2% | +17.1 pp |
| Net income (loss) | -$10.7M | -$10.8M | +0.5% | -$19.4M | +44.8% |
| Net margin | -24.6% | -24.6% | -0.1 pp | -47.4% | +22.7 pp |
| Diluted EPS | $0.08 | -$0.08 | +$0.16 | $0.15 | -$0.07 |
| Net retention rate | 101.0% | 100.0% | +1.0 pp | 117.0% | -16.0 pp |
Risks
The company may require additional financing and cannot assure that it will be available on favorable terms or at all. It cites worsening economic climate, increased inflation and interest rates, and stability in Israel as factors that may reduce net cash from operations and limit or increase the cost of new financing, with potential dilution if equity or equity-linked securities are issued.
The company has 351 full-time employees in Israel as of September 30, 2023, where primary R&D and certain finance and administrative activities are based. The October 7, 2023 Hamas attack and subsequent war have led to military reserve duty for many Israel-based employees, potential operational disruption, and insurance that does not cover war or terrorism losses.
The company expects lower demand, spend, and available budgets across its market segments due to the worsening economic climate and recession headwinds. It adopted the 2023 Reorganization Plan, downsizing an additional 11% of its workforce, with expected annualized cost reduction of approximately $16 million, and incurred pre-tax charges of approximately $1 million as of September 30, 2023.
The Term Loan Facility and Revolving Credit Facility are due and payable on January 14, 2024, and the company currently expects to amend the Credit Agreement to extend the term. The Credit Agreement requires minimum Annualized Recurring Revenue and Liquidity of at least $10 million, and the company was in compliance as of September 30, 2023.
The company maintains the majority of cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and deposits exceed insured limits. Failure of any such institution could prevent or delay access to uninsured funds and adversely affect its financial position.
The company uses third-party AI and machine learning, plans significant investments in generative AI across products and APIs, and faces evolving regulation, potential litigation, ethical concerns, and uncertain market acceptance. New agreements with labor guilds or content owners could increase costs to develop and use AI technologies.
The company depends on senior management, including co-founder and CEO Ron Yekutiel, and faces significant competition for skilled personnel, high employee attrition, and shortages in Israel for DevOps, engineering, R&D, sales, and support roles. Equity value changes may reduce employee motivation and lead to attrition.
Media & Telecom gross margin decreased to 40% for the three and nine months ended September 30, 2023 from 47% and 48% in the prior-year periods, and professional services gross margin was (80)% for the quarter versus (56)% prior year, due to higher production costs, depreciation, and fewer large-scale virtual events.
SaaS KPIs
All quarters →Net Dollar Retention Rate
Remaining Performance Obligations
Annualized Recurring Revenue (ARR)
Adjusted EBITDA
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from KALTURA INC's SEC filings for Q3 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.