KALTURA INC (KLTR) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, “Risk Factors” and other factors set forth in other parts of this Annual Report on Form 10-K.

This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the fiscal years ended December 31, 2024 and 2023, and year-to-year comparisons between fiscal 2024 and fiscal 2023. A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2022 and year-to-year comparisons between fiscal 2023 and fiscal 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 22, 2024

Overview

We are Kaltura, Inc. (“Kaltura,” “we,” “us,” or “our”), a market-leading provider of live, real-time, and on-demand video offerings for enterprises, with a mission to “create and power AI-infused hyper-personalized video experiences for organizations, that boost customer and employee engagement and success”.

Founded in 2006, we pioneered the concept of leveraging video as a core data type within organizational workflows. Today, our Video Experience Cloud includes our platforms for Enterprise Video Content Management System (including Real-Time Conferencing, Live Streaming and Lecture Capture) and TV Content Management System. These platforms power our AI-infused, video-first products: Video Portals, LMS & CMS Video Extensions, Virtual Events & Webinars, Virtual Classroom, and TV Streaming Applications.

As video usage continues to accelerate across communication, work, and learning environments, organizations are increasingly deploying sophisticated video solutions to further engage with their customers, partners, and employees. The introduction of generative AI (“Gen AI”) further amplifies this demand and is expected to have a substantial impact on our business by enabling the automatic production of hyper-personalized and contextually relevant video experiences in real time. We believe this powerful new tool will expand opportunities for increased video creation, consumption, and monetization, and drives a need for advanced video content management solutions.

We generate revenue primarily from the sale of Software-as-a-Service (“SaaS”) subscriptions, and we also derive revenue from platform usage license subscriptions and associated professional services. Our sales typically target medium to large enterprises, educational institutions, technology providers, and media and telecom companies. Our professional services revenue is generally driven by implementation and support services for new and existing customers.

We organize our business into two reporting segments: (i) Enterprise, Education, and Technology (“EE&T”); and (ii) Media and Telecom (“M&T”). Accordingly, our financial reporting distinguishes between revenue and gross profit from Subscription and Professional Services from customers who use our products and services to address Entertainment & Monetization use cases, reported in our M&T segment, and those that are attained from customers who are using us to address all other use cases, reported in our “EE&T segment“. These segments share a common underlying platform consisting of our API-based architecture, as well as unified product development, operations, and administrative resources.

•Enterprise, Education and Technology (“EE&T”): In the EE&T segment, subscription revenue is primarily generated on a per full‑time equivalent or platform usage‑license basis for all of our products, in addition to revenue derived from associated professional services. This segment encompasses customers utilizing Kaltura’s solutions across Customer Experience and Employee Experience and use cases - including Marketing, Sales & Customer Success; Teaching, Learning, Training & Certification; and Communication & Collaboration. Contracts in this segment typically range from 12 to 24 months, with billing generally executed on an annual basis.

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•Media & Telecom (“M&T”): The M&T segment includes revenue from our Entertainment & Monetization use cases, along with the associated professional services. For customers of our telecom TV Content Management System (TVCMS) and TV Streaming Applications, revenue is recognized primarily on a per end‑subscriber basis, while media customers leveraging our Online Video Platform (OVP) are billed on a platform usage‑license basis. Contracts in this segment generally extend for two to five years, with billing performed on either a quarterly or annual basis. Implementation of TV offerings typically requires six to 12 months, with upfront resource requirements generally higher than those for our other offerings. Consequently, there is an extended period from initial booking to go‑live, accompanied by a higher proportion of professional services revenue relative to overall revenue. Additionally, a greater share of revenue in this segment is derived from customers licensing our offerings through private cloud and on‑premise deployments, which has an impact on our gross margin.

Reflected below is a summary of reportable segment revenue and reportable segment gross profit for the years ended December 31, 2024, 2023 and 2022.

We employ a “land and expand” strategy with the aim of having our customers increase their usage of our offerings and/or purchase additional offerings over time. For the years ended December 31, 2024 and 2023, our Net Dollar Retention Rate was 100% and 101%, respectively. We also grew our Annualized Recurring Revenue (as defined below), by 6% in the year ended December 31, 2024, compared to the year ended December 31, 2023, demonstrating our ability to land new customers with higher spending levels and increase revenue from our existing customers.

For any given year, a large majority of our revenue comes from existing customers, with whom we are in active dialogue and tend to have visibility into their expected usage of our offerings.

As part of our go-to-market strategy, we focus on direct sales to larger enterprise, education, and media & telecom customers while also investing in channel partnerships, and in 'inside sales' for smaller customers. We believe ongoing demand for secure, scalable, and deeply integrated video solutions—further amplified by the rise of Gen AI—positions us for future growth. Our strategy remains centered on broadening our product suite, expanding our customer base across industries, and increasing recurring revenue from existing clients.

Key Factors Affecting Our Performance

Expansion of our Platform

We believe our platform is ideally suited for expansion across solutions, industries, and use cases. For example, in 2020, we entered the real-time conferencing market with the introduction of our Virtual and Hybrid Events, Webinars, and Online Learning products, focusing on learning, training, events, and marketing. Since then, we expanded the capabilities of our Virtual & Hybrid Events product to support a broader range of event types and use cases, fitted them to also address low-touch and self-serve sales and introduced a set of Gen AI-powered capabilities designed to increase productivity in creating content and setting up events and to foster user engagement. We plan to continue enhancing our platform’s capabilities—including by further integrating Gen AI features that enable automatic video creation, advanced personalization, and real-time analytics. Our robust API-first architecture supports deep integration into multiple workflows, which we believe is critical for driving adoption and delivering enhanced value for our customers.

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Acquiring New Customers

We remain focused on acquiring customers across our key verticals (technology, education, regulated industries, professional and commercial services, and media & telecom). Our approach includes direct enterprise sales for larger customers, as well as channel partnerships and more self-serve or inside sales–led motions to capture small and medium enterprises (“SMEs”). We believe that increasing brand awareness and continued product innovation will help us attract new customers across geographies and industries. We also continue to provide our self-serve offering that can be purchased completely online, which also serves as a demand generation engine for our low-touch and enterprise offerings. We believe this will enable us to efficiently acquire smaller customers across all industries over time – expanding beyond enterprises into SMEs, beyond universities into K-12 schools, beyond tier 1 media and telecom companies to tier 2 and 3 media and telecom companies, and beyond providing Media Services to large technology companies to also addressing smaller technology firms and startups.

Increasing Revenue from Existing Customers

Many of our customers run multiple Kaltura products for various use cases, ranging from employee training and collaboration to external marketing and virtual events. By cross-selling and upselling additional solutions—such as our newly introduced Gen AI-powered capabilities and expanded application suites—we aim to drive higher usage and expand overall revenue. Sustained customer adoption and usage growth are also supported by strong integration, ongoing support, and a commitment to evolving security and compliance requirements. We are focused on increasing sales within our existing customer base through increased usage of our platform and the cross-selling of additional products and solutions. For the year ended December 31, 2024, our Net Dollar Retention Rate was 100%. In order for us to increase revenue within our customer base, we will need to maintain engineering-level customer support and continue to introduce new products and features as well as innovative new use cases that are tailored to our customers' needs.

Continued Investment in Growth

Although we have invested significantly in our business to date, we believe that we still have a significant market opportunity ahead of us. We intend to continue to make investments to support the growth and expansion of our business and to increase revenue. We believe there is a significant opportunity to continue our growth. We expect that our cost of revenue and operating expenses will fluctuate.

Key Financial and Operating Metrics

We measure our business using both financial and operating metrics. We use these metrics to assess the progress of our business, make decisions on where to allocate capital, time, and technology investments, and assess the near-term and long-term performance of our business. The key financial and operating metrics we use are:

(a)The Net Dollar Retention Rate for the year ended December 31, 2023 has been recast to reflect the update to our customer count methodology, as discussed further below, which has resulted in an adjustment of 1 percentage point to the reported Net Dollar Retention Rate for such period. The Net Dollar Retention Rate for the year ended December 31, 2022 was not impacted by this update.

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Annualized Recurring Revenue

We use Annualized Recurring Revenue (“ARR”) as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring customer contracts. We calculate ARR by annualizing our recurring revenue for the most recently completed fiscal quarter. Recurring revenues are generated from SaaS and PaaS subscriptions, as well as term licenses for software installed on the customer’s premises (“On-Prem”). For the SaaS and PaaS components, we calculate ARR by annualizing the actual recurring revenue recognized for the latest fiscal quarter. For the On-Prem components for which revenue recognition is not ratable across the license term, we calculate ARR for each contract by dividing the total contract value (excluding professional services) as of the last day of the specified period by the number of days in the contract term and then multiplying by 365. Recurring revenue excludes revenue from one-time professional services and setup fees. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases.

The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to new bookings, cancellations, upgrades or downgrades, pending renewals, professional services revenue, foreign exchange rate fluctuations and acquisitions or divestitures. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.

Net Dollar Retention Rate

Our Net Dollar Retention Rate, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our Net Dollar Retention Rate for a given period as the recognized recurring revenue from the latest reported fiscal quarter from the set of customers whose revenue existed in the reported fiscal quarter from the prior year (the numerator), divided by recognized recurring revenue from such customers for the same fiscal quarter in the prior year (denominator). For annual periods, we report Net Dollar Retention Rate as the arithmetic average of the Net Dollar Retention Rate for all fiscal quarters included in the period.

As previously disclosed, in 2024 we updated our customer count methodology, which is used to calculate our Net Dollar Retention Rate, to treat subdivisions of the same legal entity (for example, divisions of a parent company or separate campuses that are part of the same state university system), as well as Value-add Resellers (“VARs”) (meaning resellers that directly manage the relationship with the customer) and the customers they manage, to be a single customer. Our calculation of Net Dollar Retention Rate for any fiscal period includes the positive recognized recurring revenue impacts of selling new services to existing customers and the negative recognized recurring revenue impacts of contraction and attrition among this set of customers. Our Net Dollar Retention Rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. Our calculation of Net Dollar Retention Rate may differ from similarly titled metrics presented by other companies

Remaining Performance Obligations

Remaining Performance Obligations represents the amount of contracted future revenue that has not yet been delivered, including both subscription and professional services revenues. Remaining Performance Obligations consists of both deferred revenue and contracted non-cancelable amounts that will be invoiced and recognized in future periods. As of December 31, 2024, our Remaining Performance Obligations was $203.4 million, which consists of both billed consideration in the amount of $63.2 million and unbilled consideration in the amount of $140.2 million that we expect to invoice and recognize in future periods. We expect to recognize 58% of our Remaining Performance Obligations as revenue over the next 12 months and the remainder over the next four years.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe that EBITDA and Adjusted EBITDA, non-GAAP financial measures, are useful in evaluating the performance of our business.

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We define EBITDA as net profit (loss) before interest expense, net, provision for income taxes and depreciation and amortization expenses. Adjusted EBITDA is defined as EBITDA (as defined above), adjusted for the impact of certain non-cash and other items that we believe are not indicative of our core operating performance, such as non-cash stock-based compensation expenses, facility exit and transition costs, restructuring charges, other non-recurring operating expenses and costs related to conflicts in Israel.

EBITDA and Adjusted EBITDA are supplemental measures of our performance, are not defined by or presented in accordance with GAAP, and should not be considered in isolation or as an alternative to net profit (loss) or any other performance measure prepared in accordance with GAAP. EBITDA and Adjusted EBITDA are presented because we believe that they provide useful supplemental information to investors and analysts regarding our operating performance and are frequently used by these parties in evaluating companies in our industry. By presenting EBITDA and Adjusted EBITDA, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance. We believe that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Additionally, our management uses Adjusted EBITDA as a supplemental measure of our performance because it assists us in comparing the operating performance of our business on a consistent basis between periods, as described above.

Although we use EBITDA and Adjusted EBITDA, as described above, EBITDA and Adjusted EBITDA, have significant limitations as analytical tools. Some of these limitations include:

•such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

•such measures do not reflect changes in, or cash requirements for, our working capital needs;

•such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

•such measures do not reflect our tax expense or the cash requirements to pay our taxes;

•although depreciation and amortization expense and non-cash stock-based compensation expense are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and

•other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures.

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. Adjusted EBITDA includes an adjustment for non-cash stock-based compensation expenses. It is reasonable to expect that this item will occur in future periods. However, we believe this adjustment is appropriate because the amount recognized can vary significantly from period to period, does not directly relate to the ongoing operations of our business, and complicates comparisons of our internal operating results between periods and with the operating results of other companies over time. Each of the normal recurring adjustments and other adjustments described above help to provide management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Nevertheless, because of the limitations described above, management does not view EBITDA, or Adjusted EBITDA in isolation and also uses other measures, such as revenue, operating loss, and net loss, to measure operating performance.

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The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net loss:

(a)The year ended December 31, 2024, 2023 and 2022 includes $2.7 million, $3.2 million and $2.3 million, respectively, of interest expenses ,and $3.4 million, $2.7 million and $1.0 million, respectively, of interest income.

(b)Facility exit and transition costs for the years ended December 31, 2023 and December 31, 2022 include losses from sale of fixed assets and other costs associated with moving to our temporary office in Israel.

(c)The year ended December 31, 2023, includes employee termination benefits incurred in connection with the 2023 Reorganization Plan and the year ended December 31, 2022 includes employee termination benefits incurred in connection with the 2022 Restructuring Plan.

(d)The years ended December 31, 2024 and 2023 include costs related to conflicts in Israel. These costs are attributable to the temporary relocation of key employees from Israel for business continuity purposes, the purchase of emergency equipment for key employees, charitable donations to communities directly impacted by the war, and office fixes and modifications.

Components of Results of Operations

Revenue

Subscription

Our revenues are mainly comprised of revenue from SaaS and PaaS subscriptions. SaaS and PaaS subscriptions provide access to our Video Experience Cloud which powers all types of video experiences: live, real-time, and on-demand video. We provide access to our platform either as a cloud-based service, which represent most of our SaaS and PaaS subscriptions, or, less commonly, as a term license to software installed on the customer's premises. Revenue from SaaS and PaaS subscriptions is recognized ratably over the time of the subscription, beginning from the date on which the customer is granted access to our Video Experience Cloud. Revenue from the sale of a term license is recognized at a point in time in which the license is delivered to the customer. Revenue from post-contract services (“PCS”) included in On-Prem deals is recognized ratably over the period of the PCS.

Professional Services

Our revenue also includes professional services, which consist of consulting, integration and customization services, technical solution services and training related to our video experience. In some of our arrangements, professional services are accounted for as a separate performance obligation, and revenue is recognized upon rendering of the service.

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In some of our SaaS and PaaS subscriptions, we determined that the professional services are solely set up activities that do not transfer goods or services to the customer and therefore are not accounted for as a separate performance obligation and are recognized ratably over the time of the subscription.

Cost of Revenue

Cost of subscription revenue consists primarily of employee-related costs including payroll, benefits and stock-based compensation expense for operations and customer support teams, costs of cloud hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology and allocated overhead costs.

Cost of professional services consists primarily of personnel costs of our professional services organization, including payroll, benefits, and stock-based compensation expense, allocated overhead costs and other third-party service providers.

The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscriptions due to the labor costs of providing professional services. As such, the implementation and professional services costs relating to an arrangement with a new customer are more significant than the costs to renew an existing customer’s license and support arrangement.

Cost of revenue decreased in absolute dollars from the year ended December 31, 2023 to the year ended December 31, 2024. For the years ended December 31, 2024 and 2023, our cost of revenue was $59,611 and $62,938, respectively.

Gross Margins

Gross margin has improved year-over-year since 2020, and while it has and will continue to vacillate between quarters, we expect it to continue the growth trend in the coming years. Gross margins have been, and will continue to be, affected by a variety of factors, including the average sales price of our products and services, volume growth, the mix of revenue between software licenses, maintenance and support, professional services, onboarding of new media and telecom customers, hosting of major virtual events, and changes in cloud infrastructure and personnel costs. In particular, the gross margins in the M&T segment are lower than in the EE&T segment because of resources required for implementing solutions for TV experiences, which generally exceed those of other offerings. This results in a longer period for M&T from initial booking to go-live and a higher proportion of professional services revenue as a percentage of overall revenue. Additionally, a higher proportion of M&T revenue comes from customers who choose to license our offerings through private cloud and on-premise deployments, which also impacts our M&T gross margin. Going forward, we expect to see a gradual improvement in gross margins for both EE&T and M&T, driven by enhanced efficiencies in both production and professional services costs.

For the years ended December 31, 2024, 2023 and 2022, our gross margins were 67% (75% for subscription and (55)% for professional services), 64% (73% for subscription and (51)% for professional services) and 63% (74% for subscription and (33)% for professional services), respectively.

For our EE&T segment, gross margins for the years ended December 31, 2024, 2023 and 2022 were 75% (82% for subscription and (97)% for professional services), 73% (79% for subscription and (78)% for professional services) and 70% (78% for subscription and (63)% for professional services), respectively.

For our M&T segment, gross margins for the years ended December 31, 2024, 2023 and 2022 were 44% (55% for subscription and (25)% for professional services), 41% (55% for subscription and (35)% for professional services) and 48% (63% for subscription and (13)% for professional services), respectively.

Research and Development

Our research and development expenses consist primarily of costs incurred for personnel-related expenses for our technical staff, including salaries and other direct personnel-related costs. Additional expenses include consulting and professional fees for third-party development resources and software subscriptions. We expect our research and development expenses to gradually decrease as a percentage of revenue. Subsequent costs incurred for the development of future upgrades and enhancements, which are expected to result in additional functionality, may qualify for capitalization under internal-use software and therefore may cause research and development expenses to fluctuate.

Sales and Marketing Expenses

Our sales and marketing expenses consist primarily of personnel related costs for our sales and marketing functions, including salaries and other direct personnel-related costs, such as sales commissions.

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Additional expenses include marketing program costs and amortization of acquired customer relationships intangible assets. We expect our sales and marketing expenses to be relatively stable as a percentage of revenue.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel-related costs for our executive, finance, human resources, information technology, and legal functions, including salaries and other direct personnel-related costs. We expect our general and administrative expenses to gradually decrease as a percentage of revenue.

We allocate overhead costs such as rent, utilities, and supplies to all departments based on relative headcount to each operating expense category.

Financial Expenses (Income), Net

Financial expenses (income), net consists of interest expense accrued or paid on our indebtedness, net of interest income earned on our cash balances and marketable securities. Financial expenses (income), net also includes foreign exchange gains and losses and bank fees.

We expect interest expenses to vary each reporting period depending on the amount of outstanding indebtedness and prevailing interest rates.

We expect interest income will vary in each reporting period depending on our average cash and marketable securities balances during the period and applicable interest rates.

Provision for Income Taxes

We are subject to taxes in the United States as well as other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax. Due to cumulative losses, we maintain a valuation allowance against our deferred tax assets. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Realization of our U.S. deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as share-based compensation, and changes in our valuation allowance.

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Results of Operations

The following table summarizes key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

Comparison of the Years Ended December 31, 2024 and 2023

Segments

We currently manage and report operating results through two reportable segments.

•Enterprise, Education & Technology (72% and 71% of revenue for the year ended December 31, 2024 and 2023, respectively): Our EE&T segment represents revenues from all of our products, industry solutions for education customers, and Media Services (except for M&T customers), as well as associated professional services for those offerings.

•Media & Telecom (28% and 29% of revenue for the year ended December 31, 2024 and 2023, respectively): Our M&T segment primarily represents revenues from our TV Solution and Media Services sold to media and telecom customers.

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Enterprise, Education & Technology

The following table presents our EE&T segment revenue and gross profit (loss) for the years indicated:

Enterprise, Education & Technology Revenue

Total EE&T revenue increased by $3.6 million , or 3%, to $128.7 million for the year ended December 31, 2024, from $125.2 million for the year ended December 31, 2023. The increase is mainly attributable to a $2.1 million increase in revenue from new customers, and a $1.5 million increase from existing customers.

EE&T subscription revenue increased by $3.6 million, or 3%, to $124.2 million for the year ended December 31, 2024, from $120.6 million for the year ended December 31, 2023.

EE&T professional services revenue decreased by $0.1 million, or 1%, to $4.5 million for the year ended December 31, 2024, from $4.6 million for the year ended December 31, 2023.

Enterprise, Education & Technology Gross Profit

EE&T gross profit increased by $5.3 million, or 6%, to $96.9 million for the year ended December 31, 2024, from $91.6 million for the year ended December 31, 2023. This increase was mainly due to a $3.6 million increase in revenue, and reduction in production costs, which is a result of improved efficiency.

EE&T subscription gross profit increased by $6.1 million, or 6%, to $101.3 million for the year ended December 31, 2024, from $95.2 million for the year ended December 31, 2023.

EE&T professional services gross loss increased by $0.8 million, or 23%, to $4.4 million for the year ended December 31, 2024, from a gross loss of $3.5 million for the year ended December 31, 2023.

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Media & Telecom

The following table presents our M&T segment revenue and gross profit for the periods indicated:

Media & Telecom Revenue

M&T revenue remained unchanged, totaling $50.0 million for both the year ended December 31, 2024 and the year ended December 31, 2023.

M&T subscription revenue increased by $1.3 million, or 3%, to $43.5 million for the year ended December 31, 2024, from $42.2 million for the year ended December 31, 2023 the increase is mainly attributable to $1.3 million increase in revenue from existing customers.

M&T professional services revenue decreased by $1.3 million, or 17%, to $6.5 million for the year ended December 31, 2024, from $7.9 million for the year ended December 31, 2023. The decrease is mainly attributable to the completion of setup for certain customers in the year ended December 31, 2023, for which professional services revenue was recognized at that time.

Media & Telecom Gross Profit

M&T gross profit increased by $1.6 million, or 8%, to $22.2 million for the year ended December 31, 2024, from $20.6 million for the year ended December 31, 2023. The increase is primarily driven by reduced compensation costs resulting from improved efficiency in production and operations, as well as an increase in subscription revenue, which typically carries higher gross margins.

M&T subscription gross profit increased by $0.5 million, or 2%, to $23.8 million for the year ended December 31, 2024, from $23.4 million for the year ended December 31, 2023.

M&T professional services gross loss decreased by $1.1 million, or 39%, to a gross loss of $1.7 million for the year ended December 31, 2024, from a gross loss of $2.7 million for the year ended December 31, 2023.

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Operating Expenses

Research and Development Expenses

Research and development expenses decreased by $3.0 million, or 6%, to $49.4 million for the year ended December 31, 2024, from $52.4 million for the year ended December 31, 2023. The decrease was primarily due to a $2.3 million decrease in compensation expenses which mainly related to lower headcount, and a $1.0 million decrease in IT related expenses, partially offset by a $0.4 million increase in subcontractors and consultants expenses mainly as a result of outsourcing part of the efforts related to specific projects.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $1.0 million, or 2%, to $47.8 million for the year ended December 31, 2024, from $48.8 million for the year ended December 31, 2023. The decrease was primarily due to a $0.6 million decrease in other marketing expenses mainly due to improved efficiency in managing the marketing budget and a $0.4 million decrease in travel expenses.

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General and Administrative Expenses

General and administrative expenses decreased by $2.7 million or 6% , to $46.0 million for the year ended December 31, 2024, from $48.7 million for the year ended December 31, 2023. The decrease was primarily due to a $3.6 million decrease in compensation expense mainly resulting from the departure of several senior executives whose market-based equity awards were canceled. The cancellation of these equity awards led to a reversal and reduction in stock-based compensation expenses. This decrease was partially offset by the cancellation of the CEO's market-based equity awards, which resulted in an acceleration of expenses, and $1.3 million of unused one-time expense associated with terminating commitments with a cloud hosting service provider.

Restructuring

There were no restructuring expenses during the year ended December 31, 2024.

Financial Expenses (Income), net

Financial income, net decreased by $0.8 million, or 64%, to $0.4 million, for the year ended December 31, 2024, from $1.2 million for the year ended December 31, 2023. The change was mainly related to lower income attributed to foreign currency translation adjustments, net, partially offset by higher interest income on our marketable securities and money market funds and lower interest expenses on our Credit Facilities (see below).

Provision for Income Taxes

Provision for income taxes decreased by $1.3 million, or 14%, to $7.7 million for the year ended December 31, 2024, from $8.9 million for the year ended December 31, 2023, primarily due to a decreased tax liability related to income generated by our subsidiaries organized under the laws of Israel and the United Kingdom.

Liquidity and Capital Resources

Overview

Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. Our principal sources of liquidity are expected to be our cash on hand and borrowings available under our Revolving Credit Facility. As of December 31, 2024, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million is available for future borrowings.

We believe that our net cash provided by operating activities, cash on hand, and availability under our Revolving Credit Facility will be adequate to meet our operating, investing, and financing needs for at least the next 12 months.

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Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, increases in general and administrative costs and many other factors as described under Part I, Item 1A. “Risk Factors” and “—Key Factors Affecting Our Performance.” In addition, our cash and cash equivalents are maintained at financial institutions in amounts that exceed federally insured limits.

In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

If necessary, we may borrow funds under our Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the current global economic volatility, rising inflation and interest rates, price increases, decrease in our customers' spend or available budget, and the ongoing conflict between Russia and Ukraine, have resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. Our ability to access capital may also be impacted by political, economic, and military conditions in Israel, including the current security situation or any escalation of conflicts with Israel, and in other regions in which we operate, or changes in the business environment in those regions. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected.

Repurchase Program

On June 11, 2024, the Company’s board of directors authorized a stock repurchase program of the Company’s outstanding common stock for up to $5.0 million of the Company’s common stock (the “Repurchase Program”). Under the Repurchase Program, the Company may make repurchases, from time to time, through open market purchases, block trades, in privately negotiated transactions, accelerated stock repurchase transactions, or by other means. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases under this authorization. The volume, timing, and manner of any repurchases will be determined at the Company’s discretion, subject to general market conditions, as well as the Company’s management of capital, general business conditions, other investment opportunities, regulatory requirements and other factors. The Repurchase Program does not obligate the Company to repurchase any specific amount of common stock, has no time limit, and may be modified, suspended, or discontinued at any time without notice at the discretion of the Board of Directors.

During the year ended December 31, 2024, the Company repurchased 2,238,569 shares of common stock at an weighted average price of $1.27 per share (excluding broker and transaction fees of $67,157). As of December 31, 2024, the Company had remaining authorization under the Repurchase Program to repurchase common stock up to an aggregate amount of $2,148,055, subject to satisfying required conditions under the Companies Law and Companies Regulations.

Credit Facilities

In January 2021, we entered into a new credit agreement (as amended, the “Credit Agreement”) with one of our existing lenders, which provides for a new senior secured term loan facility in the aggregate principal amount of $40.0 million (the “Term Loan Facility”) and a new senior secured revolving credit facility in the aggregate principal amount of $10.0 million (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”), which thereafter were extended and amended to align our business needs and other developments. In December 2023, we refinanced all amounts outstanding under the then-existing Credit Agreement, and entered into a new amendment to the credit agreement (the “Fifth Amendment”) with an existing lender, which provides for an additional term loan facility of $3.5 million in addition to the existing $31.5 million in term loans outstanding immediately prior to the Fifth Amendment. Commitments under the Revolving Credit Facility decreased to $25.0 million.

In July 2024, we entered into an amendment to the Credit Agreement with an existing lender, in connection with our Repurchase Program, which updated the aggregate amount of permitted Restricted Payments (as defined in the Credit Agreement, which term includes, among others, the repurchase of the Company’s outstanding common stock) and conditions for making such payments.

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The amount available for borrowing under the Revolving Credit Facility is limited to a borrowing base, which is equal to the product of (a) 500% (which will automatically reduce to 350% on the date the Term Loan Facility is repaid in full), multiplied by (b) monthly Recurring Revenue for the most recently ended monthly period, multiplied by (c) the Retention Rate (in each case, as defined in the Credit Agreement).

The Revolving Credit Facility includes a sub-facility for letters of credit in the aggregate availability amount of $10.0 million and a swingline sub-facility in the aggregate availability amount of $5.0 million, each of which reduces borrowing availability under the Revolving Credit Facility.

Borrowings under the Credit Facilities bear interest, determined as follows: (a) SOFR loans accrue interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus 0.10% per annum plus a margin of 2.50% (the Adjusted Term SOFR (as defined in the Credit Agreement) is subject to a 1.00% floor), and (b) ABR loans accrue interest at a rate per annum equal to the ABR plus a margin of 1.50% (ABR is equal to the highest of (i) the prime rate and (ii) the Federal Funds Effective Rate plus 0.50%, subject to a 2.00% floor). As of December 31, 2024, the current rate of interest under the Credit Facilities was equal to a rate per annum of 6.93%, consisting of 4.33% (the 3-month SOFR rate as of December 31, 2024), 0.10% credit spread adjustment and the margin of 2.50%.

We are required to prepay amounts outstanding under the Term Loan Facility with 100% of the net cash proceeds of any indebtedness incurred by us or any of our subsidiaries other than certain permitted indebtedness. In addition, we are required to prepay amounts outstanding under the Credit Facilities with the net cash proceeds of any Asset Sale or Recovery Event (each as defined in the Credit Agreement), subject to certain limited reinvestment rights.

Amounts outstanding under the Credit Facilities may be voluntarily prepaid at any time and from time to time, in whole or in part, without premium or penalty.

All voluntary prepayments (other than ABR loans borrowed under the Revolving Credit Facility) must be accompanied by accrued and unpaid interest on the principal amount being prepaid and customary “breakage” costs, if any, with respect to prepayments of SOFR loans.

The Term Loan Facility is payable in consecutive quarterly installments on the last day of each fiscal quarter in an amount equal to (i) $0.4 million for installments payable on December 31, 2023 (deferred to January 9, 2024), through September 30, 2024 (ii) $0.7 million for installments payable on December 31, 2024 ($0.2 million of the amount deferred to January 2025), through September 30, 2025, (iii) $1.3 million for installments payable on and after December 31, 2025. The remaining unpaid balance on the Term Loan Facility is due and payable on December 21, 2026, together with accrued and unpaid interest on the principal amount to be paid to, but excluding, the payment date.

Our obligations under the Credit Facilities are currently guaranteed by Kaltura Europe Limited, and are required to be guaranteed by all of our future direct and indirect subsidiaries other than certain excluded subsidiaries and immaterial foreign subsidiaries. Our obligations and those of Kaltura Europe Limited are, and the obligations of any future guarantors are required to be, secured by a first priority lien on substantially all of our respective assets.

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability, and the ability of our subsidiaries, to:

•create, issue, incur, assume, become liable in respect of or suffer to exist any debt or liens;

•consummate any merger, consolidation or amalgamation, or liquidate, wind up or dissolve, or dispose of all or substantially all of our or their respective property or business;

•dispose of property or, in the case of our subsidiaries, issue or sell any shares of such subsidiary’s capital stock;

•repay, prepay, redeem, purchase, retire or defease subordinated debt;

•declare or pay dividends or make certain other restricted payments;

•make certain investments;

•enter into transactions with affiliates;

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•enter into new lines of business; and

•make certain amendments to our or their respective organizational documents or certain material contracts.

The Credit Agreement also contains certain financial covenants that require us to maintain (i) a minimum amount of Consolidated Adjusted EBITDA (as defined in the Credit Agreement) as of the last day of each fiscal quarter (which minimum amount increased through the fiscal quarter ended December 31, 2024) (the “Adjusted EBITDA Covenant”), and (ii) Liquidity (as defined in the Credit Agreement) of at least $20 million as of the last day of any calendar month.

On July 22, 2024, we revised the Credit Agreement to modify the definition of “Liquidity” to include certain additional cash and cash equivalents. We were in compliance with these covenants as of December 31, 2024.

The Credit Agreement also contains certain customary representations and warranties and affirmative covenants, and certain reporting obligations. In addition, the lenders under the Credit Facilities will be permitted to accelerate all outstanding borrowings and other obligations, terminate outstanding commitments and exercise other specified remedies upon the occurrence of certain events of default (subject to certain grace periods and exceptions), which include, among other things, payment defaults, breaches of representations and warranties, covenant defaults, certain cross-defaults and cross-accelerations to other indebtedness, certain events of bankruptcy and insolvency, certain judgments and Change of Control events (as defined in the Credit Agreement).

As of December 31, 2024, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million remains available for future borrowings. As of December 31, 2024, we had approximately $32.3 million of borrowings outstanding under the Term Loan Facility.

Cash Flows

The following table summarizes our cash flows for the periods presented:

Operating Activities

Net cash flows provided by operating activities increased by $20.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Net cash provided by operating activities of $12.2 million for the year ended December 31, 2024, was primarily due to $31.3 million in incremental net loss, adjusted for non-cash charges of $41.6 million, and net cash of $2.1 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $5.1 million, stock-based compensation expenses of $26.3 million and amortization of deferred contract acquisitions and fulfillment costs of $11.4 million. The main drivers of net cash inflows that were derived from the changes in operating assets and liabilities were related to an increase of $5.4 million in accrued expenses and other current liabilities, a decrease in trade receivables of $3.3 million, an increase of $2.7 million in employees and payroll accruals and an increase of $0.5 million in deferred revenue, partially offset by an increase in deferred contract acquisition costs of $7.5 million, an increase of $1 million in prepaid expenses and other current assets and a decrease in trade payables of $0.5 million.

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Net cash used in operating activities of $8.3 million for the year ended December 31, 2023, was primarily due to $46.4 million in incremental net loss, adjusted for non-cash charges of $45.3 million, and net cash of $6.6 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $4.7 million, stock-based compensation expenses of $30.0 million and amortization of deferred contract acquisitions and fulfillment costs of $11.7 million. The main drivers of net cash outflows that were derived from the changes in operating assets and liabilities were related to an addition to deferred contract acquisition costs of $6.6 million, decrease in trade payables of $5.9 million and an aggregate decrease of $1.8 million in employees accruals, accrued expenses and other current liabilities, partially offset by a decrease in trade receivables of $5.5 million, increase in deferred revenue of $1.6 million, and an increase in prepaid expenses and other assets of $0.6 million.

Investing Activities

Net cash flows used in investing activities increased by $10.8 million to $12.4 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Net cash used in investing activities of $12.4 million for the year ended December 31, 2024 was related to investment in available-for-sale marketable securities of $50.9 million and $0.5 million in capital expenditures, offset by maturities of available-for-sale marketable securities of $39.0 million.

Net cash used in investing activities of $1.6 million for the year ended December 31, 2023 was related to investment in available-for-sale marketable securities of $47.7 million, $2.6 million in capital expenditures, $1.5 million of capitalized internal use software and investment in restricted bank deposits of $1.8 million, partially offset by maturities of available-for-sale marketable securities of $52.0 million.

Financing Activities

Net cash flows used in financing activities increased by $3.6 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Net cash used in financing activities of $3.5 million for the year ended December 31, 2024 was primarily due to repurchase of common stock of $2.9 million and $2.2 million of loan repayments partially offset by proceeds from the exercise of stock options of $1.6 million.

Net cash provided by financing activities of $0.1 million for the year ended December 31, 2023 was primarily due to proceeds from long-term loans, net of debt issuance cost of $3.5 million and proceeds from option exercises of $1.4 million, partially offset by $4.5 million of loan repayments.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2024:

(1) Represents borrowings outstanding under our Term Loan Facility as of December 31, 2024, together with estimated interest payments thereon based on the interest rates in effect for such indebtedness as of December 31, 2024. See “—Liquidity and Capital Resources - Credit Facilities.”

(2) Represents the lease payments under our operating leases in the U.S. and Israel. The operating lease payments for our lease in Israel assume our exercise of the first extension option for an additional five years. See Note 7, Leases, to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

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(3) Consists of minimum purchase commitments mainly for our use of certain cloud and other services with third-party providers with a term of 12 months or longer. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

We reported other liabilities of $12.8 million in our consolidated balance sheet at December 31, 2024, which principally consists of unrecognized tax benefits. See Note 11, Income Taxes, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information. We have excluded these liabilities from the contractual obligations table above. A variety of factors could affect the timing of payments for the liabilities related to unrecognized tax benefits. Therefore, we cannot reasonably estimate the timing of such payments.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

We believe that the accounting policies described below require management’s most difficult, subjective or complex judgments. Judgments or uncertainties affecting the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. See Note 2, Significant Accounting Policies, to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding these and our other significant accounting policies.

Revenue Recognition

Revenue is recognized when the customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We apply judgment in identifying and evaluating terms and conditions in contracts that may impact revenue recognition. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). When applicable, we allocate the transaction price between the separate performance obligations according to their SSP, which is based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we estimate the SSP taking into account available information, including, but not limited to, pricing practices, market conditions, and the economic life of the software.

Income Taxes

We are subject to income taxes in Israel, the U.S., and other foreign jurisdictions. Significant judgement is required in determining the provision for income taxes, including evaluating uncertainties in the application of accounting principles and complex tax laws. We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. We evaluate uncertain tax positions on a quarterly basis, based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits, and effective settlement of audit issues.

Recent Accounting Pronouncements

Please see Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recent accounting pronouncements.

Jumpstart Our Business Startups Act of 2012

Under the JOBS Act, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an “emerging growth company” to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies.

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We meet the definition of an “emerging growth company” and have elected to use this extended transition period for complying with new or revised accounting standards until the earlier of the date we (x) are no longer an emerging growth company, or (y) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements and the reported results of operations contained therein may not be directly comparable to those of other public companies.