Kaltura, Inc. (NASDAQ:KLTR) is a leading provider of video experience cloud solutions, empowering organizations across various industries to harness the power of video for communication, collaboration, marketing, sales, customer care, learning, and entertainment. With its flexible and robust platform, Kaltura enables its customers to deliver engaging video experiences tailored to their unique needs.
Business Overview
Kaltura's business is organized into two main segments: Enterprise, Education, and Technology (EE&T) and Media and Telecom (M&T). The EE&T segment encompasses the company's video solutions for enterprise customers, educational institutions, and media services (excluding media and telecom customers). The M&T segment primarily focuses on Kaltura's TV solutions and media services for media and telecom customers.
Kaltura's core offerings consist of various Software-as-a-Service (SaaS) products and solutions, as well as a Platform-as-a-Service (PaaS) offering. The company's Video Experience Cloud powers live, real-time, and on-demand video experiences for webinars, events, virtual classrooms, and video sites. Kaltura also provides robust Application Programming Interfaces (APIs) and industry-specific solutions, catering to the unique needs of its diverse customer base.
Financials
For the fiscal year ended December 31, 2023, Kaltura reported annual revenue of $175,172,000, a decrease from the previous year's revenue of $182,345,000. The company's annual net income was -$46,366,000, compared to -$41,234,000 in the prior year. Kaltura's annual operating cash flow was -$8,577,000, and its annual free cash flow was -$12,676,999.
In the first quarter of 2024, Kaltura reported total revenue of $44,781,000, up 3% year-over-year. Subscription revenue was $41,170,000, an increase of 2% compared to the same period in the prior year. Professional services revenue contributed $3,611,000, up 25% year-over-year. The company's gross profit for the quarter was $28,608,000, resulting in a gross margin of 64%, up from 63% in the first quarter of 2023.
Segmental Performance
Kaltura's EE&T segment generated revenue of $32,440,000 in the first quarter of 2024, up 4% year-over-year. Subscription revenue for this segment was $30,655,000, an increase of 3% compared to the same period in the prior year, while professional services revenue contributed $1,785,000, up 23% year-over-year.
The M&T segment reported revenue of $12,341,000 in the first quarter of 2024, representing a 3% year-over-year increase. Subscription revenue for this segment was $10,515,000, which was flat compared to the same period in the prior year, while professional services revenue contributed $1,826,000, up 28% year-over-year.
Gross Margins
Kaltura's overall gross margin for the first quarter of 2024 was 64%, up from 63% in the same period of the prior year. Within the EE&T segment, the gross margin was 73%, consistent with the first quarter of 2023. The subscription gross margin for this segment was 79%, up from 78% in the prior-year period. In the M&T segment, the gross margin was 41%, up from 38% in the first quarter of 2023. The subscription gross margin for this segment was 53%, down from 56% in the prior-year period.
The company's gross margins have been impacted by the resources required for the implementation of its TV Solution and Media Services offerings, which generally exceed those of its other offerings. This has resulted in a longer period 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 revenue comes from customers who choose to license Kaltura's offerings through private cloud and on-premise deployments, which also impacts the company's gross margin.
Liquidity
As of March 31, 2024, Kaltura had $73,800,000 in cash and marketable securities. The company consumed $1,146,000 in cash from operations during the first quarter of 2024, a significant improvement compared to $7,432,000 in the same period of the prior year.
Kaltura has a credit facility that provides for a senior secured term loan facility of $40,000,000 and a senior secured revolving credit facility of $10,000,000, which was subsequently amended to $25,000,000. As of March 31, 2024, the company had $34,125,000 of borrowings outstanding under the term loan facility and no balance outstanding under the revolving credit facility.
Outlook
For the second quarter of 2024, Kaltura expects subscription revenue to be between $39,600,000 and $40,300,000 and total revenue to be between $42,700,000 and $43,500,000. The company expects adjusted EBITDA in the second quarter to be between negative $600,000 and positive $400,000.
For the full year 2024, Kaltura reaffirmed its guidance, expecting total revenue to be between $173,700,000 and $176,700,000 and subscription revenue to be between $161,200,000 and $164,200,000. The company also continues to expect adjusted EBITDA for the year to be positive, with a high end of $1,000,000, compared to negative $2,500,000 in 2023. Kaltura also continues to forecast positive cash flow from operations for the full year.
Competitive Landscape and Growth Opportunities
Kaltura operates in a highly competitive market, facing competition from a range of players, including enterprise video platforms, webinar and virtual event providers, and specialized media and telecom solutions. However, the company believes its integrated platform, robust API ecosystem, and industry-specific solutions provide a differentiated offering that resonates with its customer base.
The company sees significant growth opportunities in the continued adoption of its video experience cloud solutions, driven by the increasing demand for video-based communication, collaboration, and learning in the hybrid work environment. Additionally, the rise of Gen Z and Millennial video-savvy employees, the need for cost savings through video platform consolidation, and the emergence of generative AI are expected to fuel further demand for Kaltura's offerings.
Risks and Challenges
Kaltura faces several risks and challenges, including the potential impact of macroeconomic conditions, such as budgetary constraints and elongated sales cycles, on its customer base. The company also operates in a rapidly evolving market, requiring ongoing investment in product development and innovation to maintain its competitive edge.
Furthermore, Kaltura's reliance on a limited number of large customers, particularly in the M&T segment, exposes the company to concentration risk. The company's ability to successfully integrate and leverage emerging technologies, such as generative AI, while managing the associated risks, will also be crucial to its long-term success.
Conclusion
Kaltura's position as a leading provider of video experience cloud solutions positions the company well to capitalize on the growing demand for video-based communication, collaboration, and learning in the hybrid work environment. While the company has faced some headwinds in recent years, its focus on improving operational efficiency, monetizing its existing customer base, and reallocating resources towards higher-ROI opportunities and markets suggests a path towards sustained revenue growth and profitability. Investors should closely monitor Kaltura's ability to execute on its strategic initiatives and navigate the evolving competitive landscape.