Executive Summary / Key Takeaways

• Kaltura is executing a pivot towards profitable growth, leveraging its unified video platform and increasing operational efficiency after navigating challenging market conditions in recent years.
• First quarter 2025 results demonstrated significant progress, with record total revenue ($47.0M, +5% YoY) and subscription revenue ($44.9M, +9% YoY), alongside record adjusted EBITDA ($4.1M, 7th consecutive positive quarter) and improving gross margins (70%).
• Key operational metrics like Annualized Recurring Revenue (ARR) at $174.8M (+7% YoY) and Net Dollar Retention (NDR) at 107% (highest since Q1 2022) indicate strengthening customer relationships and expansion within the existing base.
• Strategic investments in AI, such as the Genie agents and Content Lab, are expected to drive future upsell opportunities and improve operational efficiency, positioning Kaltura to capitalize on digital and AI transformation tailwinds.
• While Q2 2025 guidance reflects typical seasonality and anticipated Media & Telecom churn, the full-year 2025 outlook projects continued revenue growth (1-2% total, 2-3% subscription) and a doubling of adjusted EBITDA margin, with management targeting double-digit growth and a "Rule of 30" by 2028 or sooner.

Setting the Scene: Kaltura's Video Experience Cloud and Strategic Evolution

Kaltura, Inc. (NASDAQ:KLTR), founded in 2006, pioneered the concept of treating video not merely as content, but as a core data type within organizational workflows. This foundational principle underpins its Video Experience Cloud, a comprehensive platform offering Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions for live, real-time, and on-demand video. The company operates across two primary segments: Enterprise, Education, and Technology (EET) and Media and Telecom (MT), serving a wide array of use cases from corporate training and marketing to Cloud TV and virtual events.

Kaltura's initial strategy centered on a "land and expand" approach, establishing a foothold within organizations and growing revenue by increasing usage and cross-selling additional products. A significant expansion came around 2020 with the move into the real-time conferencing market, broadening its capabilities beyond traditional VOD and live streaming. Following its 2021 IPO, however, Kaltura, like much of the industry, faced "very, very tough years" marked by post-COVID adjustments and economic headwinds that pressured bookings and retention.

In response, Kaltura embarked on a strategic pivot, prioritizing operational efficiency, disciplined resource allocation towards higher ROI opportunities, and deepening its engagement with the existing customer base. This involved a purposeful reduction in lower-margin professional services revenue in favor of faster-deploying, higher-margin subscription offerings. These efforts have begun to yield tangible results, positioning Kaltura on a path towards sustainable profitable growth.

Technological Edge: Powering Experiences with AI and a Unified Platform

At the heart of Kaltura's offering is its robust, API-first architecture, designed for deep integration into diverse business workflows. This technical foundation enables Kaltura to offer a unified platform that consolidates various video needs, contrasting with fragmented point solutions offered by many competitors. This consolidation not only simplifies operations for customers but also creates a rich pool of data – video content, metadata, and analytics – that Kaltura is uniquely positioned to leverage.

A critical differentiator and a major area of investment is the integration of Artificial Intelligence, particularly generative AI. Kaltura views AI as a transformative force that will enable the automatic production of hyper-personalized and contextually relevant video experiences, significantly expanding opportunities for video creation, consumption, and monetization.

Recent technological advancements highlight this focus:

• AI-Infused Genie Agents: Kaltura has launched and enhanced "Genie" agents (like Class Genie, Work Genie, TV Genie) designed to create individualized experiences. These agents tailor content, generate video snippets, quizzes, and learning paths by drawing on institutional data. Early tests with beta customers show promising results, with 85% of video content recommended by Genie not previously seen by users, demonstrating its ability to surface value from underutilized assets.
• Content Lab: This component utilizes Gen AI for content repurposing, including automated clip creation, quiz generation, chaptering, and summaries, streamlining content workflows and driving discoverability.
• AI Transcription Engine: Kaltura's internally developed AI transcription service, deployed with over 200 customers, provides improved results at lower operational costs, contributing directly to gross margin improvement. Plans include expanding language support and adding live captioning.
• Workflow Integrations: AI features are integrated across Kaltura's product portfolio (VCMS, portals, events, virtual classroom, TVCMS), enabling enhanced automation, interactivity, and personalized recommendations.

The "so what" for investors is clear: Kaltura's technological differentiation, particularly its AI roadmap built on a unified, data-rich platform, strengthens its competitive moat. These capabilities drive higher customer engagement, enable upsell opportunities (with expectations to start closing AI deals in coming quarters), improve operational efficiency (e.g., lower transcription costs, higher gross margins), and position the company to capture a larger share of the growing market for AI-infused video experiences.

Competitive Landscape: Navigating a Fragmented Market

The video technology market is characterized by its nascent stage and high fragmentation, with numerous players competing across different niches. Key publicly traded competitors include broad collaboration platforms like Zoom Video Communications (ZM), video hosting specialists like Vimeo (VMEO), and enterprise video/OTT providers like Brightcove (BCOV).

Kaltura's strategic positioning centers on offering a unified, deeply integrated platform that addresses a wide array of enterprise video needs, aiming to be an alternative to using multiple siloed point solutions. This approach is a key competitive advantage, enabling customers to avoid content and data silos, broken workflows, and unnecessary costs.

Comparing Kaltura to its rivals reveals distinct strengths and weaknesses:

• Against ZM: While ZM dominates the video conferencing space with superior scale, brand recognition, and profitability (ZM's TTM Gross Margin ~76%, Operating Margin ~17%, Net Margin ~22% vs. KLTR's TTM Gross Margin ~68%, Operating Margin ~-10%, Net Margin ~-11%), Kaltura competes in overlapping enterprise communication and training markets. Kaltura's strength lies in its specialized video management and delivery capabilities, deeper workflow integrations, and AI-enhanced media services, which can offer advantages in specific enterprise use cases and content-centric applications.
• Against VMEO: VMEO focuses heavily on video hosting and creative tools, with a stronger appeal to SMBs and creative professionals. While VMEO has shown faster recent revenue growth (VMEO's 2024 Revenue Growth ~7% vs. KLTR's 2024 ~2%), Kaltura's enterprise focus yields significantly higher average revenue per customer (ARPU) and stronger gross margins (KLTR's TTM Gross Margin ~68% vs. VMEO's 2024 ~78% - Note: VMEO's reported 2024 GM is higher than KLTR's TTM, but KLTR's Q1 2025 GM reached 70%). Kaltura's broader platform, including virtual events and TV solutions, provides a wider scope for enterprise consolidation.
• Against BCOV: BCOV competes in enterprise video and OTT, but has faced profitability challenges (BCOV's 2023 Gross Margin ~62%, Operating Margin ~-11%). Kaltura's operational efficiencies have resulted in better gross margins and cash flow generation (KLTR's Q1 2025 Adj. EBITDA $4.1M vs. BCOV's 2023 Operating Cash Flow $2M), positioning it more favorably in terms of financial health.

Kaltura's ability to drive customer consolidation around its platform is a critical moat, leading to higher retention rates and increasing average ARR per customer. While precise market share figures for all niche competitors are not publicly detailed, Kaltura's strong performance in specific verticals like education and its growing average deal size suggest effective penetration within its target enterprise market. The company is also strategically regrowing its sales force, with a focus on reaccelerating new customer acquisition in both enterprise and previously less-emphasized areas like M&T and education, aiming to shift the bookings mix back towards a more balanced split between upsells and new logos over time.

Financial Performance: A Turn Towards Profitability

Kaltura's recent financial performance reflects the impact of its strategic adjustments and improving market conditions. The first quarter of 2025 marked a significant step forward:

• Revenue Growth: Total revenue reached a record $47.0 million, up 5% year-over-year. Subscription revenue, the core of Kaltura's business, grew even faster at 9% year-over-year to $44.9 million. This marked the third consecutive quarter of increasing year-over-year revenue growth, indicating a positive trajectory after a period of slower expansion. Professional services revenue continued its expected decline, falling 42% year-over-year to $2.1 million, as the company focuses on faster deployments and higher-margin subscription business.
• Profitability: Gross profit increased by 14% year-over-year to $32.7 million, resulting in a gross margin of 70%, a notable improvement from 65% in Q1 2024. Subscription gross margin also improved to 77% from 72%. This margin expansion is attributed to enhanced efficiencies in production and professional services costs, including benefits from the new AI transcription engine. Adjusted EBITDA reached a record $4.1 million, representing the seventh consecutive quarter of adjusted EBITDA profitability, demonstrating the impact of operating expense management. General and administrative expenses saw a significant 15% year-over-year decrease, partly due to lower compensation costs and the absence of a one-time expense incurred in the prior year.

• Operational Metrics: Annualized Recurring Revenue (ARR) grew 7% year-over-year to a record $174.8 million, and Remaining Performance Obligations (RPO) increased 12% year-over-year to $184.9 million, signaling future revenue visibility. Net Dollar Retention (NDR) climbed to 107%, its highest level since Q1 2022, reflecting successful expansion within the existing customer base. The average ARR per customer also reached a new record high, driven by customer consolidation around Kaltura's platform.

While the company reported a GAAP net loss of $1.1 million in Q1 2025, this was a substantial improvement from the $11.1 million net loss in Q1 2024. Financial income, net saw a significant increase, primarily due to favorable exchange rate differences.

Liquidity and Capital Allocation

As of March 31, 2025, Kaltura held $80.9 million in cash and marketable securities. The company's primary liquidity needs are for working capital, capital expenditures, and general corporate purposes. Management believes current cash on hand and the $25.0 million available under its Revolving Credit Facility are sufficient to meet needs for at least the next 12 months.

Cash flow from operations in Q1 2025 showed a net use of $1.0 million, similar to the prior year period. This was influenced by the net loss, non-cash adjustments, and changes in operating assets and liabilities, including a decrease in deferred revenue and increases in receivables and prepaid expenses, partially offset by an increase in trade payables. Investing activities provided $2.2 million in cash, primarily from marketable securities maturities. Financing activities used $2.6 million, largely driven by common stock repurchases and cash settlements of equity awards, partially offset by proceeds from stock option exercises.

Under its 2025 Repurchase Program, Kaltura repurchased 1.18 million shares for $2.3 million in Q1 2025, with approximately $14.1 million remaining authorized. The company also has outstanding debt under a Term Loan Facility, with approximately $31.7 million outstanding as of March 31, 2025, and scheduled quarterly principal payments through December 2026. Kaltura was in compliance with its debt covenants.

Outlook and Forward Momentum

Kaltura's guidance for the coming periods reflects both typical seasonal patterns and management's cautious optimism regarding the improving business trajectory, balanced against lingering macroeconomic uncertainty.

For the second quarter of 2025, Kaltura anticipates a sequential decline in revenue, consistent with historical trends driven by lower Q1 bookings and the timing of on-premise revenue recognition. This sequential dip is expected to be more pronounced this year due to higher Q1 on-premise revenue and anticipated Media & Telecom churn in the first half.

• Q2 2025 Guidance: Subscription Revenue between $40.8 million and $41.6 million (-1% to +1% YoY); Total Revenue between $43.4 million and $44.2 million (-1% to flat YoY); Adjusted EBITDA between $1.5 million and $2.5 million.

Looking at the full year 2025, management is maintaining its previously provided revenue guidance despite the Q1 outperformance, citing the uncertain macro outlook. However, they are slightly increasing the adjusted EBITDA guidance, reflecting confidence in continued operational efficiencies.

• Full Year 2025 Guidance: Subscription Revenue between $170.4 million and $173.4 million (+2% to +3% over 2024); Total Revenue between $179.9 million and $182.9 million (+1% to +2% YoY); Adjusted EBITDA between $13.5 million and $15.5 million.

This adjusted EBITDA guidance implies a doubling of the adjusted EBITDA margin from 2024 levels. Kaltura also expects to generate positive cash flow from operations for the full year 2025, at a level similar to adjusted EBITDA, with the majority expected in the second half due to seasonality.

Management forecasts a year-over-year regrowth in new bookings for the full year, driven by customer consolidation, the maturity of newer products, the appeal of Gen AI capabilities, expansion within the existing customer base, and the gradual regrowth of the sales force. They also expect consolidated gross retention to bounce back in the second half of 2025 after the anticipated H1 dip related to M&T churn.

Beyond 2025, Kaltura targets a modestly accelerated growth profile for revenue, adjusted EBITDA, and cash flow from operations. The long-term goal is to achieve double-digit revenue growth and a "Rule of 30" (revenue growth + adjusted EBITDA margin) by 2028 or sooner, a level the company has achieved in the past.

Risks and Challenges

While the outlook is improving, Kaltura faces several risks. The volatile macroeconomic climate and geopolitical instability, particularly in Israel where a significant portion of operations are based, could adversely affect business and access to capital. Competition in the fragmented market remains intense, requiring continuous innovation to maintain technological relevance and competitive pricing. The pace of technological change, especially in AI, necessitates ongoing investment to avoid obsolescence. Dependency on existing customer demand and the ability to expand within that base is crucial, as is the successful acquisition of new logos. The anticipated M&T churn in the first half of 2025, although expected to be temporary, could impact near-term revenue growth. Data privacy, security threats, and compliance with evolving regulations also pose ongoing challenges.

Conclusion

Kaltura is demonstrating tangible progress in its strategic pivot towards profitable growth. The first quarter of 2025 showcased accelerating revenue growth, record profitability, and strengthening customer metrics like NDR and average ARR. Leveraging its unified platform, deep workflow integrations, and significant investments in AI, Kaltura is positioning itself to capitalize on emerging market tailwinds and expand within its high-value customer base.

While near-term guidance reflects typical seasonality and segment-specific churn, the full-year outlook points to continued revenue expansion and substantial profitability improvement. The long-term target of achieving double-digit growth and a Rule of 30 by 2028 underscores management's confidence in the business model and market opportunity. For investors, Kaltura represents a potential opportunity to participate in a turnaround story, betting on the company's technological leadership, operational discipline, and ability to execute against its strategy in a dynamic video technology market. The key factors to watch will be the successful monetization of AI initiatives, the rebound in gross retention in the second half, and the ability to accelerate new customer acquisition.