What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-24 · 106 added, 115 removed, 363 unchanged (38% of the section changed)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

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.

3 unchanged sentences

Our mission is to power any video experience, for any organization.

Kaltura's "Video Experience Cloud" powers live, real-time, and on-demand video for virtual and hybrid events, webinars, online learning, and video portals for companies across all industries.

We also offer industry-specific video solutions for the Education and Media and Telecom industries.

The platform includes an extensive array of Application Programming Interfaces ("APIs") and developers tools that enable developers to build other video workflows, products, industry solutions.

Our products are used by leading brands across all industries, reaching millions of users, at home, at school and at work, for communication, collaboration, virtual and hybrid events, marketing, sales, customer care, learning, and entertainment experiences.

Our Video Experience Cloud powers live, real-time, and on-demand video for webinars, events, virtual classrooms, and video sites.

We also offer robust Application Programming Interfaces ("APIs") and industry solutions for education and media and telecom.

Our Video Experience Cloud is used by leading brands across all industries, reaching millions of users, at home, at school and at work, for communication, collaboration, marketing, sales, customer care, learning, and entertainment experiences.

With our flexible offerings, customers can experience the benefits of video across a wide range of use cases, while customizing their deployments to meet their individual, dynamic needs.

4 unchanged sentences

The 2022 Restructuring Plan included, among other things, a workforce reduction of approximately 10% of our employees.

In connection with the 2022 Restructuring Plan, during the year ended December 31, 2022, we recorded expenses of $1,238, all for one-time employee termination benefits.

In connection with the 2022 Restructuring Plan, during the year ended December 31, 2022, we recorded expenses of $1.2 million, all for one-time employee termination benefits.

The 2022 Restructuring Plan was substantially completed in 2022.

On January 3, 2023, our Board of Directors approved a re-organization plan (the “2023 Reorganization Plan” and together with the 2022 Restructuring Plan, the “Reorganization Plans”) that included, among other things, downsizing an additional 11% of our workforce and adapting our organizational structure, roles, and responsibilities accordingly.

The total cost reduction from the downsizing in connection with the 2023 Reorganization Plan on an annualized basis is expected to be approximately $16 million.

The 2023 Reorganization Plan is focused on realigning our operations to further increase efficiency and productivity, in reaction to the current macro-economic climate.

The 2023 Reorganization Plan's main objectives are to position the Company for lower demand, spend, and available budgets across our market segments, align our business strategy in light of these market conditions and support our growth initiatives and return path to profitability.

In connection with the 2023 Reorganization Plan, we expect to incur pre-tax charges of approximately $1 million, primarily for severance and related costs, all of which are expected to be expensed in the first quarter of 2023.

All of these charges are expected to result in cash expenditures.

The 2023 Reorganization Plan is expected to be substantially completed in the first half of 2023.

See Note 18, Restructuring Activities, for further information.

The total accumulated cost reduction from the downsizing in connection with the 2023 Reorganization Plan for 2023 and thereafter on a go-forward annualized basis is expected to be approximately $16 million.

The 2023 Reorganization Plan focused on realigning our operations to further increase efficiency and productivity, in reaction to the current macro-economic climate.

The 2023 Reorganization Plan's main objectives were to position the Company for lower demand, spend, and available budgets across our market segments, align our business strategy in light of these market conditions and support our growth initiatives and return path to profitability.

In connection with the 2023 Reorganization Plan, we incurred pre-tax charges of approximately $1 million as of December 31, 2023.

The 2023 Reorganization Plan was substantially completed in the first half of 2023.

See Note 18, Restructuring Activities, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

We organize our business into two reporting segments:

4 unchanged sentences

Includes revenue from all of our products, industry solutions for education customers, and Media Services (except for Media and Telecom customers), as well as associated professional services for those offerings.

Subscription revenues are primarily generated on a per full-time equivalent basis for on-demand and live products and solutions, per host basis for real-time-conferencing products and solutions, and per participant basis for the Hybrid and Virtual Events product (which intersects on-demand, live, and real-time-conferencing video).

Subscription revenues are primarily generated on a per full-time equivalent basis for on-demand and live products and solutions, per host basis for real-time-conferencing products and solutions, and per participant basis for Events product (which intersects on-demand, live, and real-time-conferencing video).

Contracts are generally 12 to 24 months in length.

1 unchanged sentence

• Media & Telecom :

Includes revenue from our Cloud TV, Streaming Platform, and Media Services for media and telecom customers, as well as associated professional services for those offerings.

Includes revenue from our TV Solution and Media Services for media and telecom customers, as well as associated professional services for those offerings.

Revenues are generated on a per end-subscriber basis for telecom customers, and on a per video play basis for media customers.

15 unchanged sentences

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.

Our ability to expand within our existing customer base is reflected by our Net Dollar Retention Rate (as defined below).

For the years ended December 31, 2022 and 2021, our Net Dollar Retention Rate was 100% and 118%, respectively.

For the years ended December 31, 2023 and 2022, our Net Dollar Retention Rate was 100%.

We also grew our Annualized Recurring Revenue (as defined below), by 3% in the three months ended December 31, 2023, compared to the three months ended December 31, 2022, demonstrating our ability to land new customers with higher spending levels and increase revenue from our existing customers.

2 unchanged sentences

In addition, we are investing in low-touch and self-serve offerings for smaller customers.

Impact of COVID-19/Macroeconomic Events

Prior to the COVID-19 pandemic, the market demand for our solutions was growing at a robust rate, with numerous tailwinds for long-term growth, and that demand accelerated mainly in 2021 as a result of the pandemic.

As the effects of the COVID-19 pandemic subsided in 2022 and the worsening economic climate and recession headwinds led to lower demand, we did not see this trend continue in 2022 and do not expect it to continue in 2023.

Moreover, due to the worsening economic climate we expect to face lower demand, spend, and available budgets across our market segments, and other adverse effects, although we cannot predict nor fully assess the actual impact, length and depth of such downturn.

In order to adapt to these changes, we have adopted the Reorganization Plans as elaborated above, that included, among other things, downsizing our workforce and adapting our organizational structure, roles, and responsibilities accordingly.

In particular, the 2023 Reorganization Plan is focused on realigning our operations to further increase efficiency and productivity, in reaction to the current macro-economic climate.

As market fluctuations have not yet stabilized, it is not possible at this time to estimate the ultimate impact and results of these developments on our business, financial condition and results of operations.

For additional information, see Part I, Item 1A.

“Risk Factors - Risks Related to Our Business and Industry—We may not be able to successfully assess or mitigate the worsening economic climate and its direct and indirect impact on our business and operations, including our customers and vendors, or to correctly predict the duration and depth of the current instability of the global economy and take the right or sufficient measures to address it, and as a result our business, financial condition, results of operations and prospects would be adversely affected” and “Risk Factors—Risks Related to Our Business and Industry—The COVID-19 pandemic could adversely affect our business, financial condition and results of operations.”

Key Factors Affecting Our Performance

2 unchanged sentences

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.

In 2021 and 2022 we expanded the capabilities of our Virtual & Hybrid Events product to support a broader range of event types and use cases and fitted them to also address low-touch and self-serve sales.

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 GenAI powered capabilities that increase the productivity in creating content and setting up events and also foster user engagement.

We believe these products present a significant long-term opportunity, and we intend to harness our growing presence with them.

2 unchanged sentences

We are focused on continuing to grow the number of customers that use our solutions.

Additionally, we are investing in low-touch and self-serve offerings that can be sold by inside-sales teams or completely online, as well as in distribution channels.

We believe this will enable us to efficiently acquire smaller customers across all industries – 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.

Our focus remains on bringing in new customers from enterprise accounts, as well as expanding our small and medium enterprise ("SME") offerings that can be sold by inside-sales teams.

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

11 unchanged sentences

The key financial and operating metrics we use are:

Year Ended December 31,

For the Year Ended December 31,

2023 2022 2021

(in thousands)

(in thousands, except percentages)

Annualized Recurring Revenue $ 164,723 $ 159,238 $ 150,800

29 unchanged sentences

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, abandonment costs, gain from sale of property and equipment, facility exit and transition costs, restructuring charges and other non-recurring operating 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, gain from sale of property and equipment, facility exit and transition costs, restructuring charges and other non-recurring operating expenses.

Adjusted EBITDA is a supplemental measure of our performance, is 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.

21 unchanged sentences

2023 2022 2021

(in thousands)

Net loss $ (46,366) $ (68,495) $ (59,351)

Financial expenses, net (a)

Financial expenses (income), net (a)

(1,200) 4,248 20,106

3 unchanged sentences

Non-cash stock-based compensation expense 29,980 23,645 17,065

Abandonment costs (b)

Gain on sale of property and equipment (c)

Other operating expenses (d)

Facility exit and transition costs (e)

Restructuring (f)

Gain on sale of property and equipment (b)

Other operating expenses (c)

Facility exit and transition costs (d)

Restructuring (e)

War related costs (f)

Adjusted EBITDA $ (2,500) $ (28,265) $ (12,231)

(a) The years ended December 31, 2022, 2021 and 2020 include $0, $15.0 million and $41.5 million , respectively, of remeasurement of warrants to fair value and $2.3 million, $3.0 million and $4.1 million, respectively, of interest expenses.

(b) The year ended December 31, 2020 includes a $4.0 million one-time expense related to the abandonment of data center equipment in connection with our transition to public cloud infrastructure.

(c) The year ended December 31, 2021 includes a gain on sale of data center equipment in connection with our transition to public cloud infrastructure.

(d) Other operating expenses in the year ended December 31, 2021 consisted of expenses related to the forgiveness of loans to certain of our directors and executive officers in connection with the public filing of the registration statement in connection with our initial public offering.

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

(f) The year ended December 31, 2022, include one-time employee termination benefits incurred in connection with the 2022 Restructuring Plan.

(a) The year ended December 31, 2021 includes $15.0 million of remeasurement of warrants to fair value and $3.2 million, $2.3 million and $3.0 million, respectively, of interest expenses.

(b) The year ended December 31, 2021 includes a gain on sale of data center equipment in connection with our transition to public cloud infrastructure.

(c) Other operating expenses in the year ended December 31, 2021 consisted of expenses related to the forgiveness of loans to certain of our directors and executive officers in connection with the public filing of the registration statement in connection with our initial public offering.

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

(e) 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 .

(f) The year ended December 31, 2023 includes costs related to conflicts in Israel, attributable to temporary relocation of key employees from Israel for business continuity purposes, purchase of emergency equipment for key employees for business continuity purposes, and charitable donation to communities directly impacted by the war.

Components of Results of Operations

Our revenues are mainly comprised of revenue from SaaS and PaaS subscriptions.

14 unchanged sentences

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, 2021 to the year ended December 31, 2022.

Cost of revenue increased in absolute dollars from the year ended December 31, 2022 to the year ended December 31, 2023.

For the years ended December 31, 2023 and 2022, our cost of revenue was $62,938 and $61,871, respectively.

1 unchanged sentence

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 SaaS and PaaS subscriptions, software licenses, maintenance and support and 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 our M&T segment have been negatively impacted due to the resources required for implementation of our TV Solution and Media Services for TV experiences, which generally exceed those of our other offerings, resulting 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 our offerings through private cloud and on-premise deployments, which also impacts our gross margin.

In the long-term, we expect the margins for this segment to improve due to the following:

expected increase in the ratio of subscription revenue to professional services with scale, improved efficiencies of both production and professional services costs, and an increase in the proportion of revenues from media customers, which generally entail simpler deployments compared to telecom customers.

However, in the near and medium term, our gross margins in our M&T segment are expected to vary from period to period based on the onboarding of new customers, as well as the timing and aggregate usage of our solutions by such customers.

For the years ended December 31, 2023, 2022 and 2021, our gross margins were 64% (73% for subscription and (51)% for professional services), 63% (74% for subscription and (33)% for professional services) and 62% (72% for subscription and (12)% for professional services), respectively.

4 unchanged sentences

Additional expenses include consulting and professional fees for third-party development resources and software subscriptions.

We expect our research and development expenses to decrease in both absolute dollars and as a percentage of revenue for the near and medium-term, as we implement our Reorganization Plans, improving efficiency and productivity while further dedicating substantial resources to develop, improve, and expand the functionality of our solutions.

We expect our research and development expenses to remain constant as a percentage of revenue for the near and medium-term, as we continue to dedicate substantial resources to develop, improve, and expand the functionality of our solutions.

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.

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.

Additional expenses include marketing program costs and amortization of acquired customer relationships intangible assets.

We expect our sales and marketing expenses to decrease both on an absolute dollar basis and as a percentage of revenue for the near and medium-term, as we implement our Reorganization Plans, improving efficiency and productivity while we continue our focused investment to support our growth.

We expect our sales and marketing expenses to be relatively stable on an absolute dollar basis.

General and Administrative Expenses

2 unchanged sentences

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

Financial Expenses, Net

Financial expenses, net consists of interest expense accrued or paid on our indebtedness and the change in the fair value of warrants to purchase our preferred and common stock in the comparative period, net of interest income earned on our cash balances and marketable securities.

Financial expenses, net also includes foreign exchange gains and losses and bank fees.

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.

10 unchanged sentences

Results of Operations

The following table summarizes key components of our 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.

12 unchanged sentences

Restructuring 973 1,238 (265) (21) %

Other operating expenses — 1,724 (1,724)

Total operating expenses 150,889 163,319 (12,430) (8) %

Loss from operations 38,655 56,379 (17,724) (31) %

Financial expenses, net 4,248 20,106 (15,858) (79) %

Financial expenses (income), net (1,200) 4,248 (5,448) (128) %

Loss before provision for income taxes 37,455 60,627 (23,172) (38) %

3 unchanged sentences

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

• Enterprise, Education & Technology (71% and 72% of revenue for the year ended December 31, 2022 and 2021, respectively):

• Enterprise, Education & Technology (71% of revenue for the year ended December 31, 2023 and 2022):

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 (29% and 28% of revenue for the year ended December 31, 2022 and 2021, respectively):

• Media & Telecom (29% of revenue for the year ended December 31, 2023 and 2022):

Our M&T segment primarily represents revenues from our TV Solution and Media Services sold to media and telecom customers.

14 unchanged sentences

Total EE&T revenue increased by $5.0 million , or 4%, to $125.2 million for the year ended December 31, 2023, from $120.2 million for the year ended December 31, 2022.

The increase is mainly attributable to a $5.0 million increase in revenue from new customers, partially offset by a $3.7 million decrease from existing customers.

The revenue decrease is partially attributable a reduction of approximately $1.6 million as a result of currency headwinds that occurred during the year.

The increase is mainly attributable to a $3.8 million increase in revenue from new customers, and a $1.2 million increase from existing customers.

EE&T subscription revenue increased by $7.0 million, or 6%, to $120.6 million for the year ended December 31, 2023, from $113.6 million for the year ended December 31, 2022.

2 unchanged sentences

Enterprise, Education & Technology Gross Profit

EE&T gross profit increased by $7.8 million, or 9%, to $91.6 million for the year ended December 31, 2023, from $83.8 million for the year ended December 31, 2022.

This increase was mainly due to a $5.0 million increase in revenue, and lower compensation costs mainly as a result of our Reorganization Plans.

EE&T subscription gross profit increased by $7.2 million, or 8%, to $95.2 million for the year ended December 31, 2023, from $88.0 million for the year ended December 31, 2022.

This increase was mainly due to a $4.7 million increase in revenue, partially offset by a $1.4 million increase in production costs.

EE&T professional services gross loss increased by $3.7 million, or 730%, to $4.2 million for the year ended December 31, 2022, from a gross loss of $0.5 million for the year ended December 31, 2021 .

This decrease was mainly due to a $3.5 million decrease in professional services revenue.

This increase was mainly due to a $7.0 million increase in revenue while costs associated with subscription remained at the same level as in the year ended December 31, 2022.

EE&T professional services gross loss decreased by $0.7 million, or 15%, to $3.5 million for the year ended December 31, 2023, from a gross loss of $4.2 million for the year ended December 31, 2022 .

This decrease was mainly due to a $2.1 million decrease in professional services revenue offset by lower compensation costs mainly as a result of our Reorganization Plans.

Media & Telecom

12 unchanged sentences

Media & Telecom Revenue

M&T revenue increased by $2.5 million, or 6%, to $48.6 million for the year ended December 31, 2022, from $46.1 million for the year ended December 31, 2021.

The increase is mainly attributable to a $1.4 million increase in revenue from existing customers and a $1.1 million increase in revenue from new customers.

The increase in revenue from existing customers also embodies an approximate revenue reduction of $2.5 million as a result of currency headwinds that occurred during the year.

M&T revenue increased by $1.4 million, or 3%, for the year ended December 31, 2023, from $48.6 million for the year ended December 31, 2022.

The increase is mainly attributable to an increase in revenue from existing customers.

M&T subscription revenue increased by $3.2 million, or 8%, to $42.2 million for the year ended December 31, 2023, from $38.9 million for the year ended December 31, 2022.

The increase is mainly attributable to a $0.5 million increase related to new customers, and a $2.3 million increase from existing customers.

The increase in M&T subscription revenue from existing customers also embodies an approximate revenue reduction of $2.1 million as a result of currency headwinds that occurred during the year.

M&T professional services revenue decreased by $1.8 million, or 19%, to $7.9 million for the year ended December 31, 2023, from $9.7 million for the year ended December 31, 2022.

Media & Telecom Gross Profit

M&T gross profit increased by $4.6 million, or 25%, to $23.1 million for the year ended December 31, 2022, from $18.5 million for the year ended December 31, 2021.

This increase was mainly due to a $2.5 million increase in revenue, and a 8 percentage point increase in gross margin to 48% for the year ended December 31, 2022 from 40% for the year ended December 31, 2021.

The increase in gross margin was attributable primarily to improvement in production costs and higher efficiency of our operations teams leading to lower compensation costs as a percentage of revenue.

M&T subscription gross profit increased by $4.0 million, or 19%, to $24.4 million for the year ended December 31, 2022, from $20.4 million for the year ended December 31, 2021.

M&T professional services gross loss decreased by $0.6 million, or 34%, to a gross loss of $1.2 million for the year ended December 31, 2022, from a gross loss of $1.9 million for the year ended December 31, 2021.

M&T gross profit decreased by $2.5 million, or 11%, to $20.6 million for the year ended December 31, 2023, from $23.1 million for the year ended December 31, 2022.

This decrease was mainly due to a decrease in gross margin to 41% for the year ended December 31, 2023 from 48% for the year ended December 31, 2022.

The decrease in gross margin was attributable primarily to an increase in production cost as a percentage of subscription revenue partially offset by a $2.5 million increase in revenue.

M&T subscription gross profit decreased by $1.0 million, or 4%, to $23.4 million for the year ended December 31, 2023, from $24.4 million for the year ended December 31, 2022.

M&T professional services gross loss increased by $1.5 million, or 120%, to a gross loss of $2.7 million for the year ended December 31, 2023, from a gross loss of $1.2 million for the year ended December 31, 2022.

Operating Expenses

8 unchanged sentences

Total research and development expenses $ 52,400 $ 57,387 $ (4,987) (9) %

Research and development expenses increased by $9.0 million, or 19%, to $57.4 million for the year ended December 31, 2022, from $48.4 million for the year ended December 31, 2021.

The increase was primarily due to a $4.1 million increase in compensation which mainly related to higher headcount and increased stock-based compensation expenses, a $1.6 million increase in subcontractors and consultants expense mainly due to fewer employees and a $2.5 million increase in IT related expenses.

Research and development expenses decreased by $5.0 million, or 9%, to $52.4 million for the year ended December 31, 2023, from $57.4 million for the year ended December 31, 2022.

The decrease was primarily due to a $6.4 million decrease in compensation which mainly related to lower headcount as a result of our Reorganization Plans, partially offset by a $1.1 million increase in subcontractors and consultants as a result of outsourcing part of the efforts related to specific projects.

Sales and Marketing Expenses

7 unchanged sentences

Total sales and marketing expenses $ 48,798 $ 59,280 $ (10,482) (18) %

S ales and marketing expenses increased by $13.5 million, or 29%, to $59.3 million for the year ended December 31, 2022, from $45.8 million for the year ended December 31, 2021.

The increase was primarily due to a $9.2 million increase in compensation related to higher headcount, a $1.6 million increase in amortization of deferred commission expenses driven by accumulated higher bookings and a $1.3 million increase in travel expenses as a result of the gradual return to pre-COVID-19 pandemic levels of routine air travel among our sales personnel.

S ales and marketing expenses decreased by $10.5 million, or 18%, to $48.8 million for the year ended December 31, 2023, from $59.3 million for the year ended December 31, 2022.

The decrease was primarily due to a $9.5 million decrease in compensation related to lower headcount as result of our Reorganization Plans and a $1.8 million decrease in other marketing expenses , partially offset by a $0.7 million increase in amortization of deferred commission expenses driven by accumulated higher bookings from previous years being amortized in 2023.

General and Administrative Expenses

4 unchanged sentences

Professional fees and insurance 4,510 6,208 (1,698) (27) %

IT related 2,278 2,701 (423) (16) %

Human resources related 1,913 1,861 52 3 %

Subcontractors and consultants 1,074 1,343 (269) (20) %

Travel and entertainment 741 427 314 74 %

Gain on sale of property and equipment — (757) 757

Other 2,331 2,095 236 11 %

1 unchanged sentence

General and administrative expenses increased by $3.3 million or 7% , to $48.7 million for the year ended December 31, 2023, from $45.4 million for the year ended December 31, 2022.

The increase was primarily due to a $2.4 million increase in compensation related to higher headcount and increased stock-based compensation expenses, a $2.0 million increase in professional fees and insurance to support our operation as a public company and a $0.8 million one-time gain from the sale of data center equipment during the year ended December 31, 2021.

The increase was primarily due to a $5.1 million increase in compensation related to increased stock-based compensation expenses due to equity grants made to our executives partially offset by $1.7 million decrease in professional fees and insurance.

Restructuring

Restructuring expenses were $1.2 million for the year ended December 31, 2022, due to the 2022 Restructuring Plan being implemented in the third quarter of 2022 and primarily consisting of employee severance and related costs.

See Note 18 to our consolidated financial statements for additional details regarding the 2022 Restructuring Plan.

Other Operating Expenses

Other operating expenses were $1.7 million during the year ended December 31, 2021, and mainly related to the forgiveness of loans to certain of our directors and executive officers immediately prior to the public filing of the registration statement for our IPO, including related tax gross-up amounts payable by us to such directors and executive officers.

We did not incur other operating expenses during the year ended December 31, 2022.

Financial Expenses, net

Financial expenses, net decreased by $15.9 million, or 79%, to $4.2 million for the year ended December 31, 2022, from $20.1 million for the year ended December 31, 2021.

The decrease was primarily due to a $15.0 million remeasurement of warrants to fair value recorded in the year ended December 31, 2021, $1.0 million interest income associated with our investments, and $0.7 million lower interest expense due to repayment of our Revolving Credit Facility during December 2021 and principal repayments.

Restructuring expenses were $1.0 million for the year ended December 31, 2023 due to the 2023 Reorganization Plan being implemented in the first quarter of 2023 and consisting of employee severance and related costs.

Restructuring expenses were $1.2 million for the year ended December 31, 2022, due to the 2022 Restructuring Plan being implemented in the third quarter of 2022 and consisting of employee severance and related costs.

See Note 18, Restructuring Activities, to our consolidated financial statements for additional details.

Financial Expenses (Income), net

Financial expenses (income), net decreased by $5.4 million, or 128%, to $1.2 million income, net for the year ended December 31, 2023, from $4.2 million of expense, net for the year ended December 31, 2022.

The decrease was mainly related to foreign currency translation adjustments, net.

Provision for Income Taxes

4 unchanged sentences

Our principal sources of liquidity are expected to be our cash on hand and borrowings available under our Revolving Credit Facility.

During December 2021, we repaid in full the outstanding principal balance under our Revolving Credit Facility.

As of December 31, 2023, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million is available for future borrowings.

2 unchanged sentences

“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.

1 unchanged sentence

however, such financing may not be available on favorable terms, or at all.

In particular, the widespread pandemic related to COVID-19 and its variants, the ongoing conflict between Russia and Ukraine and rising inflation and interest rates have resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital.

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.

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”).

In June 2021, we entered into an amendment to the Credit Agreement (the “First Amendment”) to, among other things, increase commitments under the Revolving Credit Facility to $35.0 million, and make certain other changes to certain covenants and definitions.

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.

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 are subject to interest, determined as follows:

(a) Eurodollar loans accrue interest at a rate per annum equal to the Eurodollar rate determined for such day plus a margin of 3.50% (the Eurodollar rate is calculated as described in the Credit Agreement, subject to a 1.00% floor, divided by 1.00 minus the maximum effective reserve percentage for Eurocurrency funding), and (b) Alternate Base Rate (“ABR”) loans accrue interest at a rate per annum equal to the ABR plus a margin of 2.50% (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).

In addition to paying interest on the principal amounts outstanding under the Credit Facilities, we are required to pay a commitment fee under the Revolving Credit Facility on unused amounts at a rate of 0.25% per annum.

We are also required to pay customary letter of credit and agency fees.

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, 2023, the current rate of interest under the Credit Facilities was equal to a rate per annum of 7.98%, consisting of 5.32% (the 3-month SOFR rate as of December 31, 2023), 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.

1 unchanged sentence

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 Eurodollar loans.

The Term Loan Facility is payable in consecutive quarterly installments on the last day of each fiscal quarter in an amount equal to (x) $250,000 for installments payable on March 31, 2021 through December 31, 2021, (y) $750,000 for installments payable on March 31, 2022 through December 31, 2022, and (z) $1.5 million for installments payable on and after March 31, 2023.

The remaining unpaid balance on the Term Loan Facility is due and payable on January 14, 2024, together with accrued and unpaid interest on the principal amount to be paid to, but excluding, the payment date.

Borrowings under the Revolving Credit Facility do not amortize and are due and payable on January 14, 2024.

The Term Loan Facility is payable in consecutive quarterly installments on the last day of each fiscal quarter in an amount equal to (i) $437,500 for installments payable on December 31, 2023 (deferred to January 9, 2024), through September 30, 2024, (ii) $$656,250 for installments payable on December 31, 2024 through September 30, 2025, and (iii) $1,312,500 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.

10 unchanged sentences

• 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 Annualized Recurring Revenue (as defined in the Credit Agreement) as of the last day of each fiscal quarter (which minimum amount increases through the fiscal quarter ending December 31, 2023) (the “ARR Covenant”), and (ii) Liquidity (as defined in the Credit Agreement) of at least $10 million as of the last day of any calendar month.

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, 2023) (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.

We were in compliance with these covenants as of December 31, 2023.

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.

“Change of Control” is defined as (a) any “person” or “group” (as defined in Sections 13(d) and 14(d) of the Exchange Act) becoming the beneficial owner of 40% or more of the ordinary voting power for the election of our directors, (b) during any 24-month period, a majority of the members of our board of directors ceasing to be composed of individuals (i) who were members thereof on the first day of such period, (ii) whose election or nomination thereto was approved by individuals referred to in the foregoing clause constituting at least a majority of such board, or (iii) whose election or nomination thereto was approved by individuals referred to in the foregoing clauses (i) and (ii) constituting at least a majority of such board;

or (c) at any time, if we cease to own and control 100% of each class of outstanding capital stock of each guarantor free and clear of all liens (other than certain permitted liens).

In December 2021, we repaid in full the outstanding principal balance under our Revolving Credit Facility.

As of December 31, 2023, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million remains available for future borrowings.

11 unchanged sentences

Operating Activities

Net cash flows used in operating activities increased by $24.7 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

Net cash flows used in operating activities decreased by $38.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

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 increase in trade receivables of $11.3 million, addition to deferred contract acquisition costs of $11.6 million, an aggregate decrease in employees accruals, accrued expenses and other liabilities of $3.8 million and an increase in prepaid expenses and other assets of $0.4 million, offset by an increase in deferred revenue of $7.5 million and an increase in trade payables of $3.1 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.

Net cash used in operating activities of $46.8 million for the year ended December 31, 2022, was primarily due to $68.5 million in incremental net loss, adjusted for non-cash charges of $37.3 million, and net cash of $17.0 million due to changes in our operating assets and liabilities.

Non-cash charges primarily consisted of remeasurement of warrants to fair value of $15.0 million, depreciation and amortization of $2.4 million, stock-based compensation expenses of $17.1 million and amortization of deferred contract acquisitions and fulfillment costs of $8.1 million.

The main drivers of net cash outflows that were derived from the changes in operating assets and liabilities were related to an increase in deferred revenue of $6.3 million and an aggregate increase in employees accruals, trade payables and accrued expenses and other liabilities of $10.0 million, partially offset by an addition to deferred contract acquisition costs of $18.1 million, an increase in trade receivables of $1.1 million and an increase in prepaid expenses and other assets of $2.3 million.

Non-cash charges primarily consisted of depreciation and amortization of $2.7 million, stock-based compensation expenses of $23.6 million and amortization of deferred contract acquisitions and fulfillment costs of $10.9 million.

Investing Activities

Net cash flows used in investing activities increased by $44.5 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Net cash flows used in investing activities decreased by $48.2 million to $1.6 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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.

Net cash used in investing activities of $49.8 million for the year ended December 31, 2022 was related to investment in available-for-sale marketable securities of $60.2 million, $4.8 million of capitalized internal use software, investment in restricted bank deposits of $2.6 million, and $1.2 million in capital expenditures, offset by sales and maturities of available-for-sale marketable securities of $19.0 million.

Net cash used in investing activities of $5.2 million for the year ended December 31, 2021 was related to $4.0 million of capitalized internal use software, $1.9 million in capital expenditures, and $0.1 million in purchases of intangible assets, partially offset by proceeds of $0.8 million from the sale of property and equipment.

Financing Activities

Net cash flows used in financing activities increased by $143.9 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Net cash flows provided by financing activities increased by $0.6 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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.

Net cash used in financing activities of $0.5 million for the year ended December 31, 2022 was primarily due to $3.0 million of loan repayments and an aggregate outflow of $0.2 million due to principal payment on finance lease and payment of debt issuance costs, offset by proceeds from exercise of stock options of $2.7 million.

Net cash provided by financing activities of $143.4 million for the year ended December 31, 2021 was primarily due to proceeds from our IPO, net of underwriter discounts and commissions of $160.4 million, proceeds from long term loans of $41.9 million, and $1.3 million of proceeds from the exercise of options by employees, offset by $51.8 million of loan repayments, deferred offering costs of $5.2 million, a $1.6 million payment associated with the conversion of Series F redeemable convertible preferred stock, and principal payments of finance lease liabilities of $1.7 million.

Contractual Obligations and Commitments

1 unchanged sentence

Payments Due by Period

Less than 1 year 1-3 years More than 3 years

(in thousands)

Less than 1 year 1-3 years More than 3 years

Debt obligations 1

9 unchanged sentences

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 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

See Note 7, Leases, to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

(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 $5.3 million in our consolidated balance sheet at December 31, 2022, which principally consists of unrecognized tax benefits (see Note 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

We reported other liabilities of $7.1 million in our consolidated balance sheet at December 31, 2023, 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.

10 unchanged sentences

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 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.

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

11 unchanged sentences

Recent Accounting Pronouncements

Please see Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding 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

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis