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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-22 · 115 added, 111 removed, 358 unchanged (39% of the section changed)

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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

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

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.

Our business was founded in 2006.

We generate revenue primarily through the sale of Software-as-a-Service (“SaaS”) and Platform-as-a-Service (“PaaS”) subscriptions, and additional revenue from term license subscriptions.

We also generate revenue through the sale of professional services associated with the implementation of deployments for new and existing customers.

In August 2022, our Board of Directors approved a strategic restructuring program (the “2022 Restructuring Plan”) to streamline our operations in order to support our investment in critical growth areas.

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 $1.2 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 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 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:

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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 & Technology :

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 Events product (which intersects on-demand, live, and real-time-conferencing video).

Contracts are generally 12 to 24 months in length.

Billing is primarily done on an annual basis.

• Media & Telecom :

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.

Contracts are generally two to five years in length.

Billing is generally done on a quarterly or annual basis.

It generally takes from six to 12 months to implement M&T offerings.

The upfront resources required for implementation of our Media & Telecom solutions 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.

• 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.

• 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.

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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, 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.

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.

We focus our selling efforts on large organizations and sell our solutions primarily through direct sales teams and account teams.

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

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

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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 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.

Additionally, we will continue to invest in new video products for training, communication and collaboration, sales, marketing, and customer care, as we extend our platform into more industries.

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.

Acquiring New Customers

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

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 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.

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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.

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We believe there is a significant opportunity to continue our growth.

We expect that our cost of revenue and operating expenses will fluctuate over time.

We expect that our cost of revenue and operating expenses will fluctuate.

Key Financial and Operating Metrics

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Annualized Recurring Revenue $ 173,900 $ 164,723 $ 159,238

Net Dollar Retention Rate 100 % 100 % 118 %

Net Dollar Retention Rate 100 % 101% (a)

Remaining Performance Obligations $ 203,379 $ 185,305 $ 171,660

(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.

Annualized Recurring Revenue

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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.

We consider 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) to be a single customer for purposes of calculating our Net Dollar Retention Rate.

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.

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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 59% of our Remaining Performance Obligations as revenue over the next 12 months and the remainder thereafter, in each case, in accordance with our revenue recognition policy.

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 Adjusted EBITDA, a non-GAAP financial measure, is useful in evaluating the performance of our business.

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.

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, 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.

Adjusted EBITDA is presented because we believe that it provides useful supplemental information to investors and analysts regarding our operating performance and is frequently used by these parties in evaluating companies in our industry.

By presenting 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 this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations.

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.

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Non-cash stock-based compensation expense 26,264 29,980 23,645

Gain on sale of property and equipment (b)

Other operating expenses (c)

Facility exit and transition costs (d)

Restructuring (e)

War related costs (f)

Facility exit and transition costs (b)

Restructuring (c)

War related costs (d)

Adjusted EBITDA $ 7,273 $ (2,500) $ (28,265)

(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.

(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

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

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 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.

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.

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

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.

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.

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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 on an absolute dollar basis.

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 be relatively stable both on an absolute dollar basis and as a percentage of revenue for the near and medium-term, as a combined result of implementation of our Reorganization Plans and focused investment to support our growth.

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.

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Loss from operations 24,099 38,655 (14,556) (38) %

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

Financial Income, net (434) (1,200) 766 (64) %

Loss before provision for income taxes 23,665 37,455 (13,790) (37) %

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

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

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

• 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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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.

The decrease is mainly due to fewer large-scale virtual events of the type that typically require substantial professional services.

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

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.

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.

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 .

Media & Telecom

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Media & Telecom Revenue

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.

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 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.

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.

Operating Expenses

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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 $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.

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

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Total sales and marketing expenses $ 47,766 $ 48,798 $ (1,032) (2) %

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.

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.

General and Administrative Expenses

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Travel and entertainment 751 741 10 1 %

Unused cloud hosting commitment expense 1,312 — 1,312 NM

Other 2,211 2,331 (120) (5) %

Total general and administrative expenses $ 46,009 $ 48,718 $ (2,709) (6) %

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 $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.

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

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.

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

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.

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 increased by $1.0 million, or 13%, to $8.9 million for the year ended December 31, 2023, from $7.9 million for the year ended December 31, 2022, primarily due to increased tax liability related to income generated by our subsidiaries organized under the laws of Israel and the United Kingdom.

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

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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.

“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.

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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

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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.

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).

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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) $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 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.

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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.

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(in thousands)

Net cash used in operating activities $ (8,303) $ (46,828)

Net cash provided by (used in) operating activities $ 12,233 $ (8,303)

Net cash used in investing activities (12,414) (1,583)

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Operating Activities

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.

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 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.

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.

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.

Investing Activities

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 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.

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.

Financing Activities

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 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.

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.

Contractual Obligations and Commitments

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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