UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ___________ to ____________ | |||||
Commission File Number: 001-40644
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (646 ) 290-5445
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
The | ||||||||
| N/A | (1) | |||||||
(1) Attached to Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock, par value $0.0001, outstanding as of August 2, 2022 was 131,225,371
TABLE OF CONTENTS
| Page | ||||||||
| PART I | FINANCIAL INFORMATION | |||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II | OTHER INFORMATION | |||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following risks and the other important factors discussed in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2022:
•We may not successfully execute or achieve the expected benefits of our 2022 Restructuring Plan (as defined below) and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations;
•Our business and operations have experienced rapid growth, and if we do not appropriately manage this growth and any future growth, or if we are unable to improve our systems, processes and controls, our business, financial condition, results of operations and prospects will be adversely affected;
•Our recent growth may not be indicative of our future growth, and we may not be able to sustain our revenue growth rate in the future. Our growth also makes it difficult to evaluate our current business and future prospects and may increase the risk that we will not be successful;
•We have a history of losses and may not be able to achieve or maintain profitability;
•The ongoing COVID-19 outbreak, and its variants, could adversely affect our business, financial condition and results of operations;
•The markets for our offerings are new and evolving and may develop more slowly or differently than we expect. Our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving market conditions;
•The loss of one or more of our significant customers, or any other reduction in the amount of revenue we derive from any such customer, would adversely affect our business, financial condition, results of operations and growth prospects;
•If we are not able to keep pace with technological and competitive developments and develop or otherwise introduce new products and solutions and enhancements to our existing offerings, our offerings may become less marketable, less competitive or obsolete, and our business, financial condition and results of operations may be adversely affected;
•A version of our Media Services is licensed to the public under an open source license, which could negatively affect our ability to monetize our offerings and protect our intellectual property rights;
1
•The markets in which we compete are nascent and highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial, technical, and other resources than we do. If we do not compete successfully, our business, financial condition and results of operations could be harmed;
•If we are unable to increase sales of our subscriptions to new customers, expand the offerings to which our existing customers subscribe, or expand the value of our existing customers’ subscriptions, our future revenue and results of operations will be adversely affected;
•If our existing customers do not renew their subscriptions, or if they renew on terms that are less economically beneficial to us, it could have an adverse effect on our business, financial condition and results of operations;
•We recognize a significant portion of revenue from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately reflected in full in our results of operations;
•We typically provide service-level commitments under our customer agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, face contract termination with refunds of prepaid amounts or could experience a decrease in customer renewals in future periods, any of which would lower our revenue and adversely affect our business, financial condition and results of operations;
•We rely on third parties, including third parties outside the United States, for some of our software development, quality assurance, operations, and customer support;
•We depend on our management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business;
•If we are not able to maintain and enhance awareness of our brand, especially among developers and IT operators, our business, financial condition and results of operations may be adversely affected;
•Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and entrepreneurial spirit we have worked to foster, which could adversely affect our business;
•Our failure to offer high quality customer support would have an adverse effect on our business, reputation and results of operations;
•The failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our offerings;
•The sales prices of our offerings may change, which may reduce our revenue and gross profit and adversely affect our financial results;
•We expect our revenue mix to vary over time, which could negatively impact our gross margin and results of operations;
•The length of our sales cycle can be unpredictable, particularly with respect to sales to large customers, and our sales efforts may require considerable time and expense;
•Our international operations and expansion expose us to risk;
•If we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be adversely affected;
•Currency exchange rate fluctuations affect our results of operations, as reported in our financial statements;
•A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks;
2
•If we are unable to consummate acquisitions at our historical rate and at acceptable prices, and to enter into other strategic transactions and relationships that support our long-term strategy, our growth rate and the trading price of our common stock could be negatively affected. These transactions and relationships also subject us to certain risks;
•A real or perceived bug, defect, security vulnerability, error, or other performance failure involving our platform, products or solutions could cause us to lose revenue, damage our reputation, and expose us to liability;
•If we or our third-party service providers experience a security breach, data loss or other compromise, including if unauthorized parties obtain access to our customers’ data, our reputation may be harmed, demand for our platform, products and solutions may be reduced, and we may incur significant liabilities;
•Failure to protect our proprietary technology, or to obtain, maintain, protect and enforce sufficiently broad intellectual property rights therein, could substantially harm our business, financial condition and results of operations;
•Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new offerings could reduce our ability to compete and could adversely affect our business;
•Changes in laws and regulations related to the internet, changes in the internet infrastructure itself, or increases in the cost of internet connectivity and network access may diminish the demand for our offerings and could harm our business; and
•Political, economic, and military conditions in Israel could materially and adversely affect our business.
The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.
As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Kaltura,” the “Company,” “we,” “us,” and “our,” refer to Kaltura, Inc. and its subsidiaries on a consolidated basis.
3
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (U.S. dollars in thousands, except share and per share data) | ||
| (unaudited) | ||
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Trade receivables | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Deferred contract acquisition and fulfillment costs, current | |||||||||||
| Total current assets | |||||||||||
| LONG-TERM ASSETS: | |||||||||||
| Marketable securities | |||||||||||
| Property and equipment, net | |||||||||||
| Other assets, noncurrent | |||||||||||
| Deferred contract acquisition and fulfillment costs, noncurrent | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Total noncurrent assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Current portion of long-term loans | $ | $ | |||||||||
| Trade payables | |||||||||||
| Employees and payroll accruals | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Operating lease liabilities, current | |||||||||||
| Deferred revenue, current | |||||||||||
| Total current liabilities | |||||||||||
| LONG-TERM LIABILITIES: | |||||||||||
| Deferred revenue, noncurrent | |||||||||||
| Long-term loans, net of current portion | |||||||||||
| Operating lease liabilities, noncurrent | |||||||||||
| Other liabilities, noncurrent | |||||||||||
| Total long-term liabilities | |||||||||||
| TOTAL LIABILITIES | $ | $ | |||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements
4
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (U.S. dollars in thousands, except share and per share data) | ||
| (unaudited) | ||
| June 30, 2022 | December 31, 2021 | |||||||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 8) | ||||||||||||||
| STOCKHOLDERS' EQUITY: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock $ | ||||||||||||||
Treasury stock – | ( | ( | ||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive loss | ( | |||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders' equity | ||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
(U.S. dollars in thousands, except share and per share data) | ||
| (unaudited) | ||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Subscription | $ | $ | $ | $ | ||||||||||||||||||||||
| Professional services | ||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||
| Subscription | ||||||||||||||||||||||||||
| Professional services | ||||||||||||||||||||||||||
| Total cost of revenue | ||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating loss | ||||||||||||||||||||||||||
| Financial expenses (income), net | ( | ( | ( | |||||||||||||||||||||||
| Loss before provision for income taxes | ||||||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Net loss | ||||||||||||||||||||||||||
| Preferred stock accretion and cumulative undeclared dividends | ||||||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | $ | $ | $ | ||||||||||||||||||||||
| Net loss per share attributable to common stockholders, basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Net loss per share attributable to common stockholders, diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders, basic | ||||||||||||||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders, diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
| (U.S. dollars in thousands, except for share data) | ||
| (unaudited) | ||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Net loss | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income: | ||||||||||||||||||||||||||
| Net unrealized losses on cash flow hedges | ||||||||||||||||||||||||||
| Net unrealized losses on available-for-sale marketable securities | ||||||||||||||||||||||||||
| Other comprehensive loss | ||||||||||||||||||||||||||
| Comprehensive loss | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
| KALTURA, INC. AND SUBSIDIARIES | ||
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
U.S. dollars in thousands (except share data) | ||
| (unaudited) | ||
| Common stock | Treasury stock | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 1, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options, and vesting of restricted stock units | *) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock | Redeemable convertible preferred stock | Common stock | Treasury stock | Additional paid-in capital | Accumulated deficit | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 1, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expenses | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | *) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
*) Represents an amount that is lower than $1
The accompanying notes are an integral part of the condensed consolidated financial statements.
8
| KALTURA, INC. AND SUBSIDIARIES | ||
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
U.S. dollars in thousands (except share data) | ||
| (unaudited) | ||
| Common stock | Treasury stock | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options, and vesting of restricted stock units | *) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock | Redeemable convertible preferred stock | Common stock | Treasury stock | Receivables on account of stock | Additional paid-in capital | Accumulated deficit | Total stockholders' deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan forgiveness | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expenses | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | *) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock upon exercise of warrants | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
*) Represents an amount that is lower than $1
The accompanying notes are an integral part of the condensed consolidated financial statements.
9
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| U.S. dollars in thousands | ||
| (unaudited) | ||
| Six Months Ended June 30, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Loss on sale of property and equipment | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Stock-based compensation expenses | ||||||||||||||
| Amortization of deferred contract acquisition and fulfillment costs | ||||||||||||||
| Change in valuation of warrants to purchase preferred and common stock | ( | |||||||||||||
| Non-cash interest expenses | ||||||||||||||
| Non-cash expenses with respect to stockholders’ loans | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Increase in trade receivables | ( | ( | ||||||||||||
| Decrease (increase) in prepaid expenses and other current assets and other assets, noncurrent | ( | |||||||||||||
| Increase in deferred contract acquisition and fulfillment costs | ( | ( | ||||||||||||
| Increase (decrease) in trade payables | ( | |||||||||||||
| Increase (decrease) in accrued expenses and other current liabilities | ( | |||||||||||||
| Increase (decrease) in employees and payroll accruals | ( | |||||||||||||
| Decrease in other liabilities, noncurrent | ( | ( | ||||||||||||
| Increase (decrease) in deferred revenue | ( | |||||||||||||
| Operating lease right-of-use assets and lease liabilities, net | ( | |||||||||||||
| Net cash used in operating activities | ( | ( | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Investment in available-for-sale marketable securities | ( | |||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||
| Capitalized internal-use software | ( | ( | ||||||||||||
| Investment in restricted bank deposit | ( | |||||||||||||
| Purchase of intangible assets | ( | |||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from long-term loans, net of debt issuance cost | ||||||||||||||
| Repayment of long-term loans | ( | ( | ||||||||||||
| Principal payments on finance leases | ( | ( | ||||||||||||
| Proceeds from exercise of stock options | ||||||||||||||
| Payment of debt issuance costs | ( | |||||||||||||
| Payment of deferred offering costs | ( | |||||||||||||
| Net cash provided by (used in) financing activities | ( | |||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | |||||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | ||||||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | $ | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
10
| KALTURA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| U.S. dollars in thousands | ||
| (unaudited) | ||
| Six Months Ended June 30, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Supplemental disclosure of non-cash activity: | ||||||||||||||
| Purchase of property, equipment, internal-use software, and intangible asset in credit | $ | $ | ||||||||||||
| Lease liabilities arising from right-of-use assets | $ | $ | ||||||||||||
| Capitalized stock-based compensation cost | $ | $ | ||||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||||
| Cash paid for income taxes, net | $ | $ | ||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash included in other assets, noncurrent | ||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
11
| KALTURA, INC. AND SUBSIDIARIES | ||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| U.S. dollars in thousands (except share and per share data) | ||
| (unaudited) | ||
NOTE 1: GENERAL
Description of Business
NOTE 2: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting.
The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by U.S. GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.
In management’s opinion, other than the changes to accounting for leases as described in Note 6, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements with normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2022, and the Company’s consolidated results of operations, convertible and redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for the three and six months ended June 30, 2022 and 2021. The results for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the full year ending December 31, 2022, or any other future interim or annual period.
Concentration of Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash and trade receivables.
The majority of the Company’s cash, and cash equivalents and restricted cash are invested with major banks in the United States, Israel, and the United Kingdom. Such investments in the United States may be in excess of insured limits and they are not insured in other jurisdictions. In general, these investments may be redeemed upon demand and therefore bear minimal risk.
The Company’s trade receivables are geographically dispersed and derived from sales to customers mainly in the United States, Europe, and Asia. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation, and account monitoring procedures.
Major customer data as a percentage of total revenues:
The following table sets forth customers that represented 10% or more of the Company’s total revenue in each of the periods set forth below:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Customer A (EE&T) | | | | % | ||||||||||||||||||||||
*) Represents an amount that is lower than 10% of the Company's total revenue.
Significant Accounting Policies and Estimates
The Company’s significant accounting policies are discussed in Note 2 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 25, 2022. There have been no significant changes to these policies during the six months ended June 30, 2022 except as noted below.
Derivatives and Hedging
Derivatives are recognized at fair value as either assets or liabilities in the consolidated balance sheets in accordance with ASC Topic 815, “Derivatives and Hedging.” The gain or loss of derivatives which are designated and qualify as hedging instruments in a cash flow hedge, is recorded under accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Derivatives are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments.
Marketable Securities
The Company invests its excess cash primarily in short-term fixed income securities, including government and investment-grade debt securities and money market funds. Marketable securities with original maturities greater than three months from the date of purchase and remaining maturities less than one year are classified as short-term marketable securities. Marketable securities with remaining maturities greater than one year, as of the balance sheet date and that the Company intends to hold for greater than one year, are classified as long-term marketable securities. Marketable securities are carried at fair market value, with unrealized gains and losses considered to be temporary in nature reported in accumulated other comprehensive loss. Cost of securities sold is based on specific identification. The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale. After considering its capital preservation objectives, as well as its liquidity requirements, the Company may sell securities prior to their stated maturities. The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method and record such gains and losses as a component of financial expense (income), net.
The Company evaluates the investments periodically for possible other-than-temporary impairment. A decline in fair value below the amortized costs of debt securities is considered an other-than-temporary impairment if it has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery of the entire amortized cost basis. In those instances, an impairment charge equal to the difference between the fair value and the amortized cost basis is recognized in financial expenses (income), net. Regardless of its intent or requirement to sell a debt security, impairment is considered other-than-temporary if the Company does not expect to recover the entire amortized cost basis.
Recently Adopted Accounting Pronouncements
As an “emerging growth company”, the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), which would require lessees to put all leases on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to the existing practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term.
The Company adopted the guidance on January 1, 2022 using a modified retrospective transition approach. It applied Topic 842 to all leases as of January 1, 2022 without adjusting the comparative periods presented. The Company elected certain practical expedients permitted under the transition guidance within the new guidance and carried forward the historical accounting relating to lease identification and classification, remaining lease terms, and initial direct costs. Upon adoption, the Company recognized operating lease right-of-use assets and corresponding lease liabilities of $823 . The adoption of Topic 842 did not have a material impact to the Company’s results of operations or cash flows. See Note 7, Leases, for further information.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing a variety of exceptions within the framework of ASC 740. These exceptions include the exception to the incremental approach for intra-period tax allocation in the event of a loss from continuing operations and income or a gain from other items (such as other comprehensive income), and the exception to using general methodology for the interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. Early adoption is permitted. The Company adopted this guidance on January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after December 15, 2023 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect, if any, on its consolidated financial statements.
12
| KALTURA, INC. AND SUBSIDIARIES | ||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
| U.S. dollars in thousands (except share and per share data) | ||
| (unaudited) | ||
NOTE 3: REVENUES FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following tables present disaggregated revenue by category:
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||
| Enterprise, Education and Technology | Media and Telecom | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| Subscription | $ | % | $ | % | ||||||||||||||||||||||
| Professional services | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||
| Enterprise, Education and Technology | Media and Telecom | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| Subscription | $ | % | $ | % | ||||||||||||||||||||||
| Professional services | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||
| Enterprise, Education and Technology | Media and Telecom | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| Subscription | $ | % | $ | % | ||||||||||||||||||||||
| Professional services | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||
| Enterprise, Education & Technology | Media and Telecom | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| Subscription | $ | % | $ | % | ||||||||||||||||||||||
| Professional services | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
The following tables summarizes revenue by region based on the billing address of customers:
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| United States (“US”) | $ | % | $ | % | ||||||||||||||||||||||
| Europe, the Middle East and Africa ("EMEA") | % | % | ||||||||||||||||||||||||
| Other | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Amount | Percentage of revenue | Amount | Percentage of revenue | |||||||||||||||||||||||
| US | $ | % | $ | % | ||||||||||||||||||||||
| EMEA | % | % | ||||||||||||||||||||||||
| Other | % | % | ||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
Remaining Performance Obligations
Remaining performance obligations represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and contracted amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $172,732 , which consists of both billed consideration in the amount of $53,379 and unbilled consideration in the amount of $119,353 that the Company expects to recognize as revenue but that was not yet recognized on the balance sheet. The Company expects to recognize 62 % of its remaining performance obligations as revenue over the next 12 months and the remainder thereafter.
Costs to Obtain a Contract
The following table represents a roll forward of costs to obtain a contract:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Additions to deferred contract acquisition costs during the period | ||||||||||||||||||||||||||
| Amortization of deferred contract acquisition costs | ( | ( | ( | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Deferred contract acquisition costs, current | $ | $ | $ | $ | ||||||||||||||||||||||
| Deferred contract acquisition costs, noncurrent | ||||||||||||||||||||||||||
| Total deferred costs to obtain a contract | $ | $ | $ | $ | ||||||||||||||||||||||
Costs to Fulfill a Contract
The following table represents a roll forward of costs to fulfill a contract:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Additions to deferred costs to fulfill a contract during the period | ||||||||||||||||||||||||||
| Amortization of deferred costs to fulfill a contract | ( | ( | ( | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | ||||||||||||||||||||||||