SEC Filing | Kaltura

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kltr-20220930

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 September 30, 2022


☐			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

Kaltura, Inc.

(Exact name of Registrant as specified in its Charter)


Delaware			20-8128326
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
860 Broadway 3rd Floor New York, New York			10003
(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
Common stock, $0.0001 par value per share	KLTR	The Nasdaq Stock Market LLC
Preferred Stock Purchase Rights	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	☐
Non-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 November 2, 2022 was 133,264,863

Table of Contents

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 (audited)	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Comprehensive L oss for the three and nine months ended September 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statement of Convertible and Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021 (unaudited)	8
	Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	12
	Notes to Condensed Consolidated Interim Financial Statements (unaudited)	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	69
	Signatures	ii

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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;

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•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;

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•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.

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)


	September 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	52,638	$	143,949
Marketable securities	39,744		—
Trade receivables	23,270		17,509
Prepaid expenses and other current assets	7,863		5,110
Deferred contract acquisition and fulfillment costs, current	10,455		9,079

Total current assets	133,970		175,647

LONG-TERM ASSETS:
Marketable securities	1,965		—
Property and equipment, net	13,771		9,503
Other assets, noncurrent	3,414		2,543
Deferred contract acquisition and fulfillment costs, noncurrent	22,133		22,621
Operating lease right-of-use assets	23,106		—
Intangible assets, net	1,385		1,909
Goodwill	11,070		11,070

Total noncurrent assets	76,844		47,646

TOTAL ASSETS	$	210,814	$	223,293

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term loans	$	5,047	$	2,794
Trade payables	6,414		6,480
Employees and payroll accruals	16,432		18,627
Accrued expenses and other current liabilities	15,048		18,496
Operating lease liabilities, current	1,960		—
Deferred revenue, current	58,277		51,689

Total current liabilities	103,178		98,086

LONG-TERM LIABILITIES:
Deferred revenue, noncurrent	1,510		1,953
Long-term loans, net of current portion	31,446		35,795
Operating lease liabilities, noncurrent	21,181		—
Other liabilities, noncurrent	1,996		2,185

Total long-term liabilities	56,133		39,933

TOTAL LIABILITIES	$	159,311	$	138,019

The accompanying notes are an integral part of the condensed consolidated financial statements


KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
(unaudited)


	September 30, 2022		December 31, 2021
COMMITMENTS AND CONTINGENCIES (NOTE 8)

STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of September 30, 2022, and December 31, 2021	—		—
Common stock $0.0001 par value per share, 1,000,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 140,177,314 and 134,610,294 shares issued as of September 30, 2022 and December 31, 2021, respectively; 132,492,124 and 126,925,104 outstanding as of September 30, 2022 and December 31, 2021, respectively	13		13
Treasury stock – 7,685,190 shares of common stock, $0.0001 par value per share, as of September 30, 2022 and December 31, 2021	(4,881)		(4,881)
Additional paid-in capital	433,462		412,776
Accumulated other comprehensive loss	(741)		—
Accumulated deficit	(376,350)		(322,634)

Total stockholders' equity	51,503		85,274

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	210,814	$	223,293

The accompanying notes are an integral part of the condensed consolidated financial statements.


KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Revenue:
Subscription	$	37,915	$	37,675	$	112,904	$	106,483
Professional services	3,136		5,309		11,841		15,817

Total revenue	41,051		42,984		124,745		122,300

Cost of revenue:
Subscription	9,772		9,629		29,192		29,524
Professional services	4,904		5,538		16,219		16,847

Total cost of revenue	14,676		15,167		45,411		46,371

Gross profit	26,375		27,817		79,334		75,929

Operating expenses:

Research and development	13,891		12,363		43,205		35,050
Sales and marketing	15,040		11,257		46,072		31,942
General and administrative	11,412		10,070		34,188		27,457
Restructuring	884		—		884		—
Other operating expenses	—		—		—		1,724

Total operating expenses	41,227		33,690		124,349		96,173

Operating loss	14,852		5,873		45,015		20,244

Financial expenses, net	3,002		17,780		2,945		18,432

Loss before provision for income taxes	17,854		23,653		47,960		38,676

Provision for income taxes	1,589		1,497		5,756		4,749

Net loss	19,443		25,150		53,716		43,425

Preferred stock accretion and cumulative undeclared dividends	—		1,569		—		8,241

Net loss attributable to common stockholders	$	19,443	$	26,719	$	53,716	$	51,666

Net loss per share attributable to common stockholders, basic and diluted	$	0.15	$	0.26	$	0.41	$	1.00

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	132,185,026		102,938,814		129,919,489		51,647,683

The accompanying notes are an integral part of the condensed consolidated financial statements.


KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands, except for share data)
(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Net loss	$	19,443	$	25,150	$	53,716	$	43,425
Other comprehensive income:
Net unrealized gains (losses) on cash flow hedges	553		—		(496)		—
Net unrealized gains (losses) on available-for-sale marketable securities	(100)		—		(245)		—
Other comprehensive income (loss)	453		—		(741)		—
Comprehensive loss	$	18,990	$	25,150	$	54,457	$	43,425

The accompanying notes are an integral part of the condensed consolidated financial statements.


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 July 1, 2022	130,586,754	$	13	7,685,190	$	(4,881)	$	426,037	$	(1,194)	$	(356,907)	$	63,068

Stock-based compensation	—	—		—	—		6,176		—		—		6,176
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	1,905,370	*) -		—	—		1,249		—		—		1,249
Other comprehensive income	—	—		—	—		—		453		—		453
Net loss	—	—		—	—		—		—		(19,443)		(19,443)

Balance as of September 30, 2022	132,492,124	$	13	7,685,190	$	(4,881)	$	433,462	$	(741)	$	(376,350)	$	51,503

*) Represents an amount that is lower than $1

The accompanying notes are an integral part of the condensed consolidated financial statements.


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)


	Convertible preferred stock			Redeemable convertible preferred stock			Common stock			Treasury stock			Additional paid-in capital		Accumulated deficit		Total stockholders' equity (deficit)
	Number	Amount		Number	Amount		Number	Amount		Number	Amount

Balance as of July 1, 2021	1,043,778	$	1,921	15,806,333	$	159,340	25,794,262	$	2	7,685,190	$	(4,881)	$	17,838	$	(281,558)	$	(268,599)

Accretion of redeemable convertible preferred stock	—	—		—	1,569		—	—		—	—		(1,569)		—		(1,569)
Redemption of redeemable convertible preferred stock upon initial public offering	—	—		—	(1,569)		—	—		—	—		—		—		—
Conversion of convertible and redeemable convertible preferred stock to common stock upon initial public offering	(1,043,778)	(1,921)		(15,806,333)	(159,340)		76,262,942	8		—	—		161,253		—		161,261
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other issuance costs	—	—		—	—		17,250,000	2		—	—		155,596		—		155,598
Conversion of warrants to common stock upon initial public offering	—	—		—	—		7,067,699	1		—	—		70,676		—		70,677
Stock-based compensation expenses	—	—		—	—		—	—		—	—		3,736		—		3,736
Issuance of common stock upon exercise of stock options	—	—		—	—		201,097	*) -		—	—		385		—		385
Net loss	—	—		—	—		—	—		—	—		—		(25,150)		(25,150)

Balance as of September 30, 2021	—	$	—	—	$	—	126,576,000	$	13	7,685,190	$	(4,881)	$	407,915	$	(306,708)	$	96,339

*) Represents an amount that is lower than $1

The accompanying notes are an integral part of the condensed consolidated financial statements.


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	126,925,104	$	13	7,685,190	$	(4,881)	$	412,776	$	—	$	(322,634)	$	85,274

Stock-based compensation	—	—		—	—		18,074		—		—		18,074
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	5,567,020	*) -		—	—		2,612		—		—		2,612
Other comprehensive loss	—	—		—	—		—		(741)		—		(741)
Net loss	—	—		—	—		—		—		(53,716)		(53,716)

Balance as of September 30, 2022	132,492,124	$	13	7,685,190	$	(4,881)	$	433,462	$	(741)	$	(376,350)	$	51,503

*) Represents an amount that is lower than $1

The accompanying notes are an integral part of the condensed consolidated financial statements.


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)


	Convertible preferred stock			Redeemable convertible preferred stock			Common stock			Treasury stock			Receivables on account of stock		Additional paid-in capital		Accumulated deficit		Total stockholders' equity (deficit)
	Number	Amount		Number	Amount		Number	Amount		Number	Amount

Balance as of January 1, 2021	1,043,778	$	1,921	15,779,322	$	158,191	25,467,922	$	2	7,685,190	$	(4,881)	$	(882)	$	8,388	$	(263,283)	$	(260,656)

Loan forgiveness	—	—		—	—		—	—		—	—		882		—		—		882
Accretion of redeemable convertible preferred stock	—	—		—	1,569		—	—		—	—		—		(1,569)		—		(1,569)
Issuance of preferred stock upon exercise of warrants	—	—		27,011	1,149		—	—		—	—		—		—		—		—
Redemption of redeemable convertible preferred stock upon initial public offering	—	—		—	(1,569)		—	—		—	—		—		—		—		—
Conversion of convertible and redeemable convertible preferred stock to common stock upon initial public offering	(1,043,778)	(1,921)		(15,806,333)	(159,340)		76,262,942	8		—	—		—		161,253		—		161,261
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other issuance costs	—	—		—	—		17,250,000	2		—	—		—		155,596		—		155,598
Conversion of warrants to common stock upon initial public offering	—	—		—	—		7,067,699	1		—	—		—		70,676		—		70,677
Stock-based compensation expenses	—	—		—	—		—	—		—	—		—		12,910		—		12,910
Issuance of common stock upon exercise of stock options	—	—		—	—		527,437	*) -		—	—		—		661		—		661
Net loss	—	—		—	—		—	—		—	—		—		—		(43,425)		(43,425)

Balance as of September 30, 2021	—	$	—	—	$	—	126,576,000	$	13	7,685,190	$	(4,881)	$	—	$	407,915	$	(306,708)	$	96,339

*) Represents an amount that is lower than $1

The accompanying notes are an integral part of the condensed consolidated financial statements.


KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(53,716)	$	(43,425)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (gain) on sale of property and equipment	179		(757)
Depreciation and amortization	1,874		1,795
Stock-based compensation expenses	17,827		12,910
Amortization of deferred contract acquisition and fulfillment costs	7,883		5,082
Change in valuation of warrants to purchase preferred and common stock	—		15,046
Non-cash interest expenses (income), net	(51)		267
Non-cash expenses with respect to stockholders’ loans	—		882
Changes in operating assets and liabilities:
Increase in trade receivables	(5,761)		(7,055)
Increase in prepaid expenses and other current assets and other assets, noncurrent	(697)		(4,937)
Increase in deferred contract acquisition and fulfillment costs	(8,715)		(15,262)
Increase in trade payables	98		849
Increase (decrease) in accrued expenses and other current liabilities	(3,600)		4,055
Increase (decrease) in employees and payroll accruals	(2,195)		4,265
Decrease in other liabilities, noncurrent	(33)		(306)
Increase in deferred revenue	6,145		15,221
Operating lease right-of-use assets and lease liabilities, net	(220)		—

Net cash used in operating activities	(40,982)		(11,370)

Cash flows from investing activities:

Investment in available-for-sale marketable securities	(47,447)		—
Proceeds from sales and maturities of available-for-sale marketable securities	5,670		—
Purchases of property and equipment	(1,004)		(1,580)
Proceeds from sale of property, and equipment	—		642
Capitalized internal-use software	(4,573)		(2,753)
Investment in restricted bank deposit	(1,850)		—
Purchase of intangible assets	—		(79)

Net cash used in investing activities	(49,204)		(3,770)

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriting discounts and commissions	—		160,425
Payment related to the conversion of Series F redeemable convertible preferred stock upon initial public offering	—		(1,569)
Proceeds from long-term loans, net of debt issuance cost	—		41,915
Repayment of long-term loans	(2,250)		(29,083)
Principal payments on finance leases	(135)		(1,329)
Proceeds from exercise of stock options	2,445		661
Payment of debt issuance costs	(125)		—
Payment of deferred offering costs	—		(4,087)

Net cash provided by (used in) financing activities	(65)		166,933

Net increase (decrease) in cash, cash equivalents and restricted cash	(90,251)		151,793
Cash, cash equivalents and restricted cash at the beginning of the period	144,371		28,355
Cash, cash equivalents and restricted cash at the end of the period	$	54,120	$	180,148

The accompanying notes are an integral part of the condensed consolidated financial statements.


KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(unaudited)


	Nine Months Ended September 30,
	2022		2021
Supplemental disclosure of non-cash activity:

Purchase of property, equipment, internal-use software, and intangible asset in credit	$	141	$	814

Lease liabilities arising from right-of-use assets	$	23,712	$	—

Capitalized stock-based compensation cost	$	247	$	—

Conversion of warrants to common stock upon initial public offering	$	—	$	70,677

Conversion of convertible and redeemable convertible preferred stock to common stock upon initial public offering	$	—	$	161,261

Unpaid deferred offering costs	$	—	$	626

Supplemental disclosure of cash flow information

Cash paid for income taxes, net	$	7,687	$	1,446

Cash paid for interest	$	1,429	$	1,938

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet

Cash and cash equivalents	$	52,638	$	179,740
Restricted cash included in other assets, noncurrent	1,482		408

Total cash, cash equivalents, and restricted cash	$	54,120	$	180,148

The accompanying notes are an integral part of the condensed consolidated financial statements.


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

Kaltura, Inc. (together with its subsidiaries, the “Company”) was incorporated in October 2006 and commenced operations in January 2007. The Company’s business operations are allocated between two main segments, Enterprise, Education, and Technology (“EE&T”) and Media and Telecom (“M&T”). The Company has developed a platform for video creation, management, and collaboration. The Company's platform enables companies, educational institutions, and other organizations to cost-effectively launch advanced online video experiences, including for Over-the-top (“OTT”) Television, Cloud TV, web video publishing, video-based teaching, learning and training, video-based marketing, and video-based collaboration. The Company’s core offerings consist of various Software-as-a-Service (“SaaS”) products and solutions and a Platform-as-a-Service (“PaaS”).

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 September 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 nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 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.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, income tax uncertainties, incremental borrowing rate for operating leases, fair value of financial assets and liabilities, including fair value of derivatives, fair value and useful life of intangible assets, as well as in estimates used in applying the revenue recognition policy. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.

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 September 30,			Nine Months Ended September 30,
	2022	2021		2022	2021

Customer A (M&T)	*) —	10.76	%	*) —	*) —

*) 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 nine months ended September 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 became 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.


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 September 30, 2022
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	28,676	95.4	%	$	9,239	84.0	%
Professional services	1,380		4.6	%	1,756		16.0	%

	$	30,056	100	%	$	10,995	100	%


	Three Months Ended September 30, 2021
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	27,952	91.9	%	$	9,723	77.3	%
Professional services	2,458		8.1	%	2,851		22.7	%

	$	30,410	100	%	$	12,574	100	%


	Nine Months Ended September 30, 2022
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	84,558	93.8	%	$	28,346	82.0	%
Professional services	5,628		6.2	%	6,213		18.0	%

	$	90,186	100	%	$	34,559	100	%


	Nine Months Ended September 30, 2021
	Enterprise, Education & Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	79,120	89.9	%	$	27,363	79.7	%
Professional services	8,846		10.1	%	6,971		20.3	%

	$	87,966	100	%	$	34,334	100	%

The following tables summarize revenue by region based on the billing address of customers:


	Three Months Ended September 30,
	2022				2021
	Amount		Percentage of revenue		Amount		Percentage of revenue

United States (“US”)	$	22,602	55.1	%	$	25,061	58.3	%
Europe, the Middle East and Africa ("EMEA")	13,761		33.5	%	13,482		31.4	%
Other	4,688		11.4	%