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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 March 31, 2023

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

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 May 1, 2023 was 136,410,870.

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TABLE OF CONTENTS

						Page
PART I			FINANCIAL INFORMATION
Item 1.			Consolidated Financial Statements (unaudited)
			Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 (audited)			6
			Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)			8
			Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)			9
			Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)			10
			Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)			11
			Notes to Condensed Consolidated Interim Financial Statements (unaudited)			13
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			47
Item 4.			Controls and Procedures			47
PART II			OTHER INFORMATION
Item 1.			Legal Proceedings			49
Item 1A.			Risk Factors			49
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 3.			Defaults Upon Senior Securities			51
Item 4.			Mine Safety Disclosures			51
Item 5.			Other Information			51
Item 6.			Exhibits			54
			Signatures			57

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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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2023:

•The worsening economic climate has resulted in, among other things, slowdown of business activities and decline in spending and procurement by customers, increased price-driven competition, including through initiation of bid processes and longer sale cycles, and other adverse effects. If we are unable to successfully assess or mitigate the direct and indirect impact of the worsening economic climate on our business and operations, or the duration and depth of the current instability of the global economy, or if we are unable to retain our existing customer base or to obtain new customers at reasonable prices, our business, financial condition, results of operations and prospects would be adversely affected;

•Our business and operations have experienced high volatility, including rapid growth partially attributed to the effects of the COVID-19 pandemic and thereafter a decline as such effects have subsided and the global economic climate has worsened. If we do not appropriately adapt to these or any future changes, including through improvement of our systems, processes, controls and efficiency, or if we are unable to successfully implement our Reorganization Plans (as defined below), our business, financial condition, results of operations and prospects would be adversely affected;

•Our dependency on existing customer demand and exposure to changes in demand by our customers, loss of one or more of our significant customers, or any other reduction in the amount of revenue we derive from any such customer, including as a result from reasons not under our control, makes it difficult to evaluate our current business and future prospects and may increase the risk that our business, financial condition, results of operations and growth prospects would be adversely affected;

•We have a history of losses and may not be able to achieve or maintain profitability;

•Our future success depends on the growth and expansion of the markets for our offerings, which are new and evolving and may develop more slowly or differently than we expect, and on our ability to adapt and respond effectively to evolving market conditions;

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•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;

•If we do not maintain the interoperability of our offerings across devices, operating systems and third-party applications that we do not control, and if we are not able to maintain and expand our relationships with third-party technology partners to integrate our offerings with their products and solutions, our business, financial condition and results of operations may be adversely affected;

•Part of our Application Programming Interfaces (APIs) and other components in our offerings are 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;

•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 or can provide a bundled offering and solutions that might be more attractive to our customers enabling them to better compete with us. 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 the value of their subscriptions, or have them renew their subscriptions in terms that are economically beneficial to us, our future revenue and results of operations would be adversely affected;

•Political, economic, and military conditions in Ukraine, Russia and other countries following the Russian invasion to Ukraine, or political, economic, and military conditions in Israel and in other regions at which we operate, or changes in the business environment in those regions, could materially and adversely affect our business;

•Currency exchange rate fluctuations affect our results of operations, as reported in our financial statements;

•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;

•Increased breaches of network or information technology security along with an increase in cyber-attack activities, increases the risk that we shall be subject to cybersecurity threats that could have an adverse effect on our business;

•Data privacy and data protection laws are rapidly evolving and present increasing compliance challenges. Additionally, 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;

•We typically provide service-level commitments and offer customer support 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, be charged penalties, 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;

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•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;

•Our corporate culture has contributed to our success, and if we cannot maintain it as we grow, we could lose the innovation, creativity, and entrepreneurial spirit we have worked to foster, which could adversely affect our business;

•The failure to effectively develop and expand our marketing and sales capabilities or to maintain or expand our international business, 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;

•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 would be able to access uninsured funds in a timely manner or at all.

•Our international operations and expansion expose us to risk;

•A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks;

•If we are unable to consummate acquisitions at acceptable rate or 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;

•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; and

•Changes in laws and regulations related to the internet, changes in the internet infrastructure itself, or increases in the cost of internet connectivity and access may diminish the demand for our offerings and could harm our business.

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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.

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PART I—FINANCIAL INFORMATION

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ITEM 1. FINANCIAL STATEMENTS

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

			March 31, 2023						December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	41,576					$	44,625
Marketable securities			34,393						41,343
Trade receivables			18,233						28,786
Prepaid expenses and other current assets			8,077						7,521
Deferred contract acquisition and fulfillment costs, current			10,685						10,759
Total current assets			112,964						133,034
LONG-TERM ASSETS:
Marketable securities			1,024						—
Property and equipment, net			18,713						15,142
Other assets, noncurrent			2,981						3,176
Deferred contract acquisition and fulfillment costs, noncurrent			20,536						21,691
Operating lease right-of-use assets			17,444						20,814
Intangible assets, net			1,077						1,244
Goodwill			11,070						11,070
Total noncurrent assets			72,845						73,137
TOTAL ASSETS			$	185,809					$	206,171
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term loans			34,351						5,793
Trade payables			8,214						9,437
Employees and payroll accruals			12,479						14,884
Accrued expenses and other current liabilities			16,854						16,527
Operating lease liabilities			2,533						2,355
Deferred revenue, current			50,490						59,841
Total current liabilities			124,921						108,837
LONG-TERM LIABILITIES:
Deferred revenue, noncurrent			1,022						1,266
Long-term loans, net of current portion			—						30,004
Operating lease liabilities, noncurrent			19,650						20,697
Other liabilities, noncurrent			2,245						2,021
Total long-term liabilities			22,917						53,988
TOTAL LIABILITIES			$	147,838					$	162,825

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

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

						March 31, 2023						December 31, 2022
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 0 shares issued and outstanding as of March 31, 2023, and December 31, 2022						—						—
Common stock $0.0001 par value per share, 1,000,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 143,380,444 and 142,249,619 shares issued as of March 31, 2023 and December 31, 2022, respectively; 135,695,254 and 134,564,429 outstanding as of March 31, 2023 and December 31, 2022, respectively						13						13
Treasury stock – 7,685,190 shares of common stock, $0.0001 par value per share, as of March 31, 2023 and December 31, 2022						(4,881)						(4,881)
Additional paid-in capital						447,316						439,644
Accumulated other comprehensive loss						(553)						(301)
Accumulated deficit						(403,924)						(391,129)
Total stockholders' equity						37,971						43,346
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY						$	185,809					$	206,171

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

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

						Three Months Ended March 31,
						2023						2022
Revenue:
Subscription						$	40,392					$	37,017
Professional services						2,881						4,698
Total revenue						43,273						41,715
Cost of revenue:
Subscription						11,168						9,650
Professional services						4,819						5,796
Total cost of revenue						15,987						15,446
Gross profit						27,286						26,269
Operating expenses:
Research and development						14,130						14,873
Sales and marketing						12,071						14,616
General and administrative						12,100						11,438
Restructuring						945						—
Total operating expenses						39,246						40,927
Operating loss						11,960						14,658
Financial expenses (income), net						(1,785)						182
Loss before provision for income taxes						10,175						14,840
Provision for income taxes						2,620						2,086
Net loss						12,795						16,926
Net loss per share attributable to common stockholders, basic and diluted						$	0.09					$	0.13
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted						135,087,949						127,832,785

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

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

						Three Months Ended March 31,
						2023						2022
Net loss						$	12,795					$	16,926
Other comprehensive income, net of tax:
Net unrealized gains (losses) on cash flow hedges						(361)						523
Net unrealized gains on available-for-sale marketable securities						109						—
Other comprehensive income (loss)						(252)						523
Comprehensive loss						$	13,047					$	16,403

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

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KALTURA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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, 2023									134,564,429						$	13					7,685,190						$	(4,881)					$	439,644					$	(301)					$	(391,129)					$	43,346
Stock-based compensation									—						—						—						—						7,291						—						—						7,291
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units									1,130,825						—						—						—						381						—						—						381
Other comprehensive loss, net of tax									—						—						—						—						—						(252)						—						(252)
Net loss									—						—						—						—						—						—						(12,795)						(12,795)
Balance as of March 31, 2023									135,695,254						$	13					7,685,190						$	(4,881)					$	447,316					$	(553)					$	(403,924)					$	37,971

									Common stock												Treasury stock												Additional paid-in capital						Accumulated other comprehensive income						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									—						—						—						—						5,754						—						—						5,754
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units									723,124						—						—						—						296						—						—						296
Other comprehensive income, net of tax									—						—						—						—						—						523						—						523
Net loss									—						—						—						—						—						—						(16,926)						(16,926)
Balance as of March 31, 2022									127,648,228						$	13					7,685,190						$	(4,881)					$	418,826					$	523					$	(339,560)					$	74,921

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

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

						Three Months Ended March 31,
						2023						2022
Cash flows from operating activities:
Net loss						$	(12,795)					$	(16,926)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization						1,009						615
Stock-based compensation expenses						7,159						5,684
Amortization of deferred contract acquisition and fulfillment costs						2,970						2,443
Non-cash interest expenses (income), net						(224)						39
Gain on foreign exchange						(195)						—
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables						10,553						(2,332)
Increase in prepaid expenses and other current assets and other assets, noncurrent						(764)						(594)
Increase in deferred contract acquisition and fulfillment costs						(1,642)						(1,653)
Decrease in trade payables						(1,450)						(1,498)
Decrease in accrued expenses and other current liabilities						(37)						(430)
Decrease in employees and payroll accruals						(2,405)						(1,838)
Increase (decrease) in other liabilities, noncurrent						406						(42)
Decrease in deferred revenue						(9,595)						(3,140)
Operating lease right-of-use assets and lease liabilities, net						(422)						82
Net cash used in operating activities						(7,432)						(19,590)
Cash flows from investing activities:
Investment in available-for-sale marketable securities						(2,924)						—
Proceeds from maturities of available-for-sale marketable securities						9,236						—
Investment in restricted bank deposit						—						(1,850)
Purchases of property and equipment						(852)						(445)
Capitalized internal-use software						(380)						(1,767)
Net cash provided by (used in) investing activities						5,080						(4,062)
Cash flows from financing activities:
Repayment of long-term loans						(1,500)						(750)
Principal payments on finance leases						—						(128)
Proceeds from exercise of stock options						578						244
Payment of debt issuance costs						—						(125)
Net cash used in financing activities						(922)						(759)
Effect of exchange rate changes on cash, cash equivalents and restricted cash						195						—
Net decrease in cash, cash equivalents and restricted cash						(3,079)						(24,411)
Cash, cash equivalents and restricted cash at the beginning of the period						45,833						144,371
Cash, cash equivalents and restricted cash at the end of the period						$	42,754					$	119,960

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

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

						Three Months Ended March 31,
						2023						2022
Supplemental disclosure of non-cash activity:
Purchase of property, equipment, and internal-use software in credit						$	262					$	872
Lease liabilities arising from right-of-use assets						$	—					$	4,949
Capitalized stock-based compensation cost						$	132					$	70
Pending proceeds from option exercises						$	30					$	82
Lease incentive recognized as leasehold improvements						$	2,922					$	—
Supplemental disclosure of cash flow information
Cash paid for income taxes, net						$	1,151					$	2,186
Cash paid for interest						$	749					$	444
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet
Cash and cash equivalents						$	41,576					$	119,542
Restricted cash included in other assets, noncurrent						1,178						418
Total cash, cash equivalents, and restricted cash						$	42,754					$	119,960

    

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

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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 consolidated balance sheet as of December 31, 2022 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, 2022, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

In management’s opinion, 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 March 31, 2023, and the Company’s consolidated results of operations, stockholders’ equity, and cash flows for the three months ended March 31, 2023 and 2022. The results for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for the full year ending December 31, 2023, 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 acquired intangible assets and goodwill, 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.

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

Concentration of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, restricted cash and trade receivables.

The majority of the Company’s cash, and cash equivalents, marketable securities 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. Market conditions can impact the viability of these financial institutions. In the event of failure of any of the financial institutions where the Company maintains its cash and cash equivalents, there can be no assurance that the Company would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect the Company's business and financial position. 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 March 31,
						2023						2022
Customer A (M&T)						10.70		%				*)—

*) 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, 2022, which was filed with the SEC on February 24, 2023. There have been no significant changes to these policies during the three months ended March 31, 2023 except as noted below.

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 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 Company adopted this guidance using modified retrospective approach, effective on January 1, 2023. The adoption did not have a material effect on its consolidated financial statements.

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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 March 31, 2023
						Enterprise, Education and Technology												Media and Telecom
						Amount						Percentage of revenue						Amount						Percentage of revenue
Subscription						$	29,874					95.4		%				$	10,518					88.1		%
Professional services						1,456						4.6		%				1,425						11.9		%
						$	31,330					100		%				$	11,943					100		%

						Three Months Ended March 31, 2022
						Enterprise, Education and Technology												Media and Telecom
						Amount						Percentage of revenue						Amount						Percentage of revenue
Subscription						$	27,602					92.9		%				$	9,415					78.5		%
Professional services						2,125						7.1		%				2,573						21.5		%
						$	29,727					100		%				$	11,988					100		%

The following table summarizes revenue by region based on the billing address of customers:

						Three Months Ended March 31,
						2023												2022
						Amount						Percentage of revenue						Amount						Percentage of revenue
United States (“US”)						$	23,058					53.3		%				$	23,314					55.9		%
Europe, the Middle East and Africa ("EMEA")						15,923						36.8		%				13,823						33.1		%
Other						4,292						9.9		%				4,578						11.0		%
						$	43,273					100		%				$	41,715					100		%

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

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 March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $167,425, which consists of both billed consideration in the amount of $51,512 and unbilled consideration in the amount of $115,913 that the Company expects to recognize as revenue but that was not yet recognized on the balance sheet. The Company expects to recognize 58% 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 March 31,
						2023						2022
Beginning balance						$	26,928					$	26,274
Additions to deferred contract acquisition costs during the period						1,741						1,104
Amortization of deferred contract acquisition costs						(2,523)						(2,086)
Ending balance						$	26,146					$	25,292
Deferred contract acquisition costs, current						$	8,934					$	7,809
Deferred contract acquisition costs, noncurrent						17,212						17,483
Total deferred costs to obtain a contract						$	26,146					$	25,292

Costs to Fulfill a Contract

The following table represents a roll forward of costs to fulfill a contract:

						Three Months Ended March 31,
						2023						2022
Beginning balance						$	5,522					$	5,427
Additions to deferred costs to fulfill a contract during the period						—						571
Amortization of deferred costs to fulfill a contract						(447)						(357)
Ending balance						5,075						5,641
Deferred fulfillment costs, current						1,751						1,497
Deferred fulfillment costs, noncurrent						3,324						4,144
Total deferred costs to fulfill a contract						$	5,075					$	5,641

NOTE 4: MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of March 31, 2023 and December 31, 2022:

						March 31, 2023
						Amortized cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Available-for-sale – matures within one year:
Corporate bonds						$	7,756					$	—					$	(27)					$	7,729
Municipal securities						1,540						—						(1)						1,539
U.S. Treasury						12,890						—						(46)						12,844
Commercial paper						9,320						—						—						9,320
Agency bonds						2,960						1						—						2,961
						34,466						1						(74)						34,393
Available-for-sale – matures after one year:
Agency bonds						1,022						2						—						1,024
						1,022						2						—						1,024
Total						$	35,488					$	3					$	(74)					$	35,417

						December 31, 2022
						Amortized cost						Gross unrealized gains						Gross unrealized losses						Fair Value
Available-for-sale – matures within one year:
Corporate bonds						$	9,305					$	—					$	(66)					$	9,239
Municipal securities						1,751						—						(4)						1,747
U.S. Treasury						16,306						—						(111)						16,195
Commercial paper						11,237						—						—						11,237
Agency bonds						2,925						1						(1)						2,925
						$	41,524					$	1					$	(182)					$	41,343

As of March 31, 2023 and December 31, 2022, the Company did not record an allowance for credit losses for its available-for-sale marketable debt securities and all of the gross unrealized losses of the Company's marketable securities have been in a continuous loss position for less than 12 months. There were no gains or losses from available-for-sale marketable securities that were reclassified out of accumulated other comprehensive loss during the periods presented.

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

NOTE 5: FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique. Cash equivalents and marketable securities are classified within Level 1 and Level 2, respectively, because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of March 31, 2023 and December 31, 2022 by level within the fair value hierarchy:

												Fair Value Measurements As Of
Description						Fair Value Hierarchy						March 31, 2023						December 31, 2022
Measured at fair value on a recurring basis:
Assets:
Cash equivalents:
Money market funds						Level 1						$	18,969					$	16,489
Short-term marketable securities:
Corporate bonds						Level 2						$	7,729					$	9,239
Municipal securities						Level 2						$	1,539					$	1,747
U.S. Treasury						Level 2						$	12,844					$	16,195
Commercial paper						Level 2						$	9,320					$	11,237
Agency bonds						Level 2						$	2,961					$	2,925
Long-term marketable securities:
Agency bonds						Level 2						$	1,024					$	—
Derivative instruments asset included in prepaid expenses and other current assets:
Options and forward contracts designated as hedging instruments						Level 2						$	5					$	—
Liabilities:
Derivative instruments liability included in accrued expenses and other current liabilities:
Options and forward contracts designated as hedging instruments						Level 2						$	485					$	120

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

NOTE 6: DERIVATIVES AND HEDGING

The Company entered into forward, put and call option contracts to hedge certain forecasted payroll costs denominated in NIS against exchange rate fluctuations of the U.S. dollar for a period of up to twelve months. The Company recorded the cash flows associated with these derivatives under operating activities. The Company does not use derivative instruments for trading or speculative purposes.

Notional Amount of Foreign Currency Contracts

The Company had outstanding contracts designated as hedging instruments in the aggregate notional amount of $22,797 and $8,345 as of March 31, 2023, and December 31, 2022, respectively. The fair value of the Company’s outstanding contracts amounted to an asset of $5 and $—, and a liability of $485 and $120 as of March 31, 2023 and December 31, 2022, respectively. These assets and liabilities were recorded under prepaid expenses and other current assets and accrued expenses and other current liabilities, respectively. Losses of $504, and gains of $135 were reclassified from accumulated other comprehensive loss during the three months ended March 31, 2023 and 2022, respectively. Such losses and gains were reclassified from accumulated other comprehensive loss when the related expenses were incurred.

Effect of Foreign Currency Contracts on the Condensed Consolidated Statements of Operations

The effect of foreign currency contracts on the condensed consolidated statements of operations during the three months ended March 31, 2023 and 2022 were as follows:

Condensed Statement of Operations Location:						Three Months Ended March 31 ,2023						Three Months Ended March 31 ,2022
Cost of revenue						$	70					$	(25)
Research and development						$	252					$	(66)
Sales and marketing						$	58					$	(19)
General and administrative						$	96					$	(25)
Restructuring						$	28					$	—
Total						$	504					$	(135)

NOTE 7: LEASES

The Company leases its office facilities under non-cancelable agreements that expire at various dates through November 2027. The Company has a lease agreement for offices in Israel which includes two extension options for five years each. The Company estimates that it is reasonably certain that it will exercise the option for the first extension period. Therefore, for the purposes of determining the amount of the expense and the value of the right of use asset and lease liability according to ASC 842, the Company determined that the lease term would end in November 2032.

Components of operating lease expense were as follows:

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

						Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
Operating lease cost						$	761					$	625
Short-term lease cost						154						—
Variable lease cost						9						12
Total						$	924					$	637

Supplementary cash flow information related to operating leases was as follows:

						Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
Cash paid for operating leases						$	579					$	467

As of March 31, 2023, the weighted-average discount rate is 4.7% and the weighted-average remaining term is 8.7 years. Maturities of the Company’s operating lease liabilities as of March 31, 2023 were as follows:

Year Ending December 31,
2023 (Remainder)						$	2,571
2024						3,070
2025						3,126
2026						3,188
2027						2,756
2028						2,379
2029 and thereafter						9,117
Total operating lease payments						26,207
Less: imputed interest						4,024
Total operating lease liabilities						$	22,183

NOTE 8: COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The Company has entered into various non-cancelable agreements with third-party providers for use of mainly cloud and other services, under which it committed to minimum and fixed purchases through the year ending December 31, 2026. The following table presents details of the aggregate future non-cancelable purchase commitments under such agreements as of March 31, 2023:

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

Year Ending December 31,
2023 (Remainder)						$	11,150
2024						14,581
2025						13,123
2026						14,250
Total purchase commitment						$	53,104

Litigation

The Company is occasionally a party to claims or litigation in the normal course of the business. The Company does not believe that it is a party to any pending legal proceeding that is likely to have a material adverse effect on its business, financial condition, or results of operations.

NOTE 9: CONDENSED CONSOLIDATED BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

						March 31, 2023						December 31, 2022
Prepaid expenses						$	4,098					$	3,369
Government institutions						307						422
Derivative instrument						5						—
Restricted bank deposits						2,600						2,600
Other current assets						1,067						1,130
						$	8,077					$	7,521

Property and Equipment, net

Composition of property and equipment is as follows:

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

						March 31, 2023						December 31, 2022
Cost:
Computers and peripheral equipment						$	4,466					$	4,323
Office furniture and equipment						1,483						551
Leasehold improvements						4,890						1,965
Finance leases of computers and peripheral equipment						253						253
Internal use software						12,508						12,095
						23,600						19,187
Accumulated depreciation						(4,887)						(4,045)
Depreciated cost						$	18,713					$	15,142

Depreciation expenses for the three months ended March 31, 2023 and 2022 were $842 and $402, respectively.

Other assets, noncurrent

						March 31, 2023						December 31, 2022
Restricted cash						$	1,178					$	1,208
Severance pay fund						1,674						1,855
Other						129						113
						$	2,981					$	3,176

Accrued expenses and other current liabilities

						March 31, 2023						December 31, 2022
Accrued expenses						$	7,721					$	7,471
Accrued taxes						7,788						7,966
Derivative instruments						485						120
Other current liabilities						860						970
						$	16,854					$	16,527

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

NOTE 10: GOODWILL AND INTANGIBLE ASSETS

There was no goodwill activity during the periods presented.

The carrying amounts and accumulated amortization expenses of the intangible assets, as of March 31, 2023, and December 31, 2022, were as follows:

						March 31, 2023												December 31, 2022
						Weighted average remaining useful life (in years)						Balance						Balance
Gross carrying amount:
Technology						3.00						$	4,700					$	4,700
Customer relationship						4.50						2,419						2,419
Tradename						1.17						980						980
												8,099						8,099
Accumulated amortization and impairments:
Technology												(3,854)						(3,749)
Customer relationship												(2,218)						(2,203)
Tradename												(950)						(903)
												(7,022)						(6,855)
Intangible assets, net												$	1,077					$	1,244

During the three months ended March 31, 2023, and 2022, the Company recorded amortization expenses in the amount of $167 and $213, respectively, included in cost of revenue and sales and marketing expenses in the statements of operations.

The estimated future amortization expense of intangible assets as of March 31, 2023, is as follows:

						December 31,
2023 (Remainder)						$	388
2024						478
2025						148
2026						50
2027						13
						$	1,077

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

NOTE 11: INCOME TAXES

The Company recognized an income tax expense of $2,620 and $2,086 for the three months ended March 31, 2023, and 2022, respectively. The tax expense for these periods was primarily attributable to pre-tax foreign earnings. The Company’s effective tax rates of (26)% and (14)% for the three months ended March 31, 2023 and 2022, respectively, differ from the U.S. statutory tax rate primarily due to U.S. losses for which there is no benefit and the tax rate differences between the U.S. and foreign countries.

The Company has a full valuation allowance on its deferred tax assets. Deferred tax liability is from indefinite life goodwill intangibles. Management currently believes that it is more likely than not that the deferred tax regarding the tax loss carry forwards and other temporary differences will not be realized in the foreseeable future in the U.S.

NOTE 12: NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods presented:

						Three Months Ended March 31,
						2023						2022
Numerator:
Net loss						$	12,795					$	16,926
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted						135,087,949						127,832,785
Net loss per share attributable to common stockholders, basic and diluted						$	0.09					$	0.13

Instruments potentially exercisable for common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive are as follows:

						Three Months Ended March 31,
						2023						2022
Outstanding stock options and RSUs						39,387,789						41,435,569
Total						39,387,789						41,435,569

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

NOTE 13:    REPORTABLE SEGMENTS AND GEOGRAPHICAL INFORMATION

Reportable segments

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker ("CODM") is its Chief Executive Officer. The Company's CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment.

The Company organizes its operations in two segments: Enterprise, Education and Technology and Media and Telecom. The Enterprise, Education and Technology segment represents products related to industry solutions for education customers, and media services (except for Media and Telecom customers). The Media and Telecom segment primarily represents TV solutions that are sold to media and telecom operators.

The measurement of the reportable operating segments is based on the same accounting principles applied in these financial statements, which includes certain corporate overhead allocations.

						Three Months Ended March 31, 2023
						Enterprise, Education and Technology						Media and Telecom						Total
Revenue						$	31,330					$	11,943					$	43,273
Gross profit						$	22,789					$	4,497					$	27,286
Operating expenses																		39,246
Financial expenses (income), net																		(