SEC Filing | Kaltura

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kltr-20230630

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 June 30, 2023


☐			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 July 25, 2023 was 138,491,324

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TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 202 3 (unaudited) and December 31, 202 2 (audited)	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 202 3 and 202 2 (unaudited)	7
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 202 3 and 202 2 (unaudited)	8
	Condensed Consolidated Statement of Stockholders’ Equity for the three and six months ended June 30, 202 3 and 202 2 (unaudited)	9
	Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 202 3 and 202 2 (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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	50

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	65
	Signatures	68

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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, and the associated impact on capital markets, 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 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;

•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;

•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;

•We may face risks associated with our use of certain artificial intelligence and machine learning models (collectively, "AI").

•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 (or vice-versa), 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 in 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;

•We rely on third parties, including third parties outside the United States, for some of our software development, quality assurance, operations, and customer support;

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•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 network access may diminish the demand for our offerings and could harm 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.

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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)


	June 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	40,181	$	44,625
Marketable securities	29,432		41,343
Trade receivables	29,764		28,786
Prepaid expenses and other current assets	7,404		7,521
Deferred contract acquisition and fulfillment costs, current	10,761		10,759

Total current assets	117,542		133,034

LONG-TERM ASSETS:
Marketable securities	1,007		—
Property and equipment, net	20,100		15,142
Other assets, noncurrent	2,863		3,176
Deferred contract acquisition and fulfillment costs, noncurrent	19,351		21,691
Operating lease right-of-use assets	16,045		20,814
Intangible assets, net	929		1,244
Goodwill	11,070		11,070

Total noncurrent assets	71,365		73,137

TOTAL ASSETS	$	188,907	$	206,171

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term loans	$	32,903	$	5,793
Trade payables	10,575		9,437
Employees and payroll accruals	12,475		14,884
Accrued expenses and other current liabilities	16,267		16,527
Operating lease liabilities, current	2,440		2,355
Deferred revenue, current	57,074		59,841

Total current liabilities	131,734		108,837

LONG-TERM LIABILITIES:
Deferred revenue, noncurrent	798		1,266
Long-term loans, net of current portion	—		30,004
Operating lease liabilities, noncurrent	18,679		20,697
Other liabilities, noncurrent	2,173		2,021

Total long-term liabilities	21,650		53,988

TOTAL LIABILITIES	$	153,384	$	162,825

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)


	June 30, 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 June 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of June 30, 2023, and December 31, 2022	—		—
Common stock $0.0001 par value per share, 1,000,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 145,478,668 and 142,249,619 shares issued as of June 30, 2023 and December 31, 2022, respectively; 137,793,478 and 134,564,429 outstanding as of June 30, 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 June 30, 2023 and December 31, 2022	(4,881)		(4,881)
Additional paid-in capital	455,354		439,644
Accumulated other comprehensive loss	(261)		(301)
Accumulated deficit	(414,702)		(391,129)

Total stockholders' equity	35,523		43,346

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	188,907	$	206,171

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Revenue:
Subscription	$	40,724	$	37,972	$	81,116	$	74,989
Professional services	3,156		4,006		6,037		8,705

Total revenue	43,880		41,978		87,153		83,694

Cost of revenue:
Subscription	10,935		9,770		22,103		19,419
Professional services	4,343		5,519		9,162		11,315

Total cost of revenue	15,278		15,289		31,265		30,734

Gross profit	28,602		26,689		55,888		52,960

Operating expenses:

Research and development	12,975		14,441		27,105		29,314
Sales and marketing	12,734		16,416		24,805		31,032
General and administrative	12,431		11,338		24,531		22,775
Restructuring	23		—		968		—

Total operating expenses	38,163		42,195		77,409		83,121

Operating loss	9,561		15,506		21,521		30,161

Financial income, net	(1,166)		(241)		(2,951)		(56)

Loss before provision for income taxes	8,395		15,265		18,570		30,105

Provision for income taxes	2,383		2,082		5,003		4,168

Net loss	10,778		17,347		23,573		34,273

Net loss per share attributable to common stockholders, basic and diluted	$	0.08	$	0.13	$	0.17	$	0.27

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	136,782,051		129,745,162		135,939,680		128,794,256

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net loss	$	10,778	$	17,347	$	23,573	$	34,273
Other comprehensive income (loss):
Net unrealized gains (losses) on cash flow hedges	270		(1,572)		(91)		(1,049)
Net unrealized gains (losses) on available-for-sale marketable securities	22		(145)		131		(145)
Other comprehensive income (loss)	292		(1,717)		40		(1,194)
Comprehensive loss	$	10,486	$	19,064	$	23,533	$	35,467

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


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 April 1, 2023	135,695,254	$	13	7,685,190	$	(4,881)	$	447,316	$	(553)	$	(403,924)	$	37,971

Stock-based compensation	—	—		—	—		7,668		—		—		7,668
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	2,098,224	—		—	—		370		—		—		370
Other comprehensive income	—	—		—	—		—		292		—		292
Net loss	—	—		—	—		—		—		(10,778)		(10,778)

Balance as of June 30, 2023	137,793,478	$	13	7,685,190	$	(4,881)	$	455,354	$	(261)	$	(414,702)	$	35,523


	Common stock			Treasury stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
	Number	Amount		Number	Amount

Balance as of April 1, 2022	127,648,228	$	13	7,685,190	$	(4,881)	$	418,826	$	523	$	(339,560)	$	74,921

Stock-based compensation expenses	—	—		—	—		6,145		—		—		6,145
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	2,938,526	—		—	—		1,066		—		—		1,066
Other comprehensive loss	—	—		—	—		—		(1,717)		—		(1,717)
Net loss	—	—		—	—		—		—		(17,347)		(17,347)

Balance as of June 30, 2022	130,586,754	$	13	7,685,190	$	(4,881)	$	426,037	$	(1,194)	$	(356,907)	$	63,068

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


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	—	—		—	—		14,959		—		—		14,959
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	3,229,049	—		—	—		751		—		—		751
Other comprehensive income	—	—		—	—		—		40		—		40
Net loss	—	—		—	—		—		—		(23,573)		(23,573)

Balance as of June 30, 2023	137,793,478	$	13	7,685,190	$	(4,881)	$	455,354	$	(261)	$	(414,702)	$	35,523


	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	—	—		—	—		11,897		—		—		11,897
Issuance of common stock upon exercise of stock options, and vesting of restricted stock units	3,661,650	—		—	—		1,364		—		—		1,364
Other comprehensive loss	—	—		—	—		—		(1,194)		—		(1,194)
Net loss	—	—		—	—		—		—		(34,273)		(34,273)

Balance as of June 30, 2022	130,586,754	$	13	7,685,190	$	(4,881)	$	426,037	$	(1,194)	$	(356,907)	$	63,068

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)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(23,573)	$	(34,273)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on sale of property and equipment	—		179
Depreciation and amortization	2,155		1,353
Stock-based compensation expenses	14,583		11,727
Amortization of deferred contract acquisition and fulfillment costs	5,872		5,066
Non-cash interest expenses (income), net	(405)		20
Gain on foreign exchange	(485)		—
Changes in operating assets and liabilities:
Trade receivables	(978)		(14,700)
Prepaid expenses and other current assets and other assets, noncurrent	(6)		115
Deferred contract acquisition and fulfillment costs	(3,279)		(6,517)
Trade payables	1,084		1,643
Accrued expenses and other current liabilities	(349)		(4,721)
Employees and payroll accruals	(2,409)		(1,214)
Other liabilities, noncurrent	415		(56)
Deferred revenue	(3,235)		(263)
Operating lease right-of-use assets and lease liabilities, net	(954)		(486)

Net cash used in operating activities	(11,564)		(42,127)

Cash flows from investing activities:

Investment in available-for-sale marketable securities	(14,645)		(38,393)
Proceeds from maturities of available-for-sale marketable securities	26,191		—
Purchases of property and equipment	(1,591)		(761)
Capitalized internal-use software	(1,242)		(3,076)
Investment in restricted bank deposit	(1,001)		(1,850)

Net cash provided by (used in) investing activities	7,712		(44,080)

Cash flows from financing activities:

Repayment of long-term loans	(3,000)		(1,500)
Principal payments on finance leases	—		(133)
Proceeds from exercise of stock options	815		754
Payment of debt issuance costs	—		(125)

Net cash used in financing activities	(2,185)		(1,004)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	485		—

Net increase (decrease) in cash, cash equivalents and restricted cash	(5,552)		(87,211)
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	$	40,281	$	57,160

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)


	Six Months Ended June 30,
	2023		2022

Supplemental disclosure of non-cash activity:

Purchase of property, equipment and internal-use software in credit	$	179	$	415

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

Capitalized stock-based compensation cost	$	389	$	170

Pending proceeds from option exercises	$	163	$	227

Lease incentive recognized as leasehold improvements	$	3,790	$	—

Supplemental disclosure of cash flow information

Cash paid for income taxes, net	$	2,443	$	6,463

Cash paid for interest	$	1,504	$	880

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

Cash and cash equivalents	$	40,181	$	55,660
Restricted cash included in other assets, noncurrent	100		1,500

Total cash, cash equivalents, and restricted cash	$	40,281	$	57,160

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 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 June 30, 2023, and the Company’s consolidated results of operations, stockholders’ equity, and cash flows for the three and six months ended June 30, 2023 and 2022. The results for the three and six months ended June 30, 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.

Concentration of Risks

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

The majority of the Company’s cash, and cash equivalents, marketable securities, bank deposits 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 June 30,			Six Months Ended June 30,
	2023		2022	2023		2022

Customer A (M&T)	10.30	%	*) —	10.50	%	*) —

*) 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 six months ended June 30, 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.

NOTE 3: REVENUES FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables present disaggregated revenue by category:


	Three Months Ended June 30, 2023
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	30,258	97.1	%	$	10,466	82.3	%
Professional services	900		2.9	%	2,256		17.7	%

	$	31,158	100	%	$	12,722	100	%


	Three Months Ended June 30, 2022
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	28,280	93.0	%	$	9,692	83.7	%
Professional services	2,123		7.0	%	1,883		16.3	%

	$	30,403	100	%	$	11,575	100	%


	Six Months Ended June 30, 2023
	Enterprise, Education and Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	60,132	96.2	%	$	20,984	85.1	%
Professional services	2,356		3.8	%	3,681		14.9	%

	$	62,488	100	%	$	24,665	100	%


	Six Months Ended June 30, 2022
	Enterprise, Education & Technology				Media and Telecom
	Amount		Percentage of revenue		Amount		Percentage of revenue

Subscription	$	55,882	92.9	%	$	19,107	81.1	%
Professional services	4,248		7.1	%	4,457		18.9	%

	$	60,130	100	%	$	23,564	100	%

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


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of revenue		Amount		Percentage of revenue

United States (“US”)	$	22,902	52.2	%	$	23,572	56.2	%
Europe, the Middle East and Africa ("EMEA")	16,599		37.8	%	13,816		32.9	%
Other	4,379		10.0	%	4,590		10.9	%

	$	43,880	100	%	$	41,978	100	%


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of revenue		Amount		Percentage of revenue

US	$	45,973	52.7	%	$	46,886	56.0	%
EMEA	32,523		37.3	%	27,640		33.0	%
Other	8,657		9.9	%	9,168		11.0	%

	$	87,153	100	%	$	83,694	100	%

Remaining Performance Obligations

Remaining performance obligations represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and contracted amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $174,329, which consists of both billed consideration in the amount of $57,872 and unbilled consideration in the amount of $116,457 that the Company expects to recognize as revenue but that was not yet recognized on the balance sheet. The Company expects to recognize 59% of its remaining performance obligations as revenue over the next 12 months and the remainder thereafter.

On July 19, 2023, after the balance sheet date, the Company entered into an amendment to an agreement with one of its customers. The amendment among other things, decreases future commitments from the customer by an amount of approximately $7,000. The amount will decrease the unbilled consideration balance mentioned above.

Costs to Obtain a Contract

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Beginning balance	$	26,146	$	25,292	$	26,928	$	26,274
Additions to deferred contract acquisition costs during the period	1,807		4,369		3,547		5,473
Amortization of deferred contract acquisition costs	(2,468)		(2,275)		(4,990)		(4,361)

Ending balance	$	25,485	$	27,386	$	25,485	$	27,386

Deferred contract acquisition costs, current	$	9,042	$	8,902	$	9,042	$	8,902
Deferred contract acquisition costs, noncurrent	16,443		18,484		16,443		18,484

Total deferred costs to obtain a contract	$	25,485	$	27,386	$	25,485	$	27,386

Costs to Fulfill a Contract

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Beginning balance	$	5,075	$	5,641	$	5,522	$	5,427
Additions to deferred costs to fulfill a contract during the period	—		512		—		1,084
Amortization of deferred costs to fulfill a contract	(448)		(347)		(895)		(705)

Ending balance	$	4,627	$	5,806	$	4,627	$	5,806

Deferred fulfillment costs, current	1,719		1,594		1,719		1,594
Deferred fulfillment costs, noncurrent	2,908		4,212		2,908		4,212

Total deferred costs to fulfill a contract	$	4,627	$	5,806	$	4,627	$	5,806

NOTE 4: MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities as of June 30, 2023 and December 31, 2022:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale – matures within one year:
Corporate bonds	$	2,265	$	—	$	(10)	$	2,255
Municipal securities	1,045		—		—		1,045
U.S. Treasury	12,408		1		(16)		12,393
Commercial paper	8,797		—		—		8,797
Agency bonds	4,957		—		(15)		4,942
	29,472		1		(41)		29,432

Available-for-sale – matures after one year:
Agency bonds	1,017		—		(10)		1,007
	1,017		—		(10)		1,007

Total	$	30,489	$	1	$	(51)	$	30,439


	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 June 30, 2023 and December 31, 2022, the Company did not record an allowance for credit losses for its available-for-sale marketable debt securities and the vast majority 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.

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 or Level 2 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 June 30, 2023 and December 31, 2022 by level within the fair value hierarchy:


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


		Fair Value Measurements As Of
Description	Fair Value Hierarchy	June 30, 2023		December 31, 2022

Measured at fair value on a recurring basis:

Assets:
Cash equivalents:
Money market funds	Level 1	$	19,870	$	16,489
U.S. Treasury	Level 2	$	3,989	$	—

Short-term marketable securities:
Corporate bonds	Level 2	$	2,255	$	9,239
Municipal securities	Level 2	$	1,045	$	1,747
U.S. Treasury	Level 2	$	12,393	$	16,195
Commercial paper	Level 2	$	8,797	$	11,237
Agency bonds	Level 2	$	4,942	$	2,925

Long-term marketable securities:
Agency bonds	Level 2	$	1,007	$	—

Prepaid expenses and other current assets:
Restricted bank deposits	Level 2	$	2,600	$	2,600

Other assets, noncurrent:
Restricted bank deposit	Level 2	$	1,005	$	—

Liabilities:
Accrued expenses and other current liabilities:
Options and forward contracts designated as hedging instruments	Level 2	$	210	$	120


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 $7,891 and $8,345 as of June 30, 2023 and December 31, 2022, respectively. The fair value of the Company’s outstanding contracts amounted to a liability of $210 and $120 as of June 30, 2023 and December 31, 2022, respectively. These liabilities were recorded under accrued expenses and other current liabilities. Losses of $693, $184, $1,198 and $735 were reclassified from accumulated other comprehensive losses during the three and six months ended June 30, 2023, and 2022 respectively. Such losses 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 and six months ended June 30, 2023 and 2022 were as follows:


Condensed Statement of Operations Location:	Three Months Ended June 30, 2023		Three Months Ended June 30, 2022		Six Months Ended June 30, 2023		Six Months Ended June 30, 2022

Cost of revenue	$	93	$	124	$	162	$	100
Research and development	358		373		610		308
Sales and marketing	94		107		152		88
General and administrative	124		131		220		106
Restructuring	—		—		28		—

Total	$	669	$	735	$	1,172	$	602


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

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:


	Three Months Ended June 30, 2023		Three Months Ended June 30, 2022		Six Months Ended June 30, 2023		Six Months Ended June 30, 2022

Operating lease cost	$	726	$	658	$	1,488	$	1,283
Short-term lease cost	—		81		154		81
Variable lease cost	20		6		29		18

Total	$	746	$	745	$	1,671	$	1,382

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


	Three Months Ended June 30, 2023		Three Months Ended June 30, 2022		Six Months Ended June 30, 2023		Six Months Ended June 30, 2022

Cash paid for operating leases	$	875	$	876	$	1,477	$	1,343

As of June 30, 2023, the weighted-average discount rate is 4.56% and the weighted-average remaining term is 8.5. Maturities of the Company’s operating lease liabilities as of June 30, 2023 were as follows:


Year Ending December 31,

2023 (Remainder)	1,684
2024	3,018
2025	3,074
2026	3,136
2027	2,704
2028	2,324
2029 and thereafter	8,908
Total operating lease payments	$	24,848
Less: imputed interest	3,729
Total operating lease liabilities	$	21,119


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

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 June 30, 2023:


Year Ending December 31,

2023 (Remainder)	4,773
2024	14,401
2025	13,121
2026	14,250

Total purchase commitment	$	46,545

On July 17, 2023, after the balance sheet date, the Company amended the agreement with one if its cloud service providers. Among other things, the amendment decreased the remaining commitment by approximately $35,000 and changed the termination date of the agreement to October 2024.

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:


	June 30, 2023		December 31, 2022

Prepaid expenses	$	3,078	$	3,369
Government institutions	289		422
Restricted bank deposits	2,600		2,600
Other current assets	1,437		1,130

	$	7,404	$	7,521


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

Property and Equipment, net

Composition of property and equipment is as follows:


	June 30, 2023		December 31, 2022
Cost:
Computers and peripheral equipment	$	4,506	$	4,323
Office furniture and equipment	1,855		551
Leasehold improvements	5,913		1,965
Finance leases of computers and peripheral equipment	253		253
Internal use software	13,458		12,095

	25,985		19,187

Accumulated depreciation	(5,885)		(4,045)

Depreciated cost	$	20,100	$	15,142

Depreciation expenses for the three months ended June 30, 2023 and 2022, and for the six months ended June 30, 2023 and 2022 were $998, $568, $1,840 and $970, respectively.

Other assets, noncurrent


	June 30, 2023		December 31, 2022

Restricted cash	$	100	$	1,208
Severance pay fund	1,592		1,855
Restricted deposit	1,005		—
Other	166		113

	$	2,863	$	3,176

Accrued expenses and other current liabilities


	June 30, 2023		December 31, 2022

Accrued expenses	$	6,611	$	7,471
Accrued taxes	8,636		7,966
Derivative instruments	210		120
Other current liabilities	810		970

	$	16,267	$	16,527


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 June 30, 2023, and December 31, 2022, were as follows:


	June 30, 2023			December 31, 2022
	Weighted average remaining useful life (in years)	Balance		Balance
Gross carrying amount:
Technology	1.75	$	4,700	$	4,700
Customer relationship	3.75	2,419		2,419
Tradename	0	980		980

		8,099		8,099
Accumulated amortization and impairments:
Technology		(3,961)		(3,749)
Customer relationship		(2,229)		(2,203)
Tradename		(980)		(903)

		(7,170)		(6,855)

Intangible assets, net		$	929	$	1,244

During the three months ended June 30, 2023 and 2022, and the six months ended June 30, 2023 and 2022, the Company recorded amortization expenses in the amount of $148, $168, $315 and $383, 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 June 30, 2023, is as follows:


	Year Ending December 31,

2023 (Remainder)	240
2024	478
2025	148
2026	50
2027	13

	$	929


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 $2,383, $2,082, $5,003 and $4,168 for the three and six months ended June 30, 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 (28)%, (14)%, (27)% and (14)% for the three and six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Numerator:
Net loss	$	10,778	$	17,347	$	23,573	$	34,273
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	136,782,051		129,745,162		135,939,680		128,794,256

Net loss per share attributable to common stockholders, basic and diluted	$	0.08	$	0.13	$	0.17	$	0.27

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: