Q2 2022 Kaltura Inc Earnings Call
mem time.
Good morning, everyone, and welcome to the Kaltura second quarter 2022 learning call.
Please note that this event is being recorded. All material contained in the webcast is sold properly and copyrighted off of CalTura, with all rights reserved. This event is being recorded. All material contained in the webcast is sold properly and copyrighted off of CalTura, with
For opening remarks and introductions, I will now turn the call over to Erika Manion at Sapphire Investor Relations. Please go ahead.
Thank you and good morning. With me today from Kaltura are Ron Yucatil, Co-Founder, Chairman and Chief Executive Officer, and Yaron Gomarti, Chief Financial Officer.
Ron will begin with the summary of the results for the second quarter into June 30, 2022, and the trends and areas of focus that are expected to impact the remainder of 2022.
Yaron will then review in greater detail the financial results for the second quarter followed by the company's outlook for the third quarter and full year of 2022. We will then open the call for questions.
Please note that this call will include forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding Kaltura's expected future financial results and management's expectations and plans for the business.
These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Important factors that could cause actual results to differ from forward-looking statements can be found in the risk factors section of CalTOR's annual report on Form 10-K for the fiscal year ended December 31, 2021, and other periodic SEC filings, including the quarterly report on Form 10-Q for the quarterly period ended June 30, 2022 to be filed with the SEC.
Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and CalTOR assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Please note we will be discussing a non-GAAP financial measure, adjusted EBIT-DODGER, this conference call.
For reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric, please refer to our earnings release which is available on our website at www.investors.galtura.com. Now I'd like to turn the call over to Ron.
Thank you, Erika, and thanks to everyone for joining us on the call this morning.
Today we reported total revenue for the second quarter of 2022 of $42 million, up 1% year over year, and subscription revenue of $38 million, up 4% year over year. The number that needed up for the quarter was negative $8.5 million.
In the second quarter, we resumed sequential growth across a number of metrics, including total revenue, subscription revenue, ARR, and RPO, and saw leading indicators such as conversion of longer sales cycle deals, Salesforce productivity, and new subscription bookings, which we believe support an expected increase in growth in Q4.
One of the drivers of this increase in demand is the recent commercialization of our event platform.
This product transcends our initial event offering that powered mainly large flagship events along with event services to now also power centrally all events of all sizes across the organization with minimal ongoing event services.
As an example, during the quarter we signed several important events deals including with one of the big four accounting firms.
We chose to use our platform to power thousands of internal and external events globally.
Elevating and tracking the level of engagement in virtual events is very important for them, as they are digitizing their internal and external communication to increase efficiency and productivity, reduce costs, and to achieve their net zero emissions goal.
In this multimillion dollar deal, our event platform is consolidating and replacing several existing webcasting technologies while providing a high quality engaging experience.
with brand consistency across regions and departments, and providing insightful and actionable analytics.
Beyond our event offering, we also close video and TV content management and live streaming deals across all of our markets.
For example, a major US bank selected Kaltura, signing a multimillion dollar contract to manage their internal video content and support corporate communication, and two other existing major back customers purchased additional offerings.
So, TerraNow powers video content management and live streaming for five of the six largest US banks.
On the product development front, we had another busy quarter, adding to our event platform new and improved templates, support for custom URLs, advanced analytic dashboards, and additional unique broadcast flows and management features.
We continue to boost our video quality, optimize our end-user interface, and further consolidate our on-demand, live, and real-time components into a single, comprehensive, and streamlined offering that is simple, intuitive to use, and cost-effective.
And we'll continue to advance towards the release of the new advanced version of our self-serve webinar product.
which among other things, includes full integration with our powerful video content management and publishing capabilities.
We continue to gain market recognition for our product leadership.
including winning the Digital or Hybrid Event Platform of the Year award at the annual B2B Marketing Martik Awards.
and being included as a representative vendor in the 2022 Gartner Market Guide for Event Technology Platforms report.
On November 15th, we plan to host our second annual virtually live event focusing on the future of events. Be sure to save the date. And you're also invited to tune in to a recently launched virtually live podcast, which includes weekly episodes of leading marketeers from around the globe and across industries.
While the growth engines that we discussed at the beginning of the year are producing results,
Given the macroeconomic outlook, IT budgets are being reevaluated, presenting headwinds to the slope of a rebound.
Well, this delay reduces our forecasted revenue for the full fiscal year of 2022.
We still expect a return to growth in quarter four and stronger year-over-year growth in 2023.
It's important to note that most of the forecasted growth in Q4 this year is a result of already booked deals not future ones.
Moving on to discuss our bottom line.
Earlier this year we took certain preliminary saving actions and reduced our hiring.
And now given the fluid market outlook.
We're adjusting our spending accordingly.
Today, we announced a cost reduction and reorganization plan that includes, among other things, downsizing approximately 10% of our current employees.
The plan is heavily focused on re-aligning our operations to further increase our efficiency and productivity.
Given the maturity of the ENT and M&T business units, including how their sales cycles, deployment cycles, and margins continue to converge, we've decided to merge the two segments together and take advantage of operational overlaps.
Going forward, we will have a single horizontal structure with mostly cross-company functions and product development, marketing, sales and professional services.
Through years of incubating these business units separately, we could benefit from great synergies by merging them together.
When you consider the cuts and their path back to profitability, remember that even before COVID, in 2019, we achieved positive adjusted EBITDA and cash flow from operations.
And then continue delivering positive adjusted EVDOCK and cash flow from operations in 2020.
In 2019 and 2020, we also accelerated our year-over-year revenue growth rate.
We have done it before, and we believe we can do it again.
Translating the cash flow, while we experienced high operational spend in the first half,
We expect to see a reversal in the second half of the year, throughout which we expect to post a single-digit cash flow from operations loss.
In summary,
While it has been a challenging year for the tech world, video industry, and culture, we're encouraged to enter the second half of the year with increased booking levels, a fully commercialized event platform, and new self-serve products on the way, and a more nimble and agile organization that we believe will bring us back to profitable growth.
With that, I'll turn it over to Yaron, our CFO , to discuss our financial results in more detail. Yaron.
Thank you, everyone, and good morning, everyone.
As I review our second quarter results today please note that I will be referring to a non-GAAP metric adjusted EBITDA. A reconciliation of GAAP to non-GAAP financial is included in today's earnings which is available on our website at www.investors.contour.com.
Total revenue for the second quarter and the June 30, 2022 was $42 million, up 1% in overall.
Subscription revenue was 38 million up 4% year over year while professional services are being contributed 4 million down 22% year over year.
This figure also embodies an approximate revenue reduction of $485,000 as a result of currency issuance into crude during the quarter.
These headwinds are forecasted to continue and weigh our revenue during the second half of BCO as well.
The remaining performance obligations were 172.7 million up 10% year over year of which we expect to recognise 62% of revenue over the next 12 months.
Annualized recurring revenue was 151 million, up 4% in over a year.
Our net dollar retention rate was 100% in the second quarter compared to 107% in Q1 2022.
Note that this quarter, MedDOL retention metrics incorporate the full impact of the large customer that, as mentioned in our last EIRME call, reduced some of their business with us in the fourth quarter of 2021.
This customer has since renewed various existing projects and has partnered with us on new ones.
Within our EMT segment, total revenue for the second quarter was 30.4 million up 1% year-over-year. Subscription revenue was 28.3 million up 4% year-over-year while professional services revenue contributed 2.1 million down 30% year-over-year.
Within our M&P segment total revenue for the second quarter was 11.6 million up 2% year over year. Subscription revenue was 9.7 million up 5% year over year while professional services revenue contributed 1.9 million down 10% year over year. Gap gross profit in the quarter was 26.7 million representing a gross margin of 64% up from 62% gross margin in Q2 2021.
R&D expenses for the second quarter were $14.4 million of 34% of revenue compared to 28% in Q2 2021. The increase was driven by additional aid count and payroll expenses.
Sales and marketing expenses for the second quarter were 16.4 million or 39% of revenue compared to 25% in Q2 2021. This increase was driven by additional sales and marketing investment including account and personal related expenses.
G&A expenses for the second quarter were 11.3 million or 27% of revenue compared to 23% in Q2 2021.
The increase was driven by additional aid count and third party related to expenses related to being a public company.
The gap net loss in the quarter was 17.3 million or 0.13 per diluted share.
A justice dividend was a negative 8.5 million, decreasing from a negative of 1 million in Q2 2021.
The result is in line with our former plan to increase our strength in order to further fuel our growth as discussed earlier.
Turning to the balance sheet and cash flow.
We ended the quarter with 94 million in cash and marketable securities.
Net cash used in operating activities was 22.5 million in the quarter compared to 0.9 million net cash provided by operation activities in Q2 2021.
The increasing use of cash was driven by a couple of major customers that delayed payment, both already collected in July .
As Ron stated, we are expecting a single-digit net cash flow loss from operations throughout the whole second half of 2022 and in Q3 we have already seen a strong collection momentum.
Now, I will provide some information regarding our cost reduction and reorganization process.
In the second half of 2022, total charges related to the restructuring are expected to be about 1 million.
Total cost reduction on an annualized basis from headcount down setting is expected to be around $18 million. As Ron mentioned, we believe this will enable us to achieve a profitable growth faster.
I would now like to turn to our outlook for the third quarter of 2022 and for the fiscal year ended December 31, 2022. In the third quarter we expect subscription revenue to grow by 0 to 2% to between $37.7 million to $38.4 million and total revenue to decrease by 5 to 3% to between $40.8 million and $41.7 million.
We expect a negative adjusted EBITDA to be between $8 million and $10 million. For the full year we expect subscription revenue to grow by 5 to 7% to between $152.1 million and $155.1 million and total revenue to grow by 2 to 4% to between $168.4 million and $171.6 million.
We expect that the fully negative adjusted EBITDA between 27 million and 32 million.
In summary, as Ron mentioned, our output reflects an expected return to growth in the fourth quarter of this year in line with our regional focus of acceleration during the second half of this year, albeit a little delayed within the second half because of this year's unforeseen macro-circumstances. Yes, we didn't think
The cost reduction and the reorganization that we are conducting is planned to help bring us back to profitable growth. We are looking forward realizing synergies to combine our two business units. Lastly, our total cash flow from operations throughout the second half of 2022 are focused to be in the single digit loss.
With that we will open the call for questions. operator.
Thank you.
We'll now begin the question and answer session.
To ask a question, please press star then 1 on your search tone phone.
If you are using a speakerphone, please pick up your handset before pressing the key.
If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
At this time, we'll pause momentarily to assemble our roster.
Our first question comes with Gabriella Corgis with Goldman Sachs.
Please go ahead.
Hi, good morning. Thanks for taking the question. Ron, I wanted to start on your comment on the reevaluation of budgets.
Can you give us a little more color here? How are you seeing the trend difference between M&T versus EMT? And what are the incremental changes that you're seeing in the pipeline or the willingness to invest that maybe wasn't contemplated three months ago or at the beginning of the year?
Again, I want to make sure I understand the question. It is not so much about the reevaluation of our budget, but more what is the underlying business trends.
Yes, correct. What you're hearing from customers.
Okay, great. I would love to do that. Thank you, Gabriela.
So first of all, I mean, as mentioned, booking rebounded this quarter to a level that we've not seen since Q3 21. That means that Salesforce productivity was the highest that it's been in over one year. The E&P sales reps that are doing new logos, it was as good as it was at 2020. And for the customer success folks, it was back to Q2 21 levels.
If you're looking at the proportion of new logos versus upsells, then new logos picked up again after quite a lot of time that it was more upsells than new logos. New logos was kind of a big push forward.
We spoke last time about various deals that have been prolonged.
and the pipeline building up. And now basically a lot of them have come together, a lot of them closed now, and some of them are in advanced discussions for Q3.
In the longer cycles that initially we said that people were having less urgent stuff like they had in COVID to address an immediate need. It's less about usage. It's more about thoughtful response to strategic need around video. So it took longer, but we are seeing these close. An example of that is the move from the flagship events to the new event platform. And we've given examples. I'll give you a couple more about the event platforms that are closing.
In any case, demand is coming across all segments. The largest one is still Enterprise.
geographically it's more or less still the same blend so in EMT it's mainly North America followed by Europe and then APAC.
Media and telecom, most of the bookings this quarter were upsells and not new logos coming from NIAB and APAC in North America. No change in our channel business. It's still on or about 10%. And less professional services as we've seen before. A percent of professional services out of the new bookings is lower.
We have not heard from customers direct discussions on reduced interest because of recession, obviously we're cautious.
I did mention in our last call that we feel that at least a good portion of our businesses some of them are recession proof.
education, watching more TV. And in some areas, we're replacing multiple vendors and introducing savings because of economy of scale. And also in general, our event platform is much more economic than a flagship event with a lot of services.
So that's kind of the high level of what we've seen. If you're looking at a bit of sample deals across enterprise versus medium telecom.
events. We've given an example of a multimillion dollar deal around a new customer that's one of the big four. We had another customer that's a leading European public sector IT service provider that needed us for webcasting. We had a global asset management firm that had their two-day investor events, several mid-sized tech companies holding their flagship events.
In the traditional content management, we mentioned a bank, a new one, and now we are in five out of six. A bunch of existing ones use this more to support workflows for both wealth management and live streaming. EDU continues to be a combination of learning, management systems, lecture capture, and virtual classroom. And we continue our global expansion closing new deals in the US, Italy, Switzerland, and UK.
And in media and telecom we expanded our customers into new countries. We have a big telco in Eastern Europe which we went into multiple new countries with them. We have a lot of more services that we provided around the world for existing customers in the US, Europe , and Asia. And in the pipeline we have major existing banks that are moving forward to add event platform on top of content management. One of them by the way, closed already in July . And there are more tech companies that are holding flagship events.
By the way, some of them are through AWS as a partner. This hopefully gives you a feel of the current deal flow. Is that good for you, Gabrielle? Yes, thank you. Thank you for the detail. The other question I have is a little bit of a strategy question, which is you have the offer on the table for an acquisition. We saw the shareholder rights plan press relief from earlier in the week or last week.
Could you give us an update on how you're thinking about Kaltura's pause as a standalone company versus via potential acquisition?
Well, you saw the two press releases that we issued out.
And so far as Panopto's offer, our board will evaluate the offer in due course as noted.
Insofar as the accumulation of Koutoura shares by Penobto sponsor K1 Investment Management.
that we did adopt a limited duration stockholder rights plan to help promote the fair and equal treatment of all stockholders. We also wanna make sure that the board remains in the best position to just charge our fiduciary duties. It's an available standard tool for this type of situation and we're using it. Obviously we can't comment further on the topic at this point and the board will provide its feedback in due course.
That makes sense. Thank you.
Thank you.
The next question comes with Matt Nickner with Deutsche Bank. Please go ahead.
Hey guys, thank you for taking the question. My question is on adjusted EBITDA. So you mentioned the headcount reductions are expected to drive annualized savings of about 18 million. So I'm just wondering, when do you hit that run rate cost savings level? And then ultimately, what does that imply for adjusted EBITDA in terms of just getting back to break even or positive timing wise? And then I have just one housekeeping question as well. You mentioned...
single-digit cash flow from operations loss. Is that for 2H or is that for the full year? I just want to clarify. Thanks.
Hi, Matt. It's here on the central for the question. Regarding the actions that we took around reducing our ad count and some other savings, we have seen that the
The full impact of the $18 million is going to be as soon as we basically complete the process which will take us another couple more months probably to do it. We will start to see the fruits of the improvement in profitability in Q4 and even if you are doing the math right now in order to see the adjusted evidence that we guided for Q3 and the remaining for Q4 you will see a significant improvement.
The full impact will hit us next year on 2023.
Based on the fact that we, as Ron mentioned, we see a very nice momentum in booking and very controlled churn levels. We do believe that we will see the acceleration in revenue continuing to next year. So making the two line items of the revenue continue to accelerate and at the same time save at least $18 million on an annual basis, we believe that next year adjusted EBITDA is going to be in the one digit and we will do our best to take it as close to the...
and I can tell you that we started this quarter with a very very strong collection momentum which by the way some of it was
the downside that we saw in Q2, but we feel very comfortable that it's going to be a mirror situation in Q2 compared to where it was in Q1 in terms of the case flow.
If I could just follow up one other question I had.
Go ahead, sorry.
Yeah, and one more comment.
The future cash flow, the cash flow is at this point is lagging a little bit behind Justin David as you can see.
So as soon as we are improving the justly dividend going to next year, we do believe that going into 2024 we will be able to take it to a positive territory at least to break even and as we said before we are managing our financials in order that we will not need to raise additional cash in the future.
Got it. And then the follow-up I had is just more around the longer sales cycles. Has that varied at all across verticals, geographies? I'm just wondering if there's any context. There's more of a general statement in terms of macro impacting the base. Thanks.
I think we've seen it most in Enterprise, more so than any other vertical. So much geographically different, both US and Europe .
Part of that was a function or is a function of maybe that rebound post COVID, part of it is a function of the fact that we're moving to an event platform that applies to many more users and as such requires a more strategic review and further consensus across different buyers. Obviously the benefit is it's a much more stickier experience at year-long and part of it might be related to the current macroeconomic condition but it's largely mostly seen in the enterprise but it is also seen
to some extent in education and media telecom is always hard to tell because it's a clunkier business.
that does not come in the same volume of deals and not the same frequency of deals.
And so it's a bit hard to say.
I appreciate the color from both. Thank you.
The next question comes with DJ Harns with Canaccord. Please go ahead.
Hey, good morning guys. So Ron, I think at the time of the IPO, the business just in ballpark terms was roughly evenly split corporate education and M&T revenue. We would love to get an update, like how does that break down today? What are the growth rates of the respective efforts and how does each contribute to margins?
So, insofar as between the three, and ENT, or in media and telecom as well, what was the question there? All three of them. So, corporate, education, and MT. We'll just get an update on how each is contributing to revenue, what are the growth rates of each business, how do they contribute to margins.
Happy to do that. So in the IPO or at the IPO time, we were looking at about a third of the business coming from media and telecom, and then somewhere around 30% more or less coming from enterprise, and another 30% coming from education, another probably 10% coming from Tech OEM side of the business.
In so far as trends we've seen, so I'll give you an example, this quarter, what we've seen now, EDU was the fastest year-over-year revenue grower, followed by Media Telecom, then Enterprise, then Tech OEM by way of order. If you look by way of bookings, then Enterprise was the fastest grower by way of bookings. So it's a bit of a dance there, that sometimes you're pulling forward, sometimes you're pulling back. All in all, where is the greatest momentum we believe this year? I think the greatest momentum is in Enterprise.
And the reason is that it is the largest ham, and it is the largest game. And when we moved from content management into also supporting events and webinars and the rest of it, this is something that is a big market opportunity for us in the post-COVID world. Insofar as margin structure, you would have seen the improvements on the media and telecom side that they have pulled up. We said prior that there is going to be a serious change there, which indeed has been happening.
It has become more effective on the recurring subscription revenue with economy of scale and merging environments as it becomes more sassy and the percentage of professional services have dropped as we become more transactional there. So we've gained quite a lot of points on gross margin and M&T. There's been a bit of a shrinking of the gross margin on the E&T side of the business if you look quarter by quarter, not very significant but a bit there. Big portion of it is as we move more towards live in real time. The cost of goods there for cloud.
resources, et cetera, are weighing a bit down. The total of it together has caused for an increase in gross margin for the company, which we expect will continue to occur in the quarters ahead of us, per the original plan, the mobile gear plan that we've provided. What's interesting, and we said that as it pertains to the restructuring plan, is that while M&T gross margins go up, and ENT went down a bit, in both case, representing their trends in one less professional services than the other,
a bit more through the events, they become even more similar to each other, which both operationally and financially is a good direction for us as we merge these activities. Does that address your question? Yeah, yeah, yeah. That's a super helpful color. One follow-up just in the process with K1, I mean, can you comment on how much engagement you've had with their team and where the board stands in the evaluation of the offer that's on the table?
Obviously, I am not privileged to share that. At the moment, we will be in a position to absolutely share it.
But thank you for asking. OK, thanks guys.
Thank you, appreciate it.
Our next question comes with Michael Turin with Wells Fargo. Please go ahead.
Hey guys, this is Austin Williams on for Michael Turin. I just wanted to drill down into the OPEX headwinds in the quarter in the guide. Is there anything specific that we should be aware of as it relates to currency exposures and how those impacted the full year guide? And conversely, just have you seen a benefit to OPEX as a result of the stronger dollar?
Yeah, it's a great question because obviously all of us are trying to handle the situation around currency for all ways. Let me give you a very quick overview.
On top line, definitely there is a pressure due to the weakness of the euro compared to the dollar. We mentioned it in my statement that there was an impact of roughly $0.5 million on Q2 because of the euro compared to the dollar. Definitely when we built the guidance for the year, we were very thoughtful to where it can go.
there is a negative impact on the rest of the year but we took it into consideration in the number. Roughly close to 30% of our businesses coming from Europe so there is an impact there. The other side of the coin
is that we have some savings coming from the Israeli operation, which obviously we have less expenses in terms of dollars based on the fact that dollar is also stronger compared to the Israeli currency. We also took it into consideration in the way that we guided through the rest of the year in terms of the adjusted EBITDA. But as I mentioned to make a long story short, there is a pressure on top line, which by the way, this is one of the main reasons for the fact that we will reduce the numbers for the rest of the year.
And from the Israeli Shekel, there is some benefit and we already took it into consideration in initiating the guidance for the adjusted EBITDA.
That's great. I just had one follow-up. Dollar-based expansion was down in the quarter. I'm just wondering how or if TURN is impacting this number and if you have any thoughts on just where this number can return in the longer term. Thank you.
Yes, I can tell you that the growth churn, other than the impact that we had from the specific customers that we mentioned at the beginning of the year, we are still taking the ETO because of this customer. Other than this specific customer, we didn't have any significant change in our gross retention, gross churn.
So it was very similar to the numbers that we had before. So the most of the impact that you see in MDR which went down, some of it came definitely from this specific customer. Other than that, some of the booking that we have in this quarter.
Despite the fact that, as Ron mentioned, it was a very strong quarter, much stronger than previous quarters.
It came at the last part of the quarter, in the last few weeks of the quarter, and therefore have a very limited impact on the actual revenue for the quarter.
But if you look going forward, and we are not guiding for the MDR going forward, at least for the coming, for the near term, it will probably stay around the same level and will be under some pressure. But we do believe that we see the path going into back into the numbers that we had pre-COVID. I would not assume that we will go at this point to the numbers that we saw in COVID, which is close to the 120%. But definitely we see a path later in the year to go back.
to the numbers that we had before COVID. I'll just add one point to this. And we said that in the last call when we were throwing what we expect to happen to MDR and we said it's gonna probably come down. And the reason is that Q2 21 last year is a tougher comparison than Q1 21 given the COVID increases.
And so the base by which we're comparing is rising. Conversely, as we look into the continuation of this year, that base starts balancing off.
So, at quarter two it's a tougher comparison and we knew the numbers were going to come down. And the last point is that the Euro, regarding your original, the previous question, the Euro definitely put some pressure on NDR as well in this quarter compared to last year's quarter. So, at quarter two it's a tougher comparison and we knew the numbers were going to come down. So, at quarter two it's a tougher comparison and we knew the numbers were going to come down.
The next question comes with Lauren Coop with New Hamming Company. Please go ahead.
Thanks for the question. Nice to hear about the higher productivity there on the sales front.
Any color you can help us understand the adapting go to market to this new environment and your kind of near term tangible opportunities, any change in sales motion or progress with your partners, your channel partners like AWS, be helpful to color there. So in this area, keep your engaging partners, trust me today.
Yeah, we are, as I said, a bunch of deals are closing AWS, they're a good partner. I think it's the maturity of the event platform is supporting that acceleration here and a good amount of deals are coming from that direction. As I mentioned, it's a new product that has come to be throughout this year, really gave given birth at the beginning, beginning of this year and is now in this quarter in earnest for the very first time contributing in a more significant matter and the same is expected to happen next quarter.
is quite significant. I'd say that a lot of these deals, we said that we've never lost them, but just that they came in and they took longer and then they start closing. We said that the pipeline was getting stronger and we could see the impact of that and that's happening. And so it's not a big surprise for us. We were waiting for these deals to happen and now they have, and we expect more of that to happen. There's a question, how much of this was more kind of a COVID reflex that went down over the first few quarters and now kind of come back up?
especially as I mentioned when people move from the immediate need that they have for the next month for an event to a more strategic thought process around when and how they're going to replace the whole infrastructure for the company. And even now as we get more into questions around IT budgets, the fact that we could replace multiple vendors and do that in a more cost effective way, that's really important. So I think that's all leading towards higher productivity. We expect that to continue to be there.
And one very important thing to note as we think about the future and the numbers that could be there. So as part of the reorg that we did now, we said we're obviously combining the two business units in a way that's enabling us to balance better between growth and profitability, but at the same time, trim and optimize and get a lot more synergies. From a sales perspective, we're continuing to kind of freeze. And we said that earlier, that we're going to slow down the addition. We're kind of
freezing at the current level of the ramp headcount that the company has. What's interesting is that the acceleration on the second half of the year is not affected by it because it's already kind of pegged in into all the numbers that you have and the people that we have now. But if we maintain the same overall productivity that happened this year, not this quarter, but all the way including the bad first quarter, everything till now and even less than that, and we apply the same gross retention level of this year that is the same gross retention as last year.
So kind of the base gross retention, we're set to more than double growth rates next year. And so again, obviously, we're not providing guidance. But the idea here is that the acceleration that we see coming for Q4 based on existing deals, and the general notion that it doesn't take a revolution or even an evolution compared to this year, which was a very, very tough year to bring about a significant higher growth rate is something that we could expect seeing given existing existing year results. So let alone
the productivity of this quarter continues forward, that's a higher number. And if we start assuming upsides that are associated with other factors like the economy doing better, our new event platform, bringing more business, etc. It could jump up materially. And that coupled with the fact that I've mentioned the adjusted even profitability of the single digit, hopefully mid single digit next year, and the breakeven on the cash that's going to come after and specifically in the second half of this year.
being at that single digit cash, I think puts us in a different place and we're looking forward to that. ?? ? confident with the ability to live with them, girly-looking person
success with the events platform? Is that primarily coming from Enterprise versus Tech.io?
All of them are consuming it. Meteco EM are actually supporting folks that are looking to insert components of that into their capabilities. So we have some very interesting cycles there. On the education front, we have multiple schools that have taken our event platform. One thing to note is we generally think about events and where events could go and what events are about. Events are a lot of different things.
Events is internal and external. It's marketing. It's customer education. It's training and executive communication. It's all the way from small webinar to user group to digital gathering to trade shows. And the way we've built the product, it actually touches all these different things across spectrum. So as we look into the future, one, there's immense benefit to marketeers for using these virtual event platforms more so than physical events in terms of reach and cost and...
data and stuff like that, then the budgets, as we said, post COVID that are lower, and that can apply. And generally, if there's a recession, that's going to be probably more effective. So we see that used in a lot of different places. We think it kind of brings together the best of what we could offer. It's a dramatic shift for the company compared to what we were a couple years ago. And it's a multiyear move, and we're completing it. The reason we continue to invest over the last couple years was to get to this point. And I think we're now at a point that enables that.
Thanks Ron.
Thanks, Ron. Thanks.
Once again, if you have a question, please press star 1. The next question comes with Patrick Wall-Ravens with JMP Securities. Please go ahead. Patrick Wall-Ravens, JMP Securities, Inc.
All right, great, thank you. I mean, so Ron, it's
It's been a rough go so far as a public company.
you know there's some green shoots but just big picture as CEO what do you think is the best way for CalTura to maximize shareholder value?
That's a great question, thank you Pat. At the end of the day, the goal of any company is to create free cash flows and to create profits and to be able to distribute these profits over time. Obviously, you need to strike the right balance between growth and profitability, which we're attempting to do. It's different things in different times. It's not always the same balance.
I think we have now adjusted that balance, and we are going into thoughtful growth, and more profitable growth into the future. I think it was important for us to have moved from the smaller pond of content management into the larger pond of additional real-time events, etc., because the world is converging.
It's not that we picked a different fight, it's all the vendors are coming to offer an end-to-end solution that's VLD live in real time into these use cases.
So I think that kind of electron jump that we needed to have done was important to invest in the potential of the company in the next few years. I think now that we are coming to be with the right product set, we need to more quickly come back to what we've done before, which is to show profitable growth. I think this has not been a typical year. You know, COVID wasn't a typical year, but the year after COVID has not been for the industry and for us. There obviously have been a few specific things that pertain to culture. There's a lot of things that are beyond specific. And I think that regression to the mean is a powerful force.
and things are going to come back, and we are seeing them come back. Like I said, we have leading indicators to talk about productivity and about booking, and so we believe that we're going to be able to come back to profitable growth.
Okay, I mean, do you think that evaluating your strategic options should also be part of that?
That's always the case and always being considered at any given time.
Whatever is right for the shareholders being looked at, it's not a strategy in itself or by itself. But if your question is, are we evaluating the current deal that's on the table, will we be evaluating other options? That's our job and we'll always be doing it for sure.
is being looked at, it's not a strategy in itself or by itself, but if your question is are we evaluating the current deal that's on the table, will we be evaluating other options, that's our job and we'll always be doing it for sure. Okay, thank you.
We have no further questions. This concludes our question and answer session. I would like now to turn the conference back over to Ron Ecotillo for any closing remarks. Please go ahead. Just want to thank you all again for your time and support and hopefully a continued healthy and successful year for everybody. Take care. Thank you.
This conference is now concluded.
Thank you for attending today's presentation. You may now disconnect.
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