Q2 2023 Kaltura Inc Earnings Call
Good morning, everyone and welcome to the cost for our second quarter 2023 earnings call.
All material contained in the wet cast is the sole property and copyright of Alterra, which all rights reserved.
For opening remarks, and introduction I'll now turn the call over to Erica Mannion at Sapphire Investor Relations.
Please go ahead.
Thank you and good morning with me today from Couch War, Iran. You could tell co founder Chairman and Chief Executive Officer, and you round, the Marty Chief Financial Officer.
Ron will begin with a summary of the results for the second quarter ended June 32023, and provide a business update.
Ron will then review in greater detail the financial results for the second quarter 2023, followed by the company's outlook for the third quarter and full year of 2023.
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 California as expected future financial results and management's expectations and plans for the business.
These statements any of the promises or guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Factors that could cause actual results to differ from forward looking statements can be found in the risk factors section of couch, whereas annual report on Form 10-K for the fiscal year ended December 31, 2022, and other SEC filings, including the quarterly report on Form 10-Q for the quarter ended June 32.
Twenty-three can 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 <unk> assumes no obligations.
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 EBITDA during this call.
For a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metrics. Please refer to our earnings release, which is available on our website at www Dot investors Dr. Cal Torah dotcom.
Now I'd like to turn the call over to Ron.
Thank you Erica and thanks to everyone for joining us on the call. This morning.
Today, we reported total revenue for the second quarter of 2023, and $43 9 million.
5% year over year and.
Subscription revenue of $40 7 billion up 7% year over year.
Adjusted EBITDA for the quarter was negative $1 million.
For the third quarter in a row, we posted record subscription revenue and our year over year total revenue growth rate was the highest since the first quarter of 2022.
Subscription revenue represented 93% of total revenue compared to 90% in quarter two 2022.
Given the results of the first half of the year.
We are cautiously increasing our revenue guidance for the full year.
We continue to focus on returning to profitable growth.
And achieved the lowest adjusted EBITDA loss at the last eight quarters.
Given the results of the first half of the year. We're also cautiously increasing our adjusted EBITDA guidance for the full year.
You are once again reaffirming our plan to achieve a positive adjusted EBITDA in 2024.
Regarding cash flow.
We materially reduced our cash consumption from operations in this quarter to $4 1 million.
Compared with $22 5 million in quarter two of 2022.
This brings our total each 123 cash consumption from operations grew 11 6 million compared to $42 1 million in each 122.
We expect to post positive cash flow from operations in the second half of 2023.
Following our typical seasonal greater cash losses in the first half of next year.
Arrive at cash flow from operations breakeven with sufficient cash reserves.
As stated before we were adjusted EBITDA and cash flow from operations profitable in 2019 and in 2020 and are committed to getting there again very soon independent of our topline growth.
Moving on to the business update.
We landed this quarter, a new fortune 50 bank customer that is consolidating their video content libraries into a single platform and supporting interactive video for learning and training within the organization.
Or in your global investment Bank customer, we are powering all internal and external events of their internal video portal.
Two silicon Valley Trailblazers have chosen Cultura for the first time this quarter to power events and internal communications.
We were also selected by a leading global health care organization to provide live streaming and webinars for all of their events.
By a newly signed European government institution to part of their worldwide events.
And by an online learning company that is starting to go direct to consolidate several video experiences previously powered by multiple video platform.
While the industry headwinds that we have been reporting on persist and.
And we are absorbing these translating into lower budgets increased price pressure and elongated sales cycles.
We are glad to see our leading demand indicators continues to grow.
We posted this quarter a sequential increase in the number of new qualified leads.
And the number of meetings set by our SD ours.
And then the number and size of our RFP submissions.
The growth in all of these parameters was also fueled by increased demand for our newer event plow forum and virtual classroom products.
We believe that these top of the funnel demand indicators.
As well as our growing sales pipeline.
Signal that we are positioned well competitively.
Newer products are well embraced and that the market interest income has grown.
This was also echoed this quarter with US winning industry awards, such as the overall E learning solution of the year category at the 2023 Breakthrough Award.
And five award our global event X 2023, including in the best event technology.
First virtual event platform and webinar software categories.
This quarter, we hosted called direct connect on the road 2023, a series of five exclusive events across New York, San Francisco, Atlanta, London and Berlin.
These were the first go through our organized physical industry events held since 2020.
We were thrilled to have the speaker lineup of 24 top industry executives from global leading companies, including contract customers such as AWS.
<unk> B sales force Vmware and IBM.
Hundreds of asking do you have the opportunity to network with industry leaders and visionaries and participate in hands on workshops and interactive round tables discussing the use of video experiences for marketing and learning and development.
<unk> focused on helping organizations achieve better rois and meet their ESG goals through video based digital engagement.
Clearly in the context of widespread marketing budget cuts and reduction of in person training session.
Speakers and attendees exchange insights about hybrid events.
The role of artificial intelligence and video experiences.
Online video experiences further diversity equity and inclusion.
And the need to converge around a single video platform across multiple products and use cases.
All of these aspects were also identified by speakers that disease areas.
Areas work Altera brings great differentiated value, helping them to achieve their business goals.
Lastly on the product development front this.
This quarter, we continued beefing up our events platform.
<unk> event, the preservation and theme editing registration management user authentication session moderation in content distribution.
We enhanced our video portal with a dashboard for content creators to track better engagement with their content and added better support your multi language content.
We also upgraded our video conferencing rooms to improve production studio features such as rebranding and lower third.
He brings capabilities that enable preparation.
Some segments and content in advance.
Mirror integration for collaborative white boarding and enhanced customization and branding capabilities.
We also launched cloud regions for our global fast service.
Regional requirements for data privacy and security and localized support.
This also lays the groundwork for us to be able to launch additional specialized cloud services for highly regulated markets, such as federal health care and financial services.
We would also like to share our move into the world of generative AI.
We're already starting to collaborate with customers to boost our video based experiences for marketing communication learning and training and entertainment.
And increase their return on investment.
The new capabilities are intended to leverage <unk> extensive content library and in depth analytics.
Enterprise grade generative AI that will drive efficiency and reduce content production costs for our customers across learning knowledge creation marketing and entertainment use cases.
In depth analytics enable optimization of the models as well as feedback loops for continuous learning.
We plan to insert generally it would be I capabilities into a broad range of our products.
Peter to enhance content creation search and discovery interactivity and analytics reporting.
For example, using AI to create new assets from existing content like Repurposing event or webinar content into many highlight real for highly targeted distribution across social platforms.
And for enriching, our immersive and intelligent content search and discovery services with new interactive capabilities.
And for making content more widely accessible to help customers comply with regulatory requirements.
Building on our new generative capabilities. We also plan to launch assistant event creation capabilities for event hosts that include auto generation of content and improved insights intended to streamline event creation grow attendance goose content discovery and reach and user experience and increase engagement.
As an open and flexible company and platform, we continue to harness innovation from across the tech ecosystem.
So dress partner program already includes generally I providers that have integrated their solutions into our video experience cloud that are available to go to a customer.
As part of our partner program, we intend to launch eco draw AI accelerator program that will connect AI startups with Cobra products, while facilitating brainstorming knowledge sharing and value creation with enterprise customers.
We are excited about the great promise that generally that would be I hope to create hyper personalized hyper engaging experiences on the fly.
We believe that this will significantly increase the creation consumption and are a wife and video experiences and that could draw and its customers would stand to benefit from a tremendously in.
In summary, we continue to make progress towards our goal to return to profitable growth.
We posted again record subscription revenue.
They need to increase our year over year total revenue growth rate.
We further reduced our adjusted EBITDA losses, and cash consumed from operations.
Despite the continued industry headwinds, we continue to be encouraged by leading indicators and are excited about the adoption of our newer products and about their continued innovation, especially around generally the AI that has the potential to significantly grow the demand usage and value of our solutions.
We are cautiously increasing both our revenue and adjusted EBITDA guidance numbers for 2023.
And are reaffirming our plans to achieve a positive adjusted EBITDA in 2024.
We plan to post positive cash flow from operations in the second half of 2023.
To achieve cash flow from operations breakeven by the second half of 2024 with sufficient cash reserve.
With that I'll turn it over to you Ron our CFO to discuss our financial results in more detail.
You are wrong.
Thank you Ron and good morning, everyone.
Second quarter results today. Please note that I will be referring to non-GAAP metric adjusted EBITDA.
Reconciliation of GAAP to non-GAAP financials is included in today's economy.
The release, which is available on our website at www dot investor that can do a dot com.
Total revenue for the second quarter ended June 30 of 2020 fleet was $43 9 million up 5%.
Subscription revenue was $40 7 million up 7%, while professional services revenue contributed $3 2 million down.
Down 21%.
The remaining performance obligations were $174 3 million up 1%.
We expect to recognize 59% as revenue over the next 12 months.
After the close of the quarter, we had a customer reviews. There three years commitment by approximately seven medial strive equally although they use.
We posted in the second quarter Records.
Well, if one of those being 63 4 million up 8%.
Oh, and then the low retention rate was one of them. The same the same as Q2 2022.
Within our E&P segment total revenue for the second quarter was $31 2 million up 2% year over year.
Subscription revenue was 33, 7%.
While professional services revenue contributed nine.
$9 million down 68%.
Yeah.
We know them and that's M. P segment total revenue.
The second quarter was $12 seven medium.
Presenting the 10% year over year growth.
Gross subsea.
Subscription revenue was $10 5 million up 8%.
While professional services revenue contributed $2 3 million up 20% people there yet.
GAAP gross profit in the quarter was $28 6 million, representing a gross margin of 65% the highest gross margin since Q1 <unk>.
Within our E&P segment gross proceeds toward the second quarter was $23 1 million.
Presenting a gross margin of 70 focus and up from 68% gross margin in Q2 2022.
Within our MSP segment gross profit for the second quarter was $5 5 million, representing a gross margin of 43% down from 52% gross margin in Q2 2022.
Net loss in the quarter it was <unk>.
$8 million.
Zero eight diluted share.
Adjusted EBITDA for the quarter was a naked people one medium improving from a negative $8 5 million in Q2 2022.
Turning to the balance sheet and cash flow, we ended the quarter with 76 million in cash and marketable securities.
Cash used in operating activities was $12 1 million in the quarter compared to $22 5 million in Q2 2022.
I would now like to turn to our outlook for the first quarter of 2023 and for the fiscal year.
So if you say it's 2023.
In the first quarter, we expect subscription revenue to grow by two 7% to between $39 8 million and $46 million and the total revenue to increase by 4% to 6% to between $42 7 million and 43 5 million, we expect a negative.
Adjusted EBITDA between 5 million and 1 million. So the full year, we expect subscription revenue to grow by 5% to 6% to between $169 6 million and $161 7 million and the total revenue to increase by 1% 2% to between 100.
Instead of 10 million and 173 million.
We expect significant adjusted EBITDA between $4 five for insights.
Yeah.
In summary, despite the microenvironment and industry headwinds given the positive results of the first quarters.
We're living within miles indicate that we are cautiously increasing our revenue and adjusted EBITDA guidance for the rest of the year and expecting to generate positive cash flow from operations in the second half of 2023.
We are encouraged by our continued progress towards profitable growth and are reaffirming our commitment to positive adjusted EBITDA in 2024 and to achieving our cash flow from operations breakeven by the second half of 2024 weeks.
Sufficient cash reserve independents are still playing golf.
With that we will open the cultural question operator.
Thank you.
We will now begin the question and answer session.
A question you May Press Star then one on your Touchtone phone.
You're using a speaker phone please pickup your handset before pressing the keys.
Is that any time. Your question has been addressed and you would like to withdraw your question. Please press star two.
At this time.
Charlie.
Right.
Our first question comes from J Hynes with Canaccord. Please go ahead.
Hey, good morning, guys.
Ron I wanted to ask about what Youre seeing in terms of retention dynamics in the core E&E segment.
I would've expected to see a bit more sequential growth there coming off of last quarter.
Year over year growth tick back down to 2% against an easier comp you mentioned this three year customer that is reducing its commitment by 7 million over the term of their contract maybe just unpack.
Gross retention dynamics as we think about how the model plays out over the next couple of years.
Hey, P. J. Thanks for the question happy to do so.
So first from an MBR perspective, you've seen that it was 100% slight decrease to 102 last quarter over 100%.
Quarter of last year and aligned with our general expectation for the year, we expect that to be a gross motor runs out a number but the bookings are going up.
Pick up again.
From a gross retention perspective, so the gross retention levels.
Were somewhat lower compared to the recent quarters and this quarter.
We had approximately two thirds of the first half reduction in both Q on Q2 from parcel reductions. So that means our customers are still with us and only one third came from kind of a full churn or non renewal. So we're no longer working with the customer. So it's more kind of an uptick on partial reduction because the price pressures are.
Certain projects that people are doing less of even in the case of what we'd mentioned on the <unk> side of the next quarter or this is a reduction it's not a complete departure of a customer.
A separate one that we've announced on the majority of the churn is due to kind of no longer requiring the product, but it could sometimes be virtual events.
The term physical and so there are kind of stopping at this point of time and then the second reason would be certain price pressure only 5% of the reduction is due to I'd say product feature gap or service level issues.
From a segment perspective question on the M&A front, there was an improvement from last quarter actually better retention still lower than usual.
On the T side, it was a bit lower than quarter, one it's slower than usual, but one thing to notice that we had a quarter with even lower E&P retention. So we have this quarter in each one of the last two years in fact.
Quarter to 23, the exact same quarter of the year before was lower any empty. So it goes up and down from time to time, we do expect next quarter to still be lower than usual and that's fueled.
Part of that customer that we had mentioned, but then in Q4, we expect given current forecast things to come back to usual levels and all of them all just to frame things in an overall what kind of size, we forecast for this year to be a few percent lower than the user retention rate. So nothing much more drastic than that we're not seeing any crazy.
But it will be a few percent lower than the typical gross retention rate and we think it's more than anything else is done at the time like we said squeezing in stopping certain projects and then coming back does that address your question, Yeah, Hey, guys.
I want to follow up maybe on the pipeline generation metrics I mean, you sound pretty excited around qualified leads rfps. The meeting said all of that sort of stuff.
How are things progressing through the pipeline like what are you seeing in terms of timelines to get deals over the finish line.
That's a good question. So because we did indicate that we are seeing a meeting set by SBR tick up and we are seeing out of our year over year sequential growth in that and and it was declining mid last year and we are seeing from an RFP submission continued year over year and sequential incur.
Kris and also that was supposed to decline in the second half of last year.
And also to the extent that you know the specific products that are looked at on OSB Theres a lot more requests for your products and platform virtual classroom.
And that's also to continue to pull up the average opportunity size in our RSP.
So just to give you. An example, the exempt platform responses were more than double compared to Q1 and Q4 last year. So Q2 was like the sum of Q1 and Q4 in a bit more.
So it's pulling up.
So that's that's on the top side of the funnel that <unk> meetings rfps are pulling up.
At the bottom side from a win rates, we continue to do well in fact, it was a record it was even better than last X quarters, and it's a really strong number.
So that's not the issue, but the bigger issue in the upper teens to kind of the general headwinds of the industry have lower budgets increase plate price pleasure and longer to tell cycles is that there are getting prolonged so they are taking longer to go through the funnel. It's not that we're losing the deals and its not that new opportunities are not opening up but they're taking longer to go through the path.
Yes.
And so for Q3 now we have a pretty rich pipeline and let's if it closes in Q3. It goes out to four of delays continue.
But that's the biggest story around booking not the top and not the bottom but the middle.
Got it makes sense, okay. Thank you for the color.
Thank you.
Our next question comes from charge.
We opened the hymer. Please go ahead.
Yeah.
Thank you for taking my question, maybe following up on the.
Environmental answer you just provided can you just give us a little bit more color on the pricing question. Larry you mentioned and you know the competitive dynamics are you seeing vendors be more aggressive to to take share or is this more I T.
Spend driven that our customers are just looking to be more cost efficient.
It starts with the ladder.
The customers need to have less money to spend less money.
And it does also affect competitors willingness to reduce prices both for new beds as well as existing customers even more so existing the biggest story ankle draw has been that over the years. We've received again and again to state that people want to switch to us and we still have quite a quite a lot of switches.
Not just the change of need like a physical or virtual that moving physical but people think you know what let's let's just go tomorrow affordable option right now.
Then following up on the customer engagement with a platform and Oh over the last year, you've been gradually adding more low touch opportunities for customers to directly engage with the platform can you give us an update on what you're saying there.
Yeah, I'm happy to do that so as I said, the Lopez devoted to perch bears b.
Enterprise offerings that are not complete self serve credit card, but you could have that didn't have less services and an example of that will be our event platform E. P product, which was the reincarnation of our original V. E. Virtual events solution that was rich with services that were required by Cultura the automated thing so.
You could do it yourself through <unk> and then the second piece is complete self serve which is credit card and that also lends itself more to departmental sales and even more so S. M. B N S. M. B. So let me start with the first one which is lower touch yes. Indeed, a lot of what's happening is increase L. Is that are using products that are more alone to touch us what I said earlier.
Also the demand is growing for R. E B product, that's picking up and you can see that the ratio of subscript of professional services over revenues continue to go down and there was continued to be nominal decrease in our professional services and the year of your basis, we expect that to be this year et cetera.
From a complete self serve we're making good progress on optimizing the products.
More pick up of users, but I said earlier that this is not one of these things that's gonna make a big change to this year's revenue and I'm not trying to over promote it until such time as we can tell you look this is not really move the needle for us as a company at our bookings and growth are we making progress in the plug it yes, but I wouldn't again I wouldn't.
Start talking about the revenue impact of this over the next few quarters until next year it should be an impact.
Great and last question for me the generative AI functionality that you're putting into the platform can you give us some perspective on timing is this something that you look at S, primarily driving customer stickiness and potentially expansion or do you see some price changes.
There's also a new product second call out of the backward.
Yep. So we started to collaborate already with customers to boost our experiences with a I.
Broadly the AI plans are divided into I'd say three buckets.
There's the video analysis and metadata enrichment, so it's not creating video, but it is around the video and that's where our.
Media asset is enhanced where they are except for example, if you're adding better ASR, which is transcription using for example, whisper open source project or are we doing better O C R and understanding the.
The what's inside the video or are we doing speaker identification. Let's go go so diaries nation that you could actually understand who's talking when in the video titling her chapter anger keyword identification or summarization of the tech store pulls creation. So all these is expected to happen over thanks for.
Months is already pilots out there running with our customers and works out about that.
The next step after his constant creation when it's the actual patient and editing them here too divided into two parts. There's a part where there is existing video and all you're doing is repurposing, it's more like clips or highlight reels and that's gonna come in sooner and then there's the more robust full generation of video so you insert text.
Insert audio and images and you get a video in an automatic way that's not in the immediate short future plans, but we do expect to get there I tell you by and large the big opportunity that AI introduces is compressing two things that used to have been separate which is production and distribution and the ability to have that on the fly and highly personalised so that <unk>.
Each person gets the video of the right content the right context in the right time to maximize the actual engagement is really really interesting and then on top of creation of video there is image generation Ah social posed like some nails they're.
That are creating on the fly and then the third category said there is three there was the big analysis Medicine. There's concentration. The third is just general AI powered features that are not related to video about heart touching the experience. So for example assistance for the events or Wizard for automatic generation of events of Webinars. So do you.
Basically insert what you Wanna do and it creates you with a webinar that third piece is also advancing in parallel to the first one so it's less video centric, but it has experienced centric. So it's all gonna happen over the next.
Few months, but pieces of it they're gonna take longer it's a move your strategy as I said.
Earlier in my script, we are also backing of partners and we are.
Shortly known to do that really well and we expect to do that.
And yeah. We're we're excited about it but it's you know we're in an interesting place because we have to content. We have the experience that we have a lot of data and we own the data horizontally in the enterprise for users for a lot of different use cases, so if you're out of your eye on top of that that's gonna be quite powerful.
Thank you.
Thank you George.
Our next question comes from Brian .
Coke. Please go ahead.
Hi, good morning.
Sounds like you're relatively pleased with the sales execution here and I Wonder if you could.
Reflect on you know what you can share in terms of color on.
Organizational strategy process changes you've made to.
Improve the predictability and productivity I mean, despite you know obviously some of the headcount cuts you guys have turned it around here so.
What what can you reflect you've made some changes to an organization that you think is have the results.
Yeah I appreciate that.
Again, I'll put the parentheses amount I'm very happy with what we're doing in the market and I think we're we're doing better than the other folks there are headwinds that are impacting the slower execution in bookings and and this is not a typical year, we expect to do much better than that I am pleased that were out there reaching out and beyond anything else of Maine.
Very well the expansion from the internal use gives him to both internal and external together with our marketing CMO fronting products and that's enabling us to grow our pool, but also doubled down on our unique offering to be that horizontal platform to consolidate all different did you use because in the enterprise.
So that's a very powerful and I'm also happy about our when rates are holding and actually do even better. So so that's good known so far is what are the changes that we've done in order to accomodate for that so first no big Revolution. That's Donald this quarter. For example, you know we've gone through a planning and execution on a multi quarter basis, but I can tell.
You the general trends are to a further training enable our staff to grow from being told to external to do see Emily sales sales together b enable our our team to work better in lower touch environments and more product led growth where people could start playing with the product and then get.
<unk>, even if it's an enterprise still not complete self serve sale and how to support that some product marketing through.
Sales, but also earlier than that from product and marketing and the whole organization is aligned to do so well and I'd say that by doing so we've also got <unk>.
Other competitors that we've done less work against in recent years, and I think we're doing better and being able to tell the story and why Kultura an hour. We're better situated we're getting a lot of folks are interested in making these switches and I think you're gonna see a lot more of that and the orders to come.
So these are some of the improvements that we've been.
That's great. Thanks, and what if you could comment at a high level and kind of what you see strategically happening in the industry.
Cut out you know the Brightcove Yahoo announcement to know if you saw this morning, but your Harper and was just acquired by by Ringcentral, It's a little bit of a stretch for them, but I would like to know much about events and such but what are your thoughts on the industry consolidation collaboration.
<unk> are.
Are there <unk> strategic channel relationships.
Discussed in the past and you think you know can can come to bear for for <unk>.
Documents for you I appreciate it thanks.
Yup Great question.
Starting with bank of at Yahoo, That's naughty channels or a strategic kind of statements of customer, it's a bigger customer for them, which is great.
But it's not a strategic shift they focused on media companies and the classic kind of Whoopi online video platform. As you know the median telecom we've put a bit more focus on the T V for a delivery, which are more mission critical into deal greater stickiness and the less commoditization better gross margins ultimately so.
There's a bit of a different direction, we are coming down market to also larger media companies, but you're always in the bull's eye of the focus of break open at all I'd always been in insofar as the acquisition of hopping. Congrats it just spells that there'll be a continued consolidation in the space <unk> R. A.
Off our product that's geared and you send it to the low end or smaller companies, let not the large enterprises, it's kinda the classic self serve low touch all the way to.
<unk> and not large enterprise and so will be interesting to see what they make of it we don't compete within much in the market that where we are today and even in the places. We did go for complete self Sir there was more towards <unk> towards the size of the Vince eyes were doing work with a bigger folks, but it is yet another example of more.
<unk> that will continue to happen do we believe in consolidation the answer's, yes.
And you know I'm sure we're gonna take place in consolidation in whatever form the good thing about <unk> is that we are very horizontal where in multiple markets, where with multiple products and we are in open architecture that enables to scale and grow and add to it a lot of different components. So we can be a very strong consolidator and the mark.
<unk> <unk>.
So far as your comment about channels, Yes channel is really important to you know strictly we've had five to 10 per cent booking from channels and it's remain consistent this quarter as well and I said, a few quarters ago that I expect that is part of our expansion into real time conferencing powered products and move into SME will be able to provide more channels.
Sales and that's still the case, we're working in a few deals right now that it will be quite interesting hopefully we'll be able to announce.
And the all the channels that will go to market together with us in our products.
So yeah, the future will be more channels and more consolidation.
That's a great round, thanks throat really thorough response appreciate that.
Thank you I appreciate it.
Our next question comes from my culture.
Argo. Please go ahead.
Alright, you got Michael Burger from Michael turn <unk>.
Follow up question around the customer who downgraded by $7 million a quarter.
Anything the 0.2 across the rest of your large key customers how is it that positioning whether it's expansion downwards anything to point you in color in relation to that.
Seven nine dollar customer you referenced in the script. Thank you.
Yeah first of all as you. So we mentioned these customer reduction.
<unk> around <unk> numbers.
You sold it out the order number is just a jumped nicely in this quote on a sequential base and the main reason for this is the fact that the it was a very <unk> good seasonal for a new one for us and the reason that I mentioned this customer is not because it's such a material customer for their quarterly will even full.
<unk> revenue for the company just because of the fact that the to 7 million dollar approximately 7 million dollar impact on the future I'll feel well. So we will <unk> for jumping next water.
<unk> base is a as we mentioned a it's basically roughly photo feet going to impact us on the next 12 months.
These customer you still have major customers seem both and customers actually we are discussing with them.
And some other details and they'll still paying us a big chunk of money.
So the bottom line is that there will be a short term impact on on the.
<unk>, we don't believe that that'll be all will go below delivered we so L. L. D C O.
At the same time, we did authenticate eight to continue to grow significantly in the coming <unk>.
Yeah and in the case of this specific customer it's a re shift in their strategic direction that caused them to to do something with it.
Mmk, well as I said earlier about different reasons for germ.
Related to a product not related to competitors, it's not illegal to service level, it's really.
To a decision that leads me to do something different and in the next 12 months dating package material to the business.
Thank you.
Our next question comes from.
So with Goldman Sachs. Please go ahead.
Good morning. This is Jake settlement on for Gabrielle Ron you've talks about customers consult consolidating all over their video content on Cal Tara it'd be great to get a little bit more detail on how that typically increases your deal sizes, and maybe try and quantify what the upsell them cross-sell opportunity looks like within the installed base.
Yeah happy to do that so there is a.
Nice large silicon Valley company, that's been speaking at our conferences, that's been sharing their story of 12 different instances in six different vendors.
They've consolidated into Cultura, including names that you all know.
And their view is that.
The broken workflows, otherwise and it's a lot more coffee and this you can also get unified analytics across the enterprise and much better or why if you move to one platform and so they started replacing many of them and it's a repeated theme for us.
And so what the motion is usually from an ups on cross sell it varies I mean, something historically, we've entered through the internal use case and more V. O D call at the video portal or video content management.
Here working with a C I O or with the H R. R. L N D Department learning and development and.
And then the expansion would be either more and more instances across different groups or would be moving out to also include the marketing groups.
Through events or external use cases with similar products and when you think about the video portal it could serve internally. They could also sort of externally and so what we increasingly see is that the C. I O as password owning all video workflows behalf of the CMO and others of course, they are involved in the purchasing decision but.
You're trying to get to a point, where there was one platform vacated stones no forever there'll be a stand alone separate conferencing system for the productivity and collaboration stock and these will be kind of the usual suspects, but everything except that.
Is consolidating to be provided by a single vendor and you'll note that most other if not all other vendors have not even taken the approach of consolidation. This isn't something we started talking about this or last year. This goes back to our origin.
We've stated we believe there's a need for one Lego kit that goes across the enterprise that is tightly integrated so could power workflows, but also a horizontal and interoperable.
Insofar as how that's affecting our pool will look at the company I mean, we've consistently grown and grown and grown or uncle, we don't reported that on a quarterly basis, we talk more about it an annualized basis just state that it's growing.
But it's it's the new deals are going up and the average ahmar per customers port pulling up and we're just getting bigger bigger deals.
Obviously that works to the other direction that in parallel we're also getting into more <unk> and ultimately self serve smaller customers, but that's my choice, but if you think about the size of deals with large customers. This is very big So if you take a bank and we are in sixth of the leading back to the U S. As a vendor they may have started.
Training and then I moved into a into webcasting and then I moved into events and are now using those those also for mission critical empowerment of their wealth managers to offer video for wealth management and they have grown from accounts that were worth a few hundred thousand into accounts that are in the multi million dollars.
So it's anywhere between a five X. We ultimately believe it can be a tenex growth in these accounts and that's gonna pull up our N D. R. So we're seeing the beginning of it because this year is a tough here in the last coupla years coming out of Covid.
And then getting into this financial situation.
Causing a lot of these of these companies since they were gonna do it more gradually we're gonna wait it off we want to do this but.
At the moment it hits, it's gonna pull it back up we believe into not only the starkel, India rates, but even higher rates last thing I'd say is that a lot of these things because they're moving into the world of content creation, not just content management could lend themselves to be more usage base and therefore could even have.
Even higher N D R and it could be the gift that keeps on giving and we believe that the models could change for more FTE base.
More usage based as we continue to progress, but let's take a one one quarter at a time and to see how this hits.
Yeah that makes sense and then I guess just to follow up on that what needs to happen to get <unk> back to 10 per cent growth and how much of that is in your control versus you know depending on the overall spending environment needing to improve.
That's a good question so.
Let's start from the other side of it by the way nothing needs to happen for us to be profitable. We're on the way to do that we've always promised that we're executing a dot Castro profitability that's done.
Insofar as growing as you can see we're doing better than the other companies out there that are guiding down that are reducing revenue. We are we are not not to say that we're celebrating because this is a far cry from what should happen, but it's a very very tough coupla years for the industry I think that's what.
Keeps us you know more optimistic is the fact that we're seeing a the type of companies of logos are great Big leaders <unk> Blue chip customers that are signing with us, including popped up tech companies that are choosing nothing about the best and we've landed we've stuck the landing around expansion into the new markets that we are entering now as we've done historic.
Because we've entered for the first time any markets and have done so well and so I think that what needs to happen other than convenient to optimize and finesse. What we're up to is for the markets to start turning around for budgets.
Being more available for the squeeze just start coming down now.
Is it to save that until markets don't flourish, we're not gonna get to north of 10 per cent no. That's not the case, we do believe that the second half of the year given all the deals that have come into our pipeline, albeit short on taking more time will come to fruition. We do expect that we will continue to grow and accelerate and we expect that after a certain period, we will reach that.
Milestone, but it's it's hard to say honestly in our industry how quickly that will take place. We're very very confident that ultimately we're gonna do that much better than that.
Because we've always been on the top of the heap of companies in the industry and we're gonna come back to that.
Thank you.
No. Thank you <unk>.
Our next question comes from my Bank.
Bank of America. Please go ahead.
Yeah fine. Thank you for the questions Coupla, if I cut. It I think are are you mentioned any expect churn to remain elevated for the remainder of the year. Just curious extension of that does that apply to you expect it to improve next year and I guess episode Y or was that comment is more.
[noise] about your forecast period for the for the calendar twenty-three here.
Yeah, one correction I'll, let you run to answer this is jumping to answer but before it just one comment I mentioned that we expect it to still not be amazing next quarter, but that in queue for it will already improved not next year I'll go ahead and.
Yeah. So it is one mentioned the most important point that we would do is sit down and get around in queue for a note that you've been waiting for <unk>.
And one of the reason that we are still and pointing to the fact that maybe next quarterly still going to be down is mainly because of the fact that we mentioned these specific customer it actually it they they actually reduction attending July and noting cute too so it's swelling, but the the.
Retention number in Q2 without the T. Two each will be different.
The other point that they we mentioned <unk> that we are still projecting <unk> our retention rate is going to be in the same level for next quarter. So despite the fact that we see a lower retention a we do see a very balance situation and did not do a lot of attention right.
And as mentioned the situation around the retention is going to turn around and based on what we see right now in queue for D C.
Okay. Thank you note of clarification on that.
Yeah, I just wanted to say that we we have decent visibility because these are large enterprises, it's not smbs recipes and it's not something that's kind of flooding all or a different customers at specific cases, which we we we see and we know so that's where yeah go ahead, yet another question.
It's one one more quick one you also mentioned you know pricing pressure earlier.
It seems that they must be it's been relatively competitor for for some time, and obviously competitiveness willing to discount from the bundle or a discount to Wendy off can you just give us some more detail on the intensity of the pricing pressure has it increased recently you know our other side there might be some.
The improvement in pricing any any kind of comment around pricing and the dynamics there would be helpful.
Yeah, I think my largest it's to the tune of 10 15 per cent type of price pressure when you're looking at renewals. It's not 2030 40 per cent I think it's just more companies that were more contracts have come to renewal as the more time passes into the situation and so it's there's some quarters that are more effective than others.
I can't tell you the tactically.
We're seeing in quarter extra quarter Y a big big difference.
But I can tell you that it's still there and we do expect that through gradually he's like I said the bigger issue.
Or the interesting part is that people do want to make the switch and so it's it's just a question of when they're not gonna care that much about X you know in their budget that they're gonna say you know what this is more efficient for the mid to long term. This is a better solution, we're not raising our eyes beyond the immediate.
Term and are doing what's right for our company for the midterm.
And when that happened and they choose go through when all they look at US Myopically of 2023, then they choose otherwise and they're honest about that and so I just I cannot tell you do they changed their perspective in this or that quarter I can tell you that it will change it has changed.
Every time in the past it's like it was like this have occurred and when it does we're gonna be even more in a better position then again I Gotta take you back in again to the point that we are executing better than the other folks out there and you can see the growth rates in the back that both retention as well as booking limitations have on them, where we're still <unk>.
It's all very helpful. Thank you for the question for my car.
Oh, Thank you Michael.
Ladies and gentlemen, as a reminder issue.
Question. Please press.
One.
Our next question comes from Austin.
J M. P. Securitas. Please go ahead.
Hey, there. Thanks for taking my question, Hey, So I'm just wondering about the plan it looks like they're still $33 million in debt. That's current on the balance sheet. If you could comment on that thanks.
Yeah. The this but this deputies mature early next year, but we are paying the fine on stage, you'll say.
And negotiation on refinance <unk>, so the 19th <unk>, he's going to be <unk>, it's it's basically going to be zero and we believe that the school there will be able to refinance it we have few proposal on the table and.
And the proposal Oh by the way better than what we have right now so.
No impact on our <unk> going to be renewed and and maybe even will have some <unk>.
Great. Thanks, and then if I could just throw in a quick follow up for for Iran. You know just to follow up on the <unk> topic guys mentioned some of the other new features sounds pretty intriguing you.
Can you comment on is there any new talent you guys are are bringing aboard there any testing you guys are doing and then now how can we think about any incremental revenue in any out in the out years. Thanks.
Yeah. So we are absolutely, bringing in talent and looking at different options of.
There will always been a build my partner and we are looking up more partnerships in this space and there's a lot of great stuff and hopefully we could update you in the near future and so far as incremental revenue too early to say that I mean for sure it's going to impact and that's gonna do well I think demand and usage of the platform I'm Gonna go up but.
At this point, it's not changing I mean, not coming back.
Showing that we have increased guidance for the year. We are you know we've done okay for a quarter to versus expectations, we beat them and also per quarter, three we're coming down the street and for the year, where we've increased old numbers cautiously and we're doing that you know bearing in mind that there's still the headwinds and we're taking them into consideration.
So yeah, we're not inserting AI into these assumptions. This is all upside and we believe that the opposite will come.
Great. Thank you.
Question and answer session.
I would like just trying to call back over to Ron mucus.
Also for any closing remarks.
Yeah I'd like to thank you all for your great questions and continued support as I mentioned I think it was a good quarter and a lot of good signs up for the future and the parentheses of the market the whirlwind.
But we're excited about the top.
Of the final trends that we're seeing as well as.
With additional developments, including E I and other stuff and are excited to see all this your continues to unfold have a wonderful day stay safe to be well.
What it is.
Has not concluded. Thank you for obtaining today's presentation you may now disconnect.
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