Q3 2023 Kaltura Inc Earnings Call
Good morning, everyone and welcome to the Tor third quarter 2023 earnings call I'm.
I'm not sure are contained in the webcast the salt property incorporate a culture, which all went with all rights reserved for opening remarks, and introductions I'll turn the call over to Erica Mannion of 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 Murphy Chief Financial Officer.
Brian will begin with a summary of the results for the third quarter ended September 32023, and provide a business update.
Roundel review in greater detail the financial results for the third quarter 2023, followed by the company's outlook for the fourth quarter and full year of 2023. 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.
<unk> calories expected future financial results and management's expectations and plans for the business. These statements are neither promises or 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 Cal tourists 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 September 32002.
One three which will 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 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 EBITDA during this call.
A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metrics. Please refer to our earnings press release, which is available on our website at www Dot investors Dock, California Dot Com now I would 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 third quarter of 2023 of $43 5 million.
6% year over year.
Subscription revenue of $40 8 million up 8% year over year.
Adjusted EBITDA for the quarter was 0.3 million.
For the fourth 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 94% of total revenue compared to 92% in Q3 2022.
We are pleased to share that our keen focus on returning to profitability because proven fruitful and we achieved adjusted EBITDA profit for the first time since 2020.
In the third quarter, we also posted $1 7 million in cash flow from operations the highest since the fourth quarter of 2020.
Stabilizing our bottom line and cash burn has been our main goal for the year. We repeatedly stated that we have reported positive adjusted EBITDA and cash flow from operations in 2019, and 2020 and then we have a plan to achieve but again.
We were pleased to have achieved it again in the third quarter ahead of plan.
When you go on to the business update.
The third quarter, we secured a seven digit deal with a new leading financial services customer who has chosen culture as their go to platform for all their virtual and hybrid events.
We also expanded our collaboration with two of the largest banks in the United States, including signing a seven digit upsell deal with one of those banks.
Over the quarter, we continued to see growing demand for consolidation of Arctic withdraw across a wide array of on demand live real time video use cases for both employees customers and prospects continued to drive larger deals with new customers and expansion with existing ones for example.
A leading fortune 500 customer that started working with culture of less than a year ago to power external events and marketing use cases.
And that this quarter was another seven digit deal to also utilize go through their internal video portal for improved employee collaboration and knowledge sharing and trained.
And our European University customer expanded this quarter beyond our video content management suite connected to their LMS to also utilize our real time conferencing virtual classroom solution to enrich their hybrid and remote learning experiences.
From a marketing perspective last week, we hosted our third annual virtually live events, our own virtual events are marketing and event professionals focused on discussing how to best reach and excite audiences through virtual and hybrid events, including leveraging innovative AI tools.
It was a huge success with thousands of registrants.
Stifle fireside chats and panel discussions featuring leading bonds from the marketing world, including senior leaders from Costar customers, such as AWS, Vmware Adobe and Salesforce, which is a new 2023 customer that uses Cultura Cooper live and on demand videos and Salesforce plus.
Order to among other things provide the online experience for large events like Dream Force, which took place this past quarter and it was a huge success.
This year's virtually live included a showcase of our latest AI focused product releases, including crowd reactions AI based content discovery and a new event AI assistant, which I will talk about later.
Discussions revolved around enhancing ROI strengthening brands and building a robust pipeline.
We also dedicated significant attention to sustainability diversity equity and inclusion acknowledging their growing importance in the marketing landscape.
Underlying all discussions was the transformative potential of AI and marketing we explored how AI is revolutionizing the game for marketers and now its ongoing evolution will continue to impact all of us in the industry.
While on the topic of the eye and moving to product updates.
We've started bringing AI offerings to market.
Oh of course, plus incorporated powered AI enrichment services for content Repurposing.
Wineman with their AI forward think staying focus particularly for events.
First leverage go Jersey, I to create automatic summaries and key takeaways for over 303, and four sessions, providing great value captain d's and saving their marketers and event organizers countless hours.
In addition.
Another leading Silicon Valley Technology Company went live this quarter with a pilot program that utilizes kokura powered generative AI tools to rapidly produce on the fly highly targeted short form video content and automatically publish it across many distribution channels.
This quarter Cultura also released an AI assistant with streamlines the process of setting up webinars, providing users with intelligence suggestions and coordinated actions to increase the efficacy of event management.
Jordan, we plan to expand the AI assistant to provide insights and suggested actions to organizers and presenters during webinars and other events.
We're commanding audience engagement strategies to providing real time performance metrics.
We believe this assistance will be a valuable tool for optimizing the event experience and maximizing the impact of each session.
<unk> also added an AI powered chatbot to our media Telecom cloud P b offerings.
Our U K tour at T V. Ginnie now engages PV viewers with tailored content suggestions.
Lastly on AI, we can.
Often in the past quarter equalled AI accelerator program with the goal of integrating the best Jennie O Third party technologies with our open and flexible platform.
Already engaged with 15 pioneering journey I startups, the specialized and diverse field such as video creation editing repurposing of them in the analysis.
Over 10 large go direct customers across various industries have shown interest in these solutions for their specific use case of needs.
We are excited about the great opportunity that the AI accelerator program can bring to our customers and to the wider tech ecosystem.
Beyond the eye during the quarter on the E&P front, our product front, we introduced more than platform features aimed at enhancing engagement in Ottawa. These include a new dashboard precession analytics interactive quick poll improved recording management and deeper integration with their video portal.
We also added a connector to Salesforce CRM and you'll have an integration and a theme editor for customization.
M and P product shrunk, we integrated new AD supported fast channels and server side AD insertion capabilities designed to allow us to broaden the target segment of our couture a streaming platform to media companies, who want to syndicate their content to third party platforms like LG, Samsung Amazon Prime and broken.
Before I summarize and hand, the call over to your own.
I would like to briefly comment on the recent escalation in the middle East.
Contrary to the U S domiciled company that operates in many countries, including Israel, where we have a sizable presence.
We are heartbroken.
Thoughts and prayers go out to our Israeli country and their families and everyone else that has been impacted.
Approximately 10% of our Israel based workforce, which is approximately 5% of our global workforce has been called up to a resort Judy and we are prioritizing and allocating resources between projects to mitigate any impact to our business to.
To date, we've not seen any disruption to our ability to deliver products and services to our customers.
In summary.
In the third quarter, we achieved an important milestone in our journey back to profitability posting both positive adjusted EBITDA and positive cash flow from operations.
Given the quarterly results.
Slightly increasing our subscription and total revenue guidance for the full year.
While top of the sales funnel kpis like the number of new qualified leads grew sequentially underscoring the interest income drove comprehensive offering.
History headwinds, we have been discussing in recent quarters have continued to weigh down on both new deals and renewals.
Lower budgets increased price pressure and elongated sales cycles have kept new bookings relatively flat throughout this year and up tick down gross retention levels.
As a result, we continue to forecast the combined impact will create a headwind to revenue in the fourth quarter, which is reflected in our guidance.
We are raising our adjusted EBITDA guidance for the full year.
Setting the middle of the range of negative $4 3 million compared with negative $28 3 million in 2022.
We're also restating again, our expectation of posting a positive adjusted EBITDA in 2024.
And lastly, we are reaffirming once again, our expectation to achieve positive cash flow from operations for the second half of 2023.
Translates into a maximum forecasted annual cash consumption from operations of $11 5 million compared with $46 8 million in 2022. We're also reaffirming that following the typical seasonal greater cash losses in the first half of next year.
Specter of why the cash flow from operations break even by the second half of 'twenty 'twenty four with sufficient cash reserves.
With that I'll turn it over to your own our CFO to discuss our financial results in more detail.
They're wrong.
Thank you Ron and good morning, everyone.
Third quarter results today, please know that I would be referring to non.
non-GAAP metric adjusted EBITDA.
A reconciliation of GAAP and non-GAAP financials is included in today's earnings release, which is available on our website at www definitely Batesville that's for sure that's cool.
Total revenues for the third quarter ended September 30 of 2020 fleet was $43 5 million up 6% globally.
Subscription revenue was 48.
8% year over year professional services revenue contributed $2 7 million down 14% year over year.
The remaining performance obligation well why not look at 64 million down 3%.
Where are you with which we expect to recognize 59% as revenue over the next 12 months.
Annualized recurring revenue was $163 1 million up 7% deals.
Our retention rate was 101 hundred 10, 1% in the third quarter compared with 19, 6% in Q fleets when people wanted to well.
Within our E&P segment total revenue for the first quarter was $31 1 million up 30%.
Subscription revenue was $13 million up 5% deals with you while professional services revenue contributed one 1 million down 20 focused and peoples are ya.
Within our M and P segment total revenue for the first quarter was $12 4 million, representing 13% year over year growth.
I think it was $10 8 million up 17% year over year.
Whereas professional it's everything is within your control either the one 6 million down 6% year over year.
GAAP gross profit for the quarter. It was 27 7 million representing a gross margin of 64%.
What we see now a T shirt named go slow feed for the third quarter was striking to me they only representing a gross margin of 73% up from 71% gross margin in Q3 'twenty to 'twenty two.
Our MMP segment gross profit for the first quarter. It was four point times, new medium representing a gross margin of 40% down from 47% gross margin in Q3 FY 'twenty two.
GAAP net loss for the quarter was $8 3 million all 0.08 of diluted share.
Adjusted EBITDA for the quarter was positive 23 million improving from a negative standpoint.
Now in Q3 'twenty to 'twenty two.
Turning to the balance sheet and cash flow, we ended the quarter with $71 1 million indication in March have been securities net.
Net cash provided by operating activity was one 7 million in the quarter compared to $1 1 million provided in Q3 2022.
I would now like to turn to our outlook for the fourth quarter of 2020.
<unk> three and for the fiscal year, ending December 31, 'twenty two 'twenty three.
In the fourth quarter, we expect subscription revenue to be between 3% decline to 1% growth to between $38 4 million and 39 8 million in total revenue to decrease by 72, 4% to between 40 million.
And $42 3 million, we expect negative adjusted EBITDA to be between 6 million and $1 1 million.
For the full year, we expect to.
To grow by five to six stores tend to be drilling 163 million and 161 7 million in total if everything were to grow by about 2% to between 171 5 million and $173 million.
We expect for the full year negative adjusted EBITDA to be between 4 million and salt sites lithium.
In summary, despite the macro environment and our industry headwinds, we are slightly increasing anyhow in total revenue subscription revenue and adjusted EBITDA guidance for the rest of video and video streaming.
Our focus to achieving a positive cash flow from operation for the.
Second half of 'twenty 'twenty suites lastly, we are reaffirming our expectation to a positive adjusted EBITDA in 2024 and to achieving our cash flow from operations breakeven by the second half of 'twenty 'twenty four we sufficient cash reserves independently so far we're still playing golf.
With that we will open the call to questions operator.
Yes. Thank you at this time, we will begin the question and answer session.
You May press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Gabriela Borges with Goldman Sachs.
Thanks for taking my question. This is Jake titled Man on for Gabriela, Our thoughts are with you and all the couch or employees on the ground in Israel.
On subscription revenue, which has grown sequentially for the for the last four quarters, what is changed in the macro environment, that's resulting in the negative sequential growth guide for the fourth quarter.
Thank you Jake and appreciate your comments about Israel.
Nothing has changed by the way, we said last quarter that that was expected to happen and that's because of the bookings versus gross retention in the last couple of quarters already. So that continued you can see that the general direction is not very different than what you'd said last quarter, but let me give you a bit more insight around what.
Business was and is to.
To give you a bit more background around where we feel things are so first.
And this quarter most contribution came from Upsells versus new logos. It was still headed by enterprise and also headed by North America, you could see there was a bit more on the European side, the leading financial pressure.
There is continued increase in demand for our <unk> platform and especially our external marketing use cases now that's something that's not view again, we've been discussing this in recent years as we've moved from internal external and earlier, we referred to a seven digit deal with a new customer that's one of the largest investment firms in the world and they moved.
To us from our competitors apart all their marketing communication events, we're getting a lot more of that so that continues.
We also continue to see companies consolidate around cultural and so you're seeing both internal and external cases, which is unique for us half of our Rfps. We've responded this quarter work combined internal and external and the auto continues to grow.
And we also mentioned earlier about another seven digit deal with an existing fortune 500 type of company that signed with us.
<unk> expanded from external into internally, sometimes it's the other way around and they grew their accounts of two and a half ex the initial value. That's also typical win rates continue to be high this quarter by the way higher than all quarters last year. So the change isn't the percent of deals that we win versus news again helman actually.
Make it through the final process.
We also had a higher percent of bookings this quarter were compared to usual from channel.
It's generally been choppy now deep into the double digits and we had two quite large channel dropped competitors and start working with US this quarter and we expect it to impact future quarters as well we saw less percent booking from professional services. We know that that continue to pressure our P. S revenue down which is not amazing for the short.
Term, but good for the mid to long term it increases our Tam.
Elevating ourselves deployment cycle does well to gross margin. So that's good but we're still seeing good top of the funnel times I mentioned, a number of <unk> in the quarter It grew sequentially.
Also a lot of meetings are generally lower in Q3 because of the summer, but it was better year over year.
So all of these are the good signs to your question about the debt, we're still seeing the industry headwinds we reported on that you know earlier in the year the longer sales cycles, though reduced budget still price pressures that means the deals get delayed again. The result is kind of a flattish new bookings this quarter compared to Q1, and Q2 and it's that low.
<unk> levels than last year about 25% less so bookings have been lower.
I would note, though that the productivity is lower we have now two thirds of their salespeople that way out a year ago, so its bookings or less by 25%.
You know two thirds of the salespeople that means on an average well actually selling better per sales person.
And so that's the combination of that we can talk later about retention has pushed us a bit down.
We believe that the macro conditions are going to start improving the headwinds are going to settle down our productivity is expected to go up and generally speaking we based on existing business or where do you see that that compression that we're seeing in Q4 is not expected to continue into Q1. It's based on what were the deals that are in pocket.
So its a lengthy answer but it gives you a feel for where the business does that address your question absolutely. Thanks. Thanks, That's super helpful color and then maybe one for you Ron and I realize that you're not going to provide you know 2020 for guidance on this call, but if we look at the exit rate that's implied for Q4 how.
Should we think about like planning for 'twenty 'twenty four numbers at this point.
Yeah. Thank you for the question the one important comment as Juan mentioned at festival the decline that we projected when we projected it before include Q4 revenue, we don't see it continuing to Q1 'twenty 'twenty four so we definitely change direction.
The way that you should look in 'twenty 'twenty four is the at this point, we see the subscription revenue will continue to grow it's too early to give you. The exact number one day, they're not at the rate that it's continuing to grow but at the same time, we will continue to see decline in the professional services revenue.
So in that way and we still want to close the quarter, we want to see the trends in terms of booking and retention rate.
But the to make a long story short and we see the subscription revenue.
Our revenue continued to grow into next deal and probably some more pressure that we saw before in the professional services.
Thank you and good luck.
Thank you.
Thank you and the next question comes from Ryan Connors with Needham and company.
I think it's a question on your Oh developments wrong can you kind of walk us through some of your strategy there build versus buy are you partnering for some of these.
There certainly are enthused about the a 10 in your ecosystem partners are bringing to bear but on the other new AI features youre rolling out can you walk us through how much of that you're sourcing internally versus versus partner.
Sure happy to do that Ryan So yeah, we said that in the last couple of quarters that AI is definitely an important direction for us.
Part of the benefit of contracts that we have almost all the layered cake in the AI would complete it because we are running workflow integration deep into the workflows that we have the metadata. So the data itself is owned by us or managed by us on behalf of the customers and then if you add on top of that we also own the last layer, which is being.
Gauge currently are because we are a system of engagement. So if you have the integration of all the way through to work through it together with the data that could be prompted into the AI and then used immediately into the engagement you have yourself loop and the vision that we said from the beginning is that we have several levels of work that we want to do some things are going to be around.
The video, but not immediately touching video so things like our you know summarization of text.
Pertaining to videos or help around preparation or execution of a virtual event around lead management or messaging or or speaker list recommendations. So things like this could be actually used off the shelf with existing api's that are out there for charge U P T and otherwise.
The things that are more exciting for us that we want to either own by way of building from our existing people and or maybe even M&A type activities that we're looking at options or whatever are things pertaining to compressing.
The the threats.
Different providers around creation and consumption and distribution of video historically and I said that last time, there's been different technology vendors that we're addressing the creation of video the production of video the postproduction of video to those that were dealing with the distribution and engagement and we see the future as one system.
Creates the videos distributes them, meaning that you could have highly personalized highly interactive videos that are made on the fly to cater to specific context and cause specific users and then adopting underway in order to maximize our Hawaii, whether it is training or marketing.
So this is a big focus for us as we go forward right now what we've launched we mentioned leading Silicon Valley company that launched with us.
It was around.
The short form content distribution together with the Repurposing of the content in order to address specific needs. So now that's done in an automated way and the other one that we mentioned was done with Salesforce outdoor event, a dream force, which was also a successful so it's already starting to hit we also mentioned that we are.
Working with a lot of ecosystem partners.
As mentioned, we have some 15 already that are working with us to them and there's many other customers. Many customers already 10 that are formally there and others that are joining and added into that are that are looking to consume the services a big advantage of Cultura given what I said earlier about API workflows is up.
Our open and flexible and could easily insert third party innovation coming from other companies.
We've done that across our history, we have 120 different technology partners for the company at large beyond AI and we expect to do the same here for you. So a lot of plans and we're going to share them as we advance for both E. N T N M and T. We also mentioned some M. P applications, where we are running.
That's great Ryan. Thank you for that color on the on your large deals or six and seven figure new deals you announced any general trend there in terms of.
Are these typically are still displacements of multiple vendors are going into or some of them are new use cases for your customer base.
Yeah.
It's a combination of both so it's either so we mentioned one of them for example, an existing back that we have it's an existing use case, though we power, but they continue to grow organically.
If a bank, but we're discussing it as the wealth management use case, if you recall in that specific bank in the past we have discussed.
<unk> was one we started internally with the video portal for training and knowledge sharing and then I moved to webcasting and then it moved to external use and ultimately have moved into video for wealth management, where our tools enable a secure distribution and creation and distribution of content for wealth managers for their car.
The Mers in a mission critical way connected to all the compliance and security and approvals that are required in such a situation in this specific piece by the way that customer had grown tenex in recent years and a deep deep into the seven digit figure as a bank and it started with six digital as an initial deal.
Not only are we adding use cases, but they're adding users and adding departments and so it continues to grow and grow in a different example, which we had mentioned it was the expansion from external into internal use case, where we started with Vince.
Less than a year ago, the new customer and now they've moved into their internal quote unquote T V for internal learning and collaboration by the way that customer is now in discussion with us on a very large deal to move all of their marketing use case to go through all of which could be another very large seven digit deal.
Which as an example budget pertaining there what do you say look we wanted to do this in Q4, but we're rolling those into next year because of budgetary reasons, but we've already used electrical draw. We believe you are the right partner, we'd like to do it with you, but budget wise, it's going to need to wait a bit longer to get the budget and so this keeps on being the story, we enter from the window, we exited from.
The door or the other way around either internal growth with external goes internal but you ought to continue to decline and the land and expand is continuing to do very well for us.
That's really helpful. Ron.
Desktops to everyone there about the company.
Thank you Ryan appreciate it.
Thank you and the next question comes from Patrick Wall Ravens with JMP Securities.
Yeah.
Please go ahead your line is live.
Thank you and let me add my thoughts and prayers are on to you your families and everyone.
Hum.
So number one why is subscription revenue I know you you answered it but just very very clearly for us why subscription revenue going down from Q3 to Q4 by one to one and a half million dollars.
So I'm not sure happens as Brian and I said bookings are flattish compared to last year and at about a 25% less.
Other piece of it is retention right and I said last quarter.
That it went down and we expect it but they tend to go down because we also said that we had a large deal that we announced that came in after the end of the quarter, but we mentioned it last time for the RP O change in it.
This quarter Q3, so we had another quarter of lower gross retention rates than usual in part because of that large single customer now and then the gross retention rate in general is down by a few percentage points from the high end to the mid eighties.
It's still decent but it's not as good as it was before Oh.
By the way E N T have lowered gross retention rate this quarter than M T.
In tea house of the churn very similar to last time.
Reduction in not torture, and so its not customers completely leaving us, but spending less less than 10% of that reduction was because of the product or service has gone up in the west as budget price related services and are no longer needed. So net net what we're saying is <unk>.
<unk> gross retention and lesser new bookings, which are and have for this specific quarter ended up with a negative impact on subscription run.
No. We're expecting then have expected just because we've seen that come towards Q2, and nobody saw what's going to happen in Q4, but likewise, we could already see what's expected to happen in Q1, we're seeing this balance given the different numbers that we're seeing the question is for next year right. Now is the gross retention that I pick up again.
And is the bookings going up.
Go up again I already mentioned earlier, the productivity is higher than last year, because we bought so really some of the people and it's really a question of all the are we seeing better quarters. There is some upside in Q4, we're seeing a lot of interest and demand. There are some interesting deal we're very cautious and obviously, we don't forecast bookings we forecast revenue.
But by the end of Q4 will be in a position to tell you. What's happened in the booking you know we have some reasons to be cautiously optimistic about Q4, maybe being different.
But let's wait and see.
Yeah.
Okay, and I mean under what circumstances would you say okay. This is no time.
Time to consider our strategic alternatives.
So they're selling the company.
I think it's always been a reasonable legitimate option like it is for any single company in or I don't know that we've ever said that were not already but we are our responsibility is to take care of our shareholders and we listen to them closely we've been in touch and continue to be in touch with different players if and when an offer that makes sense would come our way.
We will reconsider it.
But this has never been a yes versus no. It's always been devil in the detail and the right time, the right place to deal with it we said that the same answer I've said time and time again by the way.
Yeah, Okay, and then lastly on a partner I really like what I do want to just mention one thing and macro because it's easier to find them.
Did the whole industry right now is worked out and you can listen to all the other players in the industry two of which are about three of which have already reported.
What youre hearing here is not different we're looking at a situation where there's some headwinds that are continuing by way of demand and by retention and pressures.
Adopting Dolby Buddy I must admit that most of the other folks out there the Republican we see their numbers have been declining aggressively this year, we're not and so we're not as out of place where the others are is this a great year for us definitely is it.
Is there a lot more to hope for yes are we meeting the numbers that we've started the beginning of the year, we are doing better than the numbers.
Both on adjusted EBITDA and revenue and so the direction is as guided for the year, but we're hoping that next year is going to pull up a we need to wait patiently like all the other folks and I understand like I said, we do see pulp is the funnel of activity that looks good.
And we do see continued strategic interest in moving to go through I mean, we hear a lot of folks talking about moving to go through and when things are better because when you talk about consolidation in the interest of one single platform for everything.
A lot of them are saying listen for the immediate short term, it's an investment that we don't want to make but for the mid to long term, it's a savings, but we want to have and it's a better product that we want to have and so we keep on hearing. The question. There was one other quick on it and again, we're doing better than the other folks, but I think that when things turnaround for the industry, we're going to continue to be involved in that.
It's going to be.
I think it's going to be decent returns.
In terms of we've not seen them over the last couple of years for sure not asked more than industry, sorry, Pat just Utica had described.
That's fine thank you very much.
Yeah.
Thank you and our next question comes from Michael Brown with Wells Fargo.
Hi, This is Austin Williams on for Michael.
Just wanted to ask on the EBITDA breakeven target and it's good to hear that that's that's restated for next year, but looking into 'twenty 'twenty four where are you expecting the biggest areas of operating leverage to emerge.
Yeah, No one wanted to say.
Yes.
First of all the one comment that I made in my statement is that we do these.
This trend of getting back to positive.
Bottom line adjusted EBITDA wise.
He is going to happen anyway that the revenue will develop into next deal.
We say totally alone.
At least for the short and the gross margin will continue to be in the low to mid sixties and they I think it's a very solid statement right now in the long term, it's definitely going to go.
More to the 70%.
If we would be able to do it all at the next deal I know true, but there we are doing some major way thoughts around.
Production costs than they are major agreement that we signed with one of our.
Cloud providers, which give us much better.
And really the economics.
At the same time, we believe that in terms of our expense base, we don't need to increase significantly our sales and marketing in our endo I wouldn't be in order to push revenue into start see reacceleration of the revenue.
So bottom line keep the gross margin as it is right now in Greece.
Got it.
Keep the rest of the balance sheet the expenses around the same levels.
Get back to growth next year will enable us at least to be in the positive territory going into the beginning of deal.
Okay got it.
I also wanted to ask on the new AI assistant and some of the new way AI features.
What are you what are you expecting this to open up from a monetization perspective, and how is it changing the expansion discussion with customers. Thank you.
Sure I'll take this one thanks for the question, it's early to say for us and for everybody.
We do know that a residual effect of this is dramatically greater amount of videos that are created and consumed.
Our life with wherever the videos are used.
We'll be immediate value come from a higher subscription for the feature or will it come from the greater use of the platform. That's the question.
You asked me I expect it'll be more than louder than the first but it's still early days around that to be able to provide a clear enough answer.
At this point in time, we're still in the initial deployment on that the focuses on creating value as opposed to optimizing and maximizing revenue.
But over the next few quarters that'll take shape and then we'll be able to provide you the answer and by the way. This is the same answer for every single company in our ecosystem, it's still true.
Okay.
Okay.
And last question comes from Georgia ironic with Oppenheimer.
Thank you for taking my question, Iran, and maybe following up on your comments about the sales productivity progress, you're saying can you give us some perspective.
On the lower touch parts of the platform that you've put in place and the traction we're seeing there.
Yeah happy to do that look we said that throughout the year that this is not the bigger focus, especially given our need to focus on the different aspects of the business, especially in a year like this now we've improved our messaging framework and updated it in order to have better flow around webinars.
It's grown by about 180% quarter over quarter.
In part by the way, we've been sort of AI into that.
And we've also seen that the number of Webinars that are creating the platform increased 100% month over month.
So keep your eyes and we're currently looking at are more adoption user conversion and are not yet revenue kpis for this year and we said that throughout the entire year I expect that next year at a certain point will be able to point on it but.
But I was clear as the year went by we said you know.
The number one revenue generator for our company has been the higher touch larger enterprise deals and between the different verticals between enterprise education media and telecom and had been enterprise and in a year like this we you know what everybody's required it focus more and not less this is the number one place that we put most of them halfway to complete.
This.
<unk> expansion into real time conferencing and into the new products being the event popcorn.
Webinars, where larger companies and the virtual classroom as well as the move to a new buyer, but from a cio's simo for smaller companies for very large into have been low attaching to us because and even applying more distribution channels as I mentioned, we're working on so that took a first step more so than <unk>.
The complete self served credit card small small company type of Oh, the sale, but we are advancing and we are seeing better and better results and I do expect that the cavalry will arrive and that will become an increasing part of our revenue in the years to come it's just not an immediate impact and it was never forecasts.
Good to be even before things turn around a bit for the year.
Yeah.
Alright, Thank you for that and then Ron maybe just a question for you what the stability that you found that net expansion rate. This quarter. What are your assumptions in guidance what type of visibility do you have to the early part of next year from an expansion perspective.
Yeah Yeah.
As Ron and myself mentioned before we do see.
A very solid scenario that the brand of <unk>.
Declining revenue in Q4.
It's going to go with us into next year.
Too early to see what's going to be the trend in terms of getting back to reacceleration.
But it's definitely based on the deals are two already closed.
Three quarters in the beginning of Q4, we see that the trend of declining revenue in Q4, which by the way we focused from the beginning of deal almost when do we get the guidance is not going to be going into next year.
Too early to say when it's going to rebound back and start to accelerate again.
We have to close the quarter to see that to get better visibility in terms of the bookings.
Hopefully, we'll be able to deliver better numbers going into next year.
Let me add a comment about MBR for.
This quarter, we're still aligned with the general direction that we set it for the year and we still forecast the year to be at around 100% in Dr. For the year, which is well throughout the year, we kind of said, it's gonna be it could given what we just said about grocery tensions and where they are in the last couple of quarters is expected to dip a bit for Q4 before graduate starting to turn.
Back again, it's not going to be lower than earlier numbers posted by us. So theres nothing extra judge dramatic in the in the dip, but given the gross retention situation. This year, which I mentioned earlier, it will dip a bit lower but remain at 100% for the year and we expect it to be 100% hopefully plus for next year.
Okay.
Thank you and once again. Please press Star then one if you would like to ask a question.
And the next question comes from Matthew <unk> with Deutsche Bank.
Hey, guys. Thank you for taking the question just one for me on the competitive backdrop can you just talk about what you're seeing there whether there's been any change in dynamics over the last quarter and if that's a factor that may be weighing in addition to macro on some of the bookings are gross retention trends. Thanks.
Yeah. Thanks for the good question and the answer is no its not winning because our win rate does not come down and it's at the very high number, but that's higher than last year.
Higher than most years.
So it's not that we're losing accounts so our competitors more so than ever before and we're not seeing any clear that's coming in and taking significant deals from us and even from the gross retention statement that I said earlier by and large most of them are reductions as I said earlier as opposed to a full on departures and when they are a reduction it's just because they have.
Less money indoor are pressuring to have a bit more price.
Being less on the contrary, what we're seeing is takeaways from competitors I mentioned earlier, one of the Big financial services is yet another big takeaway from a competitor around the webinar slash external slash marketing use case that you know as far back as a year ago, we weren't able to do it. All this is an expansion for our product and we're able now.
Not to take away it adds up to a few other big customers that we've taken from that particular competitor and we expect to have many more because again, we're just entering the pearly gates of being able to do that that we werent able to do before so no. We're not seeing any of the competitors out there win more business compared to US we're just seeing a journey.
Well pressures of the industries that are causing everybody to be a bit slower that's all.
Very helpful. Thanks, John.
Thank you.
Yeah.
Thank you and this concludes our question and answer session I will turn the floor erroneous to you for any closing comments.
Yeah I want to thank you all for your questions and also for those that have commented on our institution in Israel. We also are broken and send her a big hug store the country instead of working there, but we are a global company and pulling forward and doing well I'd say from a macro perspective again, there's a lot of discussions here about the industry.
Driven by and large we're delivering on the numbers that we've committed to at the beginning of the year. We've achieved adjusted EBITDA earlier positive earlier been sudden and cash flow positive and we are seeing a lot of top of funnel trends that were taking us to the right direction I think we don't place for some hope for good news around our Q4 bookings and the general direction for next year hasn't.
Gross so.
So we're looking forward to what's to come and I. Thank you again for your continued support and how the Greek remainder of the week take care of it.
The conference has now concluded. Thank you for attending today's presentation, you may not have a central lines.