Q1 2024 Kaltura Inc Earnings Call

Operator: Good morning, everyone, and welcome to Kaltura's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. If you require any assistance during the conference, please press star zero on your telephone keypad. All material contained in this webcast is the sole property and copyright of Kaltura, with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Thank you. Please go ahead.

Good morning, everyone and welcome to the Cal Tourist's first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.

If you require any assistance during the conference. Please press star zero on your telephone keypad all material contained in this webcast is the sole property and copyright of <unk> with all rights reserved for opening remarks, and introductions I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Thank you. Please go ahead.

Erica Mannion: Thank you, operator, and good morning. I'm joined by Ron Yekutiel, Kaltura's co-founder, chairman, president, and chief executive officer, and John Doherty, chief financial officer. Ron will begin with a summary of results for the first quarter ended March 31, 2024 and provide a business update. John will then review the financial results for the first quarter of 2024 in greater detail, followed by the company's outlook for the second quarter and full year of 2024. We will then open the call for questions.

Erica Mannion: Thank you operator, and good morning, I'm joined by Ron You've tell Cal tourists co founder Chairman, President and Chief Executive Officer, and John Doherty, Chief Financial Officer, Ron will begin with a summary of results for the first quarter ended March 31, 2024, and provide a business update.

John Doherty: John will then review the financial results for the first quarter of 2024, and greater detail followed by the company's outlook for the second quarter and full year of 2024, we will then open the call for questions.

Erica Mannion: Please note that this call will include forward-looking statements within the meaning of the Federal Securities Laws, including, but not limited to, statements regarding Kaltura's expected future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Important factors that could cause actual results to differ from forward-looking statements can be found in the risk factors section of Kaltura's annual report on Form 10-K for the fiscal year ended December 31, 2023 and other SEC filings, including the quarterly report on Form 10-Q for the quarter ended March 31, 2024, to be filed with the SEC.

John Doherty: 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> expected future financial results and management's expectations and plans for the business.

John Doherty: These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.

John Doherty: Important factors that could cause actual results to differ from forward looking statements can be found in the risk factors section of <unk> annual report on Form 10-K for the fiscal year ended December 31, 2023, and other SEC filings.

John Doherty: Including the quarterly report on Form 10-Q for the quarter ended March 31, 2024 to be filed with the SEC.

John Doherty: Any forward looking statements made during this conference call, including responses to your questions are based on current expectations as of today and couch, where assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Erica Mannion: Any forward-looking statements made during this conference call, including responses to questions, are based on current expectations as of today, and Kaltura assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Please note that 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 metric, please refer to our earnings release, which is available on our website at www.investors.kaltura.com. Now, I'm pleased to hand the call over to Ron.

John Doherty: 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 metric. Please refer to our earnings release, which is available on our website at www dot investors Doc couch, where dot com now I'm pleased to hand, the call over to Ron.

John Doherty: <unk>.

Ron Yekutiel: Thank you Erica and welcome everyone to our first quarter earnings call.

Ron Yekutiel: Thank you, Erica, and welcome everyone to our first quarter earnings call. The first quarter of 2024 marked our sixth consecutive quarter of year-over-year growth. We reported record total revenue of $44.8 million, up 3% year-over-year, and record subscription revenue of $41.2 million, up 2% year-over-year. Adjusted EBITDA for the quarter was positive $0.6 million.

Ron: The first quarter of 2024 marked our sixth consecutive quarter of year over year growth.

Ron: We reported record total revenue of $44 8 million up 3% year over year and record subscription revenue of $41.2 million up 2% year over year.

Ron: Adjusted EBITDA for the quarter was positive zero point $6 million.

Ron Yekutiel: As for our bottom line, the first quarter was our third consecutive quarter of adjusted EBITDA profitability. We consumed cash from operations during the first quarter, as expected, due to our typical seasonality, which came in at $1.1 million, an improvement from $7.4 million in Q1 2023. Moving on to the business update, retention in the first quarter of 2024 continued to improve for the third quarter in a row and was the highest level in five quarters.

As for our bottom line the first quarter was our third consecutive quarter of adjusted EBITDA profitability.

Ron: We consumed cash from operations during the first quarter as expected due to our typical seasonality, which came in at $1 1 million an improvement from $7 4 million in quarter one 2023.

Speaker Change: Moving on to the business update.

Speaker Change: Gross retention in the first quarter of 2024 continued to improve for the third quarter in a row and was the highest level in five quarters.

Ron Yekutiel: This represents an annualized rate that is better than that of the last three fiscal years. We continue to forecast a better retention level this year compared to last. We believe this is driven by the passage of most post-COVID video usage reductions and the budgetary constraints of the subsequent global economic downturn. As for new bookings, the first quarter was, as usual, a slower quarter.

Speaker Change: This represents an annualized rate that is better than that of the last three fiscal years.

Speaker Change: We continue to forecast a better retention levels this year compared to last week.

Speaker Change: We believe this is driven by the passage of multiple corporate video usage reductions.

Speaker Change: The budgetary constraints the subsequent global economic downturn.

Speaker Change: As for new bookings the first quarter was as usual a slower quarter. This year, even more so as we had a few large deals slipped into the second quarter.

Ron Yekutiel: And this year, even more so, as we had a few large deals slip into the second quarter. In the first quarter, we closed one seven-digit deal with a large Fortune 100 insurance company and 12 six-digit deals. Consistent with one of our key focus areas, we continue to see growth in the number and size of the opportunities for our event platform for both internal and external use. We also continue to see existing customers expand their adoption of Kaltura from their original, mostly internal use cases for employee communication and learning and development to also external use cases for marketing and customer engagement. In addition, while the market remains competitive, we have been increasingly successful at raising our prices upon contract renewal.

Speaker Change: In the first quarter, we closed one seven digit deal with a large fortune 100 insurance company and.

Speaker Change: And 12 six digit deals.

Speaker Change: Consistent with one of our key focus areas, we continue to see growth in the number and size of the opportunities for our event platform for both internal and external use.

Speaker Change: We also continue to see existing customers expand their adoption of go through up from their original mostly internal use cases for employee communication and learning and development.

Ortho external used cases for marketing and customer engagement.

Speaker Change: In addition, while the market remains competitive we have been increasingly successful at raising our prices upon contract renewal.

Ron Yekutiel: From a geographic perspective, while our bookings from outside of the U.S. continue to be negatively impacted by the macro environment, we are seeing initial signs of recovery with multiple new large E&T and M&T deals in the sales pipeline that are coming from EMEA and APAC.

Speaker Change: From a geographic perspective, while our booking from outside of the U S continues to be negatively impacted from the macro environment. We are seeing initial signs of recovery with multiple new large E. N T N M and P deals in the sales pipeline that are coming from EMEA and APAC.

Speaker Change: On the product front in the first quarter. We continued good thing or a imply for them with enhanced content management capabilities leave Madison and features an onsite registration for hybrid event.

Ron Yekutiel: On the product front, in the first quarter, we continued boosting our event platform with enhanced content management capabilities, lead management features, and onsite registration for hybrid events. We enhanced our video portal search results, filters, and user experience, and added to our video player ad blog detection and hotspots for similar adventures. The Realtime Conferencing Rooms within our event platform and virtual classrooms now also enable interludes and have more granular roles and permissions, improved dual screen layouts, and globally shared stories.

Speaker Change: We enhanced our video portal search result, filters and user experience and added to our video player Adblock detection and hotspots for similar 11 countries.

Speaker Change: The real time conferencing rooms within our platform and virtual classrooms, now also enable interlude in a more granular bowls and permission improved dual screen layout and globally shared story.

Speaker Change: On the M&A front, we continue to beef up scalability and security and analytics for both end users and quality of service as.

Ron Yekutiel: On the M&T front, we continue to beef up scalability, security, and analytics for both end users and quality of service, as well as simplify the experience of content curation. Our Strong and Growing Product Portfolio yielded several recognitions and awards in the past quarter. These included G2's 2024 Best Software Awards in the categories of Best Design Software as a Virtual Event Platform and Best Education Software, as well as the Best Virtual Event Platform in North America Award of the 2024 Innovation and Business Smart Tech Award.

Speaker Change: As well as to simplify the experience of content curation.

Speaker Change: Our strong and growing product portfolio yogurt are several recognitions and awards in the bathroom quarter.

Speaker Change: These included <unk> 2024, best off to award the categories. The best design software as a virtual event platform and best Education software as.

Speaker Change: As well as the best virtual platform in North America Award of the 'twenty 'twenty, four innovation and business Martha Award.

Speaker Change: On the AI front, we were continuing to infuse AI features and capabilities into our products. We completed a successful pilot with a leading tech company to repurpose video content and Great Britain Nacobre moment from video.

Ron Yekutiel: On the AI front, we are continuing to infuse AI features and capabilities into our products. We completed a successful pilot with a leading tech company to repurpose video content and create snippets and snackable moments from video. The feedback has been superb, and the ROI measure was very significant, with savings of $1,000 to $1,500 and three to five hours in turnaround time per clip.

Speaker Change: The feedback has been superb.

Speaker Change: Oh, why measured was very significant with savings of 1000 to 1500 in three to five hours and turnaround time per clip.

Speaker Change: We're ramping up investment in content Repurposing with the goal of further integrating it into our content management Webinars and event workflow.

Ron Yekutiel: Ramping up investment and content repurposing with the goal of further integrating it into our content management webinars and event workflows, we are expanding our AI add-on for webinars and events with capabilities to automatically generate notifications and sentiment analysis for chat, and are developing our own AI-powered automatic speech recognition solution with the goal of providing improved results and extended features. In summary, we wrapped up another record revenue quarter that showed continued improvement in our gross retention rate. While the year started, as usual, with slower new bookings, our current pipeline indicates an expected improvement in the coming quarters, and we believe we will encounter more tailwinds as companies start reaccelerating their investments in digital transformation and online experiences.

Speaker Change: We're expanding our AI add on for Webinars and events with capability with automatically generate notifications and sentiment analysis for chat.

Speaker Change: And are developing our own AI powered automatic speech recognition solution with a goal of providing improved result in extended features.

Speaker Change: In summary.

Speaker Change: We wrapped up another record revenue quarter that showed continued improvement in our gross retention rates.

Speaker Change: Well the year started as usual with lower new bookings our current pipeline indicates an expected improvement in the coming quarters. We believe we will encounter more tailwind that's coming.

Speaker Change: You can start re accelerating investments in digital transformation and online experiences.

We expect that this will be fueled by the increasingly hybrid workplace.

Ron Yekutiel: We expect that this will be fueled by the increasingly hybrid workplace, growth in Gen Z and millennial video-savvy employees, the need to save costs by consolidating multiple enterprise video use cases around a single video platform, and the advent of Gen AI, which will bring about more creation and consumption of videos and increased ROI.

Speaker Change: Growth in Gen Z and millennial video savvy employees.

Need to save costs by consolidating multiple enterprise video use cases around a single video platform and the advent of journey, II, which will bring about more creation and consumption of video and increase our Hawaii.

Speaker Change: Despite our revenue guidance our performance in the first quarter, considering the lower bookings start and there's still uncertain macro outlook, we need to be thoughtful and are therefore, maintaining revenue guidance for 2024.

Ron Yekutiel: Despite our revenue guidance on performance in the first quarter, considering the lower booking start and the still uncertain macro outlook, we need to be thoughtful and are therefore maintaining revenue guidance for 2024. Lastly, regardless of our top line growth, we're reaffirming our expectation of posting both a positive adjusted EBITDA and positive cash flow from operations this year. With that, I'll turn it over to John, our CFO, to discuss our financial results in more detail. John.

Speaker Change: Lastly, regardless of our topline growth, we're reaffirming our expectation of posting both a positive adjusted EBITDA and positive cash flow from operations. This year.

Speaker Change: With that I'll turn it over to John our CFO to discuss our financial results in more detail.

John Doherty: John Thanks.

John Doherty: Thanks, Ron. And hello to everyone on the call today. With three months behind me, I want to open up with a few of my thoughts on Kaltura overall. Kaltura has been operating in a very challenging environment over the past two years. Although there have been industry headwinds from budgetary constraints, competitive pressure, and elongated sales cycles due to the economic environment, which impacted the company more in Europe than in the U.S. during this period, Kaltura has made the necessary and difficult adjustments.

John Doherty: Thanks, Ron and Hello to everyone on the call today with.

John Doherty: With three months behind me I want to open up with a few of my thoughts on cats or overall <unk> has been operating in a very challenging environment over the past two years.

John Doherty: There have been industry headwinds from budgetary constraints competitive pressure and elongated sales cycles due to the economic environment, which impacted the company more in Europe and the U S. During this period.

John Doherty: Laura has made the necessary and difficult adjustments, including improving its operating efficiency focusing on further monetizing the existing customer base and reallocating resources towards higher ROI opportunities and markets based on these actions and with the continued steady execution. The company is well positioned to benefit from emerging.

John Doherty: Including improving its operating efficiency, focusing on further monetizing the existing customer base, and reallocating resources towards higher ROI opportunities and markets. Based on these actions and with the continued steady execution, the company is well positioned to benefit from emerging talent of spend consolidation to a single vendor, digital transformation, and the hybrid workplace that is continuing to drive demand for video-based offerings. With that, let me move on to our results. Results exceeded expectations for revenue and adjusted EBITDA for the quarter.

John Doherty: Wins of spend consolidation to a single vendor digital transformation and the hybrid workplace that is continuing to drive demand for video based offerings with that let me move on to our results.

John Doherty: Total revenue for the quarter ended March 31, 2024, was $44.8 million, up 3% year-over-year. Subscription revenue was $41.2 million, up 2% year-over-year. Total revenue and subscription revenue were also up 1% sequentially, while professional services revenue contributed $3.6 million, 25% year over year. The remaining performance obligations were $165.2 million, down 1% year-over-year, of which we expect to recognize 57% as revenue over the next 12 months. With the anticipated increase in bookings as we move to the second half of the year, we expect RPO to trend upward as well.

John Doherty: Results exceeded expectations for revenue and adjusted EBITDA for the quarter.

John Doherty: Total revenue for the quarter ended March 31, 2024, with $44 8 million up 3% year over year subscription.

John Doherty: Revenue was $41 2 million up 2% year over year total revenue and subscription revenue were also up 1% sequentially professional services revenue contributed $3 6 million up 25% year over year.

John Doherty: The remaining performance obligations were $165 2 million down 1% year over year, which we expect to recognize 57% as revenue over the next 12 months.

John Doherty: With the anticipated increase in bookings as we move through the second half of the year, we expect our P O to trend upward as well.

John Doherty: Annualized recurring revenue was $162.7 million, up 2% year-over-year. We slightly modified our net dollar retention calculation, and the results that I will reference reflect that adjustment for all periods, which was to the tune of up to plus or minus 1%. Our net dollar retention rate for the quarter was 98%, incidentally, both before and after the modification.

John Doherty: Annualized recurring revenue was $162 7 million up 2% year over year.

John Doherty: We slightly modified our net dollar retention calculation and the results that I will reference reflect that adjustments for all periods, which were to the tune of up to plus or minus 1%.

John Doherty: Our net dollar retention rate for the quarter was 98% incidentally, both before and after the modification.

John Doherty: This reflects no change from where we were in the fourth quarter, but down from one hundred and three percent in Q1 2023. This result was expected due to lower net bookings last year. NDR is a lagging indicator for gross retention in upsell bookings.

John Doherty: This reflects no change from where we were in the fourth quarter, but down from 103% in Q1 2023.

John Doherty: This result was expected due to lower net bookings last year MTR is a lagging indicator for grocery tension and upsell booking we expect it to further decrease in the second quarter and then rebound in the second half of 'twenty 'twenty four given the sequential improvement in grocery retention that we have demonstrated over the last three quarters and our upcoming.

John Doherty: We expect it to further decrease in the second quarter and then rebound in the second half of 2024, given the sequential improvement in gross retention that we have demonstrated over the last three quarters and our upcoming forecasted sequential pickup in booking following the traditional slower beginning of the year. Within our EENT segment, total revenue for the first quarter was $32.4 million, up 4% year-over-year. Subscription revenue was $30.7 million, up 3% year-over-year, while professional services revenue contributed $1.8 million, up 23% year-over-year.

John Doherty: <unk> forecasted sequential pickup in booking following the traditional slower beginning of the year.

John Doherty: Within our E N T segment total revenue for the first quarter was $32 4 million up 4% year over year.

John Doherty: Ascription revenue was $30 7 million up 3% year over year, while professional services revenue contributed $1 8 million up 23% year over year.

John Doherty: Within our M&T segment, total revenue for the first quarter was 12.3 million, representing 3% year-over-year growth. Subscription revenue was $10.5 million, which was flat year over year, while professional services revenue contributed $1.8 million, up 28% year over year. Gap gross profit in the first quarter 2024 was $28.6 million compared to $27.3 million in the first quarter 2023, resulting in a gross margin of 64% for the quarter, up from 63% in Q1 2023. Within our EENT segment, gross profit for the quarter was $23.6 million, representing a gross margin of 73%, which is consistent with where we were in Q1.

John Doherty: Within our <unk> segment total revenue for the first quarter was $12 3 million, representing 3% year over year growth.

John Doherty: Subscription revenue was $10 5 million, which was flat year over year, while professional services revenue contributed $1 8 million up 28% year over year.

John Doherty: GAAP gross profit in first quarter 'twenty 'twenty four was $28 6 million.

John Doherty: To $27 3 million in first quarter 2023.

John Doherty: Belting and a gross margin of 64% for the quarter up from 63% in Q1 2023.

John Doherty: Within our E N T segment gross profit for the quarter was $23 6 million.

John Doherty: Representing a gross margin of 73%, which is consistent with where we were in Q1 2023.

John Doherty: Subscription gross margin was 79%, up from 78% in Q1 2023. Within our M&T segment, gross profit for the quarter was $5.1 million, representing a gross margin of 41%, up from 38% in Q1 2023. Title Microsoft Office Word Document MSWordDoc Word.

John Doherty: Subscription gross margin was 79% up from 78% in Q1 2023.

John Doherty: Within our <unk> segment gross profit for the quarter was $5 1 million, representing a gross margin of 41% up from 38% in Q1 2023.

John Doherty: Document.8, Total operating expenses in the quarter were $35.9 million compared to $39.2 million in the first quarter of 2023, an improvement of 9% year-over-year and indicative of our goal of improving our operating efficiency. Gap's net loss in the quarter was $11.1 million or $0.08 per diluted share. Adjusted EVE-DOT for the quarter was 0.6 million, increasing by 3.3 million from negative 2.7 million in Q1. Turning to the balance sheet and cash flow, we ended the quarter with $73.8 million in cash and markable securities. We consumed $1.1 million in cash from operations during the quarter, as expected, due to our typical seasonality.

John Doherty: Scripture gross margin was 53% down from 56% in Q1 2023.

John Doherty: Total operating expenses in the quarter were $35 9 million compared to $39 2 million in the first quarter of 2023, an improvement of 9% year over year and indicative of our goal of improving our operating efficiency.

John Doherty: GAAP net loss in the quarter was $11 1 million or eight cents per diluted share.

John Doherty: Adjusted EBITDA for the quarter was 0.6 million, increasing by $3 3 million from negative $2 7 million in Q1 2023.

John Doherty: Turning to the balance sheet and cash flow.

John Doherty: We ended the quarter with $73 8 million in cash and marketable securities we consumed $1 1 million in cash from operations during the quarter as expected due to our typical seasonality. This reflects a significant improvement compared with $7 4 million in Q1 2023.

John Doherty: This reflects a significant improvement compared with $7.4 million in Q1 2023. I would like now to turn to our outlook for the second quarter of 2024 and for the fiscal year ending December 31st, 2024. In 2023, we experienced a year-over-year decline in gross retention and new bookings, which impacted our revenue. And while gross retention sequentially improved in recent quarters, new booking was still low in the first quarter for reasons mentioned.

I would like now to turn to our outlook for the second quarter of 2024 and for the fiscal year ending December 31st 2024.

John Doherty: In 'twenty two 'twenty three we experienced a year over year decline in gross retention in new bookings, which impacted our revenue and while gross retention sequentially improved in recent quarters, new booking was still low in the first quarter for reasons mentioned in.

John Doherty: In the last two quarters, we guided towards sequential total revenue declines, but ultimately, our revenue grew. We believe that the downward pressure that had accumulated in prior quarters will catch up to us this quarter, and therefore, we are forecasting a modest low single-digit sequential revenue decline in both subscription and total revenue in the second quarter. As a result, we expect subscription revenue in the second quarter to be between $39.6 million and $40.3 million, and total revenue to be between $42.7 million and $43.5 million.

John Doherty: In the last two quarters, we had guided towards sequential total revenue declines, but ultimately our revenue growth.

John Doherty: We believe that the downward pressure that had accumulated in prior quarters will catch up to us this quarter and therefore, we are forecasting a modest low single digit sequential revenue decline in both subscription and total revenue in the second quarter.

As a result, we expect subscription revenue in the second quarter to be between $39 6 million and $40 3 million and total revenue to be between $42 7 million and $43 5 million.

John Doherty: We expect the just-added EBITDA in the second quarter to be between negative 0.6 million and positive 0.4 million. As we look towards the second half of the year, we expect to return to sequential revenue growth driven by our improved gross retention rate and our forecasted growth in new bookings. For the full year, we are reaffirming our guidance. We continue to expect total revenue to be between $173.7 million and $176.7 million, and subscription revenue to be between $161.2 million and $164.2 million.

John Doherty: We expect adjusted EBITDA in the second quarter to be between negative <unk> 6 million and positive $4 million.

John Doherty: We look towards the second half of the year, we expect to return to sequential revenue growth driven by our improved gross retention rate and our forecasted growth in new bookings.

John Doherty: For the full year, we are reaffirming our guidance. We continue to expect total revenue to be between $173 7 million and $176 7 million in subscription revenue to be between $161 2 million and $164 2 million. We also continue to expect adjusted EBITDA for the year to be.

John Doherty: Positive with the high end of $1 million, which compares to negative $2 5 million in 2023.

John Doherty: We also continue to forecast a positive cash flow from operations for the full year.

John Doherty: We also continue to expect adjusted EBITDA for the year to be positive, with a high end of $1 million, which compares to negative $2.5 million in 2023. We also continue to forecast a positive cash flow from operations for the full year. Now, I would like to share some closing thoughts as we look out over the balance of 2024 and into 2025. We are aiming to achieve both revenue, growth, and sustained and improving profitability over the long term.

John Doherty: Now I would like to share some closing thoughts as we look out over the balance of 'twenty 'twenty four and into 2025.

John Doherty: We are aiming to achieve both revenue growth and a sustained and improving profitability over the long term.

John Doherty: We believe we are on the right path to achieve this objective and to drive consistent returns to our shareholders. We are encouraged by the increased adoption of our products. The continued improvement in our growth retention rate, the large deals in our pipeline that we expect will yield growing bookings, and by what we believe will be growing industry tailwinds in the second half of the year and in 2025. With that, we'll open it up for questions, Operator.

John Doherty: We believe we are on the right path to achieve this objective and to drive consistent returns to our shareholders.

John Doherty: We are encouraged by the increased adoption of our products. The continued improvement in our gross retention rate. The large deals in our pipeline that we expect will yield growing bookings and about what we believe will be growing industry tailwind in the second half of the year and in 2025 with that we'll open it up for questions operator.

Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star 1 to register a question at this time. Today's first question is coming from Matt Nickman of Deutsche Bank. Please go ahead.

Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.

John Doherty: Once you Register a question at this time.

Matthew Niknam: Hey, guys. Thank you for taking the question. Just two, if I could.

John Doherty: Today's first question is coming from Matt Knickman of Deutsche Bank. Please go ahead.

Matthew Niknam: Hey, guys. Thank you for taking the question just two if I could first on the demand backdrop I think Ron.

Matthew Niknam: First, on the demand backdrop, I think Ronnie spoke to maybe a little bit softer booking, and it sounded like that may have been more seasonal in the first quarter, but just generally wondering if you could speak to what you're seeing and hearing from customers as they entered the new year in terms of budget and the willingness to spend on video and how that's evolved relative to 2023. And then secondarily, on deal slippage, maybe just to follow on to that, if you can talk about what drove some of those larger deals slipping from 1Q to 2Q, are we seeing lengthening sales cycles again, and have these ended up, ultimately, closing by where we sit today? Thank you.

Matthew Niknam: Ron you spoke to maybe a little bit softer booking sounded like that may have been more seasonal in the first quarter, but just generally wondering if you can speak to what you're seeing and hearing from customers as they entered the new year in terms of budgets and the willingness to spend on video and how that's evolved relative to 2023 and then.

Ron: Secondarily on the deal slippage, maybe just a follow on to that if you can talk to what drove some of those larger deals slipping from <unk> to <unk> or.

Ron: Are we seeing lengthening sales cycles again and have these ended up ultimately closing.

Ron: By where we sit today. Thank you.

Speaker Change: Yeah, Matt. Thank you and thanks, everybody for joining today I'll, let's start with the demand and a bit of background around where we start yeah Q1 is always a dropped to Q4. The numbers are generally not very high for Q1 compared to the year. So differences if even if we come a bit softer do not necessarily see much about the rest of the year.

Ron Yekutiel: Yeah, Matt, thank you and thank everybody for joining today. I'll start with the demand and a bit of a background around where we are starting. Yeah, Q1 is always a drop compared to Q4. The numbers are generally not very high for Q1 compared to the year. So differences, even if we come a bit softer, do not necessarily say much about the rest of the year. It's just the nature of our business being a larger enterprise company.

Speaker Change: It was just the nature of our business being a larger enterprise company.

Ron Yekutiel: We are, I think, in Q2 already in a better spot and expecting to continue to pick up throughout the rest of the year. To your point about the slippage of these deals, yeah, they seem strong coming into Q2. I can't foreclose exactly what happened and what has closed since, but we feel pretty good about this being a better quarter than Q1 from a booking perspective. Most of the new bookings were upsells from North America.

Speaker Change: We are seeing Q2 already in a better spot than expecting to continue to pick up throughout the rest of the year.

Speaker Change: To your point about the slippage of these deals yeah. They seem strong coming into Q2 I can for closed exactly what happened in one of close ins, but you know we feel pretty good about this being a better quarter than Q1 from a booking perspective.

Speaker Change: Most of the new bookings were up so from North America I mentioned in the amount of deals that we closed we did mention that there is a strengthening of the pipeline across EMEA and APAC, which is interesting for us.

Ron Yekutiel: I mentioned the amount of deals that we had closed. We did mention that there is a strengthening of the pipeline across ME&A back, which is interesting for us. There's also some high-flying deals that are being looked at that might make a very big difference to our numbers, but it's early to talk about these things, and they could take a while, but we are excited about these things. The type of demand we're seeing out there continues to be similar in the sense of consolidating around Kaltura for internal and external use cases.

Speaker Change: Theres also some high flying deals that are being looked at stuff like make a very big difference store numbers, but you know it's early to talk about these things when they could take a while and but we are excited about these things.

Speaker Change:

Speaker Change: The.

Speaker Change: Type of demand, we're seeing out there continues to be similar in the sense of consolidating around cultural for internal and external use cases, and we are seeing more E. T cells, even platform sales both opportunities and usage by the way. We just came out of the first go through our customer events for the year a culture of connect in New York, We will be discussing it in the subsequent <unk>.

Ron Yekutiel: We are seeing more EP sales, and event platform sales, both opportunities and usage. By the way, we just came out of the first Kaltura customer event for the year, Kaltura Connect in New York. We will be discussing it in the subsequent call, given the timing of it, but we also have our San Francisco coming tomorrow and our London coming later this month. We had a great turnout and very, very excited people about the type of stuff they could do with us and more thoughts about what they could do in the future. These are big brands, so there's no softening in the business from that perspective.

Speaker Change: Paul given the timing of it but we also are San Francisco coming Tomorrow, and our London coming later this month and we had great turnout and very very excited people about the type of stuff they could do with us with more thoughts about what they can do in the future. These are big brands.

So theres no softening in the business from that perspective, the contrary.

Ron Yekutiel: On the contrary, we are able to command higher prices in times that we have also talked about, which is great upon contract renewal, just inserting that automatically regardless of additional services that we offer. We're seeing some growth in the top of the sales funnel with year-over-year growth in QBMs. That's good. We are expecting companies to start accelerating their demand in the second half of the year. We are strong on the belief that digital transformation, online experiences, the hybrid workplace, and Gen Z savvy video folks are going to need and want to do this. It does come up in conversations we have had, including in the last couple of days. As I mentioned with customers, Gen AI is pushing us forward, which is really exciting.

Speaker Change: We are able to command higher prices in times that we had also talked about which is great and upon contract renewal just inserting that automatically and regardless of additional services that we offer them. We're seeing some growth in the top of the sales funnel with year over year growth in <unk> that's good.

Speaker Change: So you know we are expecting companies to start accelerating their demand in the second half of the year. We are strong on the belief that digital transformation online experiences hybrid workplace.

Speaker Change: Gen Z savvy video folks are going to need and want to do this it does come up in conversations we have including in the last couple of days has mentioned with customers' journey I was pushing us forward, which is really exciting and the deals that we do close are across all industries, that's excited and across multiple use cases, so all in all were.

Ron Yekutiel: And the deals that we do close are across all industries, that's exciting, and across multiple use cases. So all in all, we're feeling good. And again, we've talked more about retention. It's also a good sign.

We're feeling good and again, we'll talk more about retention. It's also a good sign.

Speaker Change: But we're feeling good but that said.

Ron Yekutiel: But that said, the year did start slow, as it generally does, it was a bit slower, and we got to be thoughtful and cautious. And it's too early to celebrate. We left the numbers as they are for the year. So let's see where things move.

Speaker Change: It did start slow as it generally does it was a bit slower and we got to be thoughtful and cautious and it's too early to celebrate we left numbers as are for the year, but let's see where things move.

Matthew Niknam: If I could just follow up also, just one question for John. I know it's still relatively early, but I've just been in the seat for a couple of months now. You talked about longer-term sustained revenue growth as well as profitability. What's the path, I guess, to more sustained profitability and cash flow generation? You know, is it improving gross margins? Is it more work to be done in the OPEC space?

Speaker Change: If I can just follow up also just one question for John I know, it's still relatively early but just being in the seat a couple of months now you talked about longer term sustained revenue growth as well as.

John Doherty: Profitability, what's the pass I guess to more sustained profitability and cash flow generation is it improving gross margin is it more work to be done on the Opex space.

Speaker Change: Maybe get a little higher level sensitive.

John Doherty: I just want to maybe get a little higher level sense. Title Microsoft Office Word Document MSWordDoc Word. Document.8, Yeah, sure. I mean, I mean, basically, it's all the above.

Speaker Change: What the path is as you think about you know later 'twenty four 'twenty five.

John Doherty: Yeah, sure. I mean, basically, it's all of the above. I mentioned some of that in my prepared comments in terms of the hard work that the company did over the last couple of years to improve the overall operating expense foundation. I certainly think there's additional work that can be done there. But, you know, the largest driver I anticipate would be coming from Topline, given what we're seeing and kind of what I said about what we see for the second half of this year and into 2025.

Speaker Change: Yeah sure I mean, I mean, basically it's all the above I mean, I mentioned some of it in my prepared comments in terms of the hard work that the company did over the last couple of years to improve the overall operating expense Foundation I. Certainly think there is additional work that can be done there, but the largest driver yeah just to.

Speaker Change: They would be coming from from topline given you know, what we're seeing and kind of what I said about what we see for the second half of this year and into 2025.

Speaker Change: Great. Thank you both.

Speaker Change: Thank you Matt.

Ryan Boyer Koontz: Thank you. The next question is coming from Ryan Koontz of Needham & Co. Please go ahead.

Speaker Change: The next question is coming from Ryan Koontz of Needham <unk> co. Please go ahead.

Ryan Boyer Koontz: Great. Thanks.

Ryan Boyer Koontz: Great, thanks. Ron, how do you think about, you know, pricing for AI? Are there some features there that are definitely, you know, really kind of shiny objects to attract customers to the platform? And are there other features that come with a higher COGS perspective element that you've got to, you know, accommodate, you know, higher price points for? How do you generally think at this point about AI as a feature set and price?

Ryan Boyer Koontz: Ron how do you think about pricing for a a there's some features there that are definitely.

Ryan Boyer Koontz: You know really kind of the shiny objects to attract customers to the platform.

Ryan Boyer Koontz: And are there other features that come with a higher Cogs perspective.

Ryan Boyer Koontz: Element that you've got to accommodate.

Ryan Boyer Koontz: Accommodate a higher price points for <unk>.

Ryan Boyer Koontz: Generally speaking at this point about AI as a as a feature set and pricing.

Speaker Change: Yeah. Thanks for that good question as you know we are very excited about it I would think that that represents a material shift and change in the world at large obviously, but also in the world of video.

Ron Yekutiel: Yeah, thanks for that good question. As you know, we're very excited about AI. We think that it represents a material shift and change in the world at large, obviously, but also in the world of video. I think that video is the most engaging data type out there, and organizations are going to want to have a lot more immersive experiences. And if they're AI-infused immersive experiences, they could drive results. The beauty in Kaltura is that we are tightly integrated into workflows in that we have all the content federated across the enterprise, given the breadth of use cases, and are the system of record.

Speaker Change: Video is the most engaging data type out there and our organization is going to want to have a lot more immersive experiences and if their AI infused immersive experiences they could drive results the beauty and cold drugs is that we are tightly integrated into workflows and that we have all the content federated across the enterprise given the breadth of use cases.

Ron Yekutiel: And then we're also the engagement layer. So if you consider kind of a sandwich at the bottom of which are the integration into the workflows, then the data, then the AI, and on top of that, the system of engagement, then you could create solutions with gratuitous kind of cycle that enables to provide the right contextualized, hyper-relevant content for interaction with individuals, like kind of a Khan Academy on steroids for all these schools that we're in, plus corporate training that would enable people to learn.

Speaker Change: That being the system of record and then we're also the engagement layer. So if you consider kind of a sandwich, although bottom of which are the integration into the workflows them. The data then the AI and on top of that the system of engagement than you could create solutions with the two there's kind of a cycle that enables to provide the right <unk>.

Speaker Change: I realized hyper relevant content for interaction with individuals' like kind of a Khan Academy on steroids for all the schools that we're in plus corporate training that would enable people to learn and then we could go up to the content well and not just the system platform providing.

Ron Yekutiel: And we could go up to the content realm and not just the system platform, providing the right information for people to learn and rescale. And that could increase ARPU by an order of magnitude when we're not just kind of the pipes, but we're helping the water come.

Speaker Change: Providing the right information for people to learn and re skill.

Speaker Change: And that could increase our pool by an order of magnitude when we're not just the kind of the pipes, but we're helping the water come.

Speaker Change: The thing goes to marketing and stuff that we're doing now with big Big brands, where it's supporting Salesforce and Adobe and so many others right now when they are looking into inserting.

Ron Yekutiel: The same goes to marketing, and the stuff that we're doing now with big, big brands. We're supporting Salesforce, and Adobe, and so many others right now, and they are looking into insertion, whether they're AI or REI. So we're excited about that. To your question about pricing, I think we, as much as all the other folks in the industry, are taking it slower because we're running POCs; we're starting to introduce things. These are large enterprises. They do require a certain degree of caution as you introduce AI into their world.

Speaker Change: Whether they're a R. R. A I used the word.

Speaker Change: We're excited about that to your question about pricing I think we have as much as in the same as all the other folks in the industry are are taking a slower because were running kill sees we're starting to insert things. These are large enterprises. They do require certain degree of caution as you introduce AI into their world We do.

Ron Yekutiel: We did state in our prepared remarks that there was a very successful POC that demonstrated a very clear ROI, and that could translate into pricing. We've been very careful to date not to mention how that's going to drive revenue, but we believe it will. It would probably be a combination of, in certain places, increasing prices for things that will be offered by AI, but even more so by orders of magnitude, it will be driving the amount of content that's created and the amount of content that's consumed.

Speaker Change: It does state that our prepared remarks that there was a very successful appeals that demonstrated a very clear rois and that could translate into pricing. We had not been very careful to date not to mention how that's going to drive revenue, but we believe it will it would be a probably a combination of in certain places increasing prices for things that will.

Speaker Change: Be offered by AI, but even more so by order of magnitude it will be driving the amount of content. That's created in the amount of content that is consumed and by doing so in a roundabout way will drive ARPA and would drive stickiness and withdraw all these great things on the kit and they kicked out of the company and we're seeing.

Ron Yekutiel: By doing so in a roundabout way, we'll drive ARPU, and we'll drive stickiness, and we'll drive all these great things in the KPIs of the case. We're seeing the beginning of a lot of exciting things, so I don't want to set the stage to say here's how much revenue is going to come up over the next next month in line with what I've been saying in recent quarters, but we absolutely think it's a very important element of the future. It makes great sense.

Speaker Change: The beginning of a lot of exciting things. So I don't want to set the stage to say here's how much revenue is going to come up over the next six months in line with what I've been saying over the recent quarters, but we absolutely think it's a very important element of the future of this company.

Speaker Change: Makes great sense and one of them some comment because you did you did ask about Cogs.

Ron Yekutiel: And one additional comment, because you did ask about COGS. This is actually an opportunity for reducing COGS in various areas. Let me give you one example. We announced and mentioned in our prepared remarks that we're creating our own ASR. So the transcription engine that we've used from a third party is now going to be based on Whisper, an open source library that is AI driven, not only increasing and improving quality but also reducing cogs.

Speaker Change: This is actually an opportunity for reducing Cogs in various areas. Let me give you. One example.

Speaker Change: We announced in May as mentioned in our prepared remarks, so we're creating our own ASR.

Speaker Change: So the transcription engender, we've used from a third party is not going to be based on what spurred an open source library that is AI, driven not only increasing and improving quality, but also reducing cogs.

Ron Yekutiel: And so, if used smartly, the opportunity here is to actually generate something that improves our margins. We are not in the business of creating new LLNs from scratch. We're not crunching endless amounts of data. Like I mentioned earlier in the sandwich metaphor, we're riding on existing integrations into workflows with existing data and are prompting the LLNs. I will say that the opportunity that we have, and we're talking about major banks and financial institutions and insurance companies and just about every industry, is that they have vertical solutions based on their improved LLNs for their specific vertical case. But that does not require the crunching of an endless amount of data that is extremely expensive. So I don't foresee a worsening of our margins. I potentially foresee an improvement.

Speaker Change: So if used smartly the opportunity here is to actually generate something that's improving our margins.

Speaker Change: We are not in the business of creating from scratch, new Ela lens, we're not crunching endless amount of data like I mentioned earlier in the sandwich metaphor, we're waiting on existing integrations into workflows with existing data and are prompting the Ireland I will say that the opportunity that we have and we're talking about major banks since the financial institutions.

Speaker Change: Insurance companies in just about every industry is that they are vertical solutions based on their improved L. O labs for their specific vertical case, but that does not require a clenching or an endless amount of data that is extremely expensive. So I don't foresee a worsening, but our margins are potentially foresee an improvement.

Ryan Boyer Koontz: Interesting. Super helpful. Thank you.

Speaker Change: Interesting Super helpful. Thank you.

Speaker Change: Paul if I could any comments around kind of industry structure out there in terms of you know a larger players smaller players you know how do you see this evolving.

Ryan Boyer Koontz: Follow up if I could. Any comments around the kind of industry structure out there in terms of, you know, larger players, smaller players, you know, how you see this evolving? You know, right now we just seem to be kind of a stall in terms of growth and potential consolidation still. Any comments? Any updated comments in that area?

Paul: Right now, we just seem to be kind of a story in terms of growth and potential consolidation still in any comments you know did it comes in that area.

Ron Yekutiel: Yeah, that's a good question. No major changes. I mean, we are seeing the beginning of the reports for the quarter and glad to see that where we're coming from and again with a cautionary forward or above or we're not below any forward-looking kind of year-over-year growth directions of other companies, which is not surprising. But again, it's the beginning of the year, and there could be many surprises as we advance. And so far as consolidation is concerned, yeah, we are keeping an eye on opportunities out there to create further value for shareholders.

Paul: Yeah. That's a good question no major change I mean, we are seeing the beginning of the reports for the quarter and glad to see that where we're coming out with a caution forward are above or we're not below any forward looking kind of year over year growth the directions of other companies, which is not surprising.

Paul: But again, it's the beginning of the year and there can be many.

Paul: Rises as we advance.

Paul: So far as consolidation, we are keeping an eye on opportunities out there to create further value for shareholders. We do believe that this industry has been under quite a significant pressure over the last couple of years. We do believe things are going to turn around and it was coming out of Covid on one hand, they're coming into the financial crisis, but the other end.

Ron Yekutiel: We do believe that this industry has been under quite significant pressure over the last couple of years. We do believe things are going to turn around, you know, with coming out of COVID on the one hand and coming into the financial crisis on the other. And when there's blood in the street, there is opportunity.

Paul: When there's blood in the streets. There is the opportunity I think we've proven that we can do the consolidator of this industry by way of the depth of integration into workflows as well as the breadth of products and use cases and industries and so that introduces opportunities to partner with other technologies that we've done.

Ron Yekutiel: I think we've proven that we could be the consolidator of this industry by way of the depth of integration into workflows as well as the breadth of products, use cases, and industries. And so that introduces opportunities to partner with other technologies, which we've done successfully, to integrate them into our APIs quite easily, as well as to potentially consolidate the market and cater to a larger set of customers, which could introduce economies of scale and more operational leverage.

Paul: Successfully to integrate them into our a pea is quite easily as well as to potentially consolidate a market and cater to a larger set of customers, which could introduce economies of scale and more operational leverage.

Ron Yekutiel: So, you know, nothing specific to state, obviously, on this call, but, you know, the fact that we also have John together with us, and he's done great things of that nature in the past, is indicative, as we've said, of us looking to seize the opportunity around this market to actually become a stronger, leading player because of the amazing technology positioning and customer set that we have. I'm going to let John comment on this if he has anything to say. I think Ron covered it all.

Speaker Change: So no nothing specific to state obviously on this call.

Speaker Change: But you know the fact that we also have John together with us and he's done great things of that nature in the past is indicative as we've said to us looking on seizing the opportunity around this market to actually become a stronger leading player Hum.

Speaker Change: And because of the amazing technology positioning and customer set that we have I'm going to let John comment on this if he has anything to sell.

John Doherty: I think Ron covered it all. I mean, I would expect, over the course of time, there could be strategic activity in the space, just given the account of what's happening in the space, and you mentioned it up front. Our goal is to make sure we continue to build a tremendous business here, a business that shows revenue growth and puts the company in a great position for revenue growth, as well as increasing profitability. And we are doing that. We feel that other things take care of themselves.

John Doherty: I think Ron you Ron covered it all I mean, you know I would expect over the course of time, there there could be strategic activity in the space, just given kind of what's happening in the space and you mentioned it upfront.

Speaker Change:

Speaker Change: Our goal is to make sure we continue to build a tremendous business here a business that shows off revenue growth from physicians and puts the company in a great position for revenue growth as well as increasing profitability and we do that we feel other things take care of themselves.

Speaker Change: Yeah.

Speaker Change: Super Thanks for the comments.

Speaker Change: Thank you. The next question is coming from George Wang.

George Michael Iwanyc: Thank you. The next question is coming from George Iwanyc of Oppenheimer & Co. Please go ahead.

George Michael Iwanyc: Oppenheimer and co. Please go ahead.

George Michael Iwanyc: Okay.

George Michael Iwanyc: Thank you for taking my question. Ron, given the comments you made about EMEA and APAC, can you kind of expand on the regional trends you're seeing at this point?

George Michael Iwanyc: Thank you for taking my question.

George Michael Iwanyc: Rod.

George Michael Iwanyc: Given the comments you've made for EMEA and APAC kind of expand on that the retail trend interesting at this point.

Ron Yekutiel: And again, it's early in the year, we've got to be careful, but a few things that we're seeing. We have the majority of our E&T business coming from North America, but we have a fair bit of significant revenue for M&T coming from the rest of the world. Kind of immediately connected to the fact that the very large companies in the U.S. have bought or built their own technologies. We consider the large streamers or the very, very large telcos or media companies in North America, which is very different otherwise. So that's historically been the case.

Speaker Change: And again, it's early in the year, we gotta be careful but are but a few things that we're seeing for one.

Speaker Change: We have the majority of our E N T business coming from North America, but we have a fair bit significant revenue for EM and Ts coming from rest of world kind of immediately connected to the fact that the very large companies in the U S have bought or built their own technologies, we consider the large <unk>.

Speaker Change: Mirrors are the very very large telcos or media companies in North America, which is very different otherwise. So that's historically been the case.

George Michael Iwanyc: The growth we're seeing around the world is a function of two things. Number one, a certain regrowth of the M&T opportunity, and I want to be very clear, these are long cycles and they are also long to convert into revenue and profitability, so not to say that, you know, it closes the deal within a second or that it impacts revenue or profitability within a second, but we are cooking some stuff and looking at various opportunities, and it seems as if some folks that have taken a pause given COVID or given following some financial and geopolitical unrest, et cetera, are considering to improve where they are and what they're doing, and to remind you, we are a premium technology there, and these are quite significant, large deals, and so that's one thing, but it's not just that.

Speaker Change: The growth, we're seeing around the world as a function of two things number one a certain regrowth of the M T opportunity.

Speaker Change: I don't want to be very clear. These are long cycles, and they're also longer to convert into revenue and profitability. So not to say that you know because we deal with in a second or that it impacts revenue or profitability within a second.

Speaker Change: But we are cooking, some stuff and looking at various opportunities and it seems as if some folks that have.

Speaker Change: Taking a pause given COVID-19 or given following some financial and geopolitical unrest et cetera are considering to improve where they are and what they're doing and to remind you. We are a premium technology. There and these are quite significant large deals.

Speaker Change: And so that's one thing, but it's not just that we are seeing also in E. N T and to remind you again, where large enterprise not SMB, but some of the folks out there that have been extremely cautious over the course of the last couple of years, given where things are our understanding that they can sit on their hands forever.

George Michael Iwanyc: We are also seeing in E&T, and to remind you again, we're a large enterprise, not an SMB, some of the folks out there that have been extremely cautious over the course of the last couple of years, given where things are, are understanding that they can't sit on their hands forever. Especially, the decision to move to Kaltura is not just a decision to improve the functionality and to have less complexity and less silos, but it is also a cost-reducing because there's an economy of scale associated with having a single platform as opposed to multiple vendors.

Speaker Change: Especially that the decision to move to what he called Terra is not just a decision to improve the functionality and to have less complexity and less silos, but it is also a cost reducer.

Speaker Change: Because there's economies of scale associated with having a single platform as opposed to multiple vendors.

George Michael Iwanyc: And so what might not work well for a given year could be very much smart for a company as it looks forward into the next two, three, four years. And I think companies are now more open to considering the mid to long term than they were a couple years ago. But again, we'll wait and see. We're just giving you what we see in the pipeline. When it converts to more deals, we're going to report it out.

Speaker Change: So what might not work well for a given year could very much be smart for our company as it looks forward until the next 234 years and I think companies now are more open to consider the mid to long term than they were a couple of years back.

Speaker Change: But again, let's let's wait and see we're just giving what we see at the pipeline when it converts to more deals we're going to report on it.

Speaker Change: And given the.

Ron Yekutiel: And, you know, given the seasonal start to the year and maybe the slightly softer trends that you're seeing, can you maybe update us on your hiring expectations, especially from a Salesforce perspective? And when you do talk about Salesforce, maybe give us some updates on your downmarket focus. Sure.

Speaker Change: Susan I'll start to the year and I don't agree with that a little bit softer.

Speaker Change: Trends that you are saying can you maybe update us on your hiring expectations, especially from a salesforce perspective.

Speaker Change: And when you do talk about Salesforce, maybe give us some update on your down market. Okay.

Speaker Change: Yeah.

Speaker Change: Sure.

Ron Yekutiel: Sure. So when we were prepping for the year and giving the year guidance, we said that last year we reduced the sales force by about 25 percent and, indicative of that, booking had come down by about the same amount, meaning that the sales efficiency was kind of flat year over year and that this year, unlike before, we expected it not to be reduced but gradually increased to 10 percent. But that that was going to be more so in the second half of the year and that, you know, it's not going to make a huge difference this year, but it will start building up towards the following year by way of revenue. That's still the case. We haven't changed our thesis. Again. Okay.

Susan: So we did say when we were prepping for the year and giving the year guidance. The last year, we've reduced sales force by about 25% and indicative without booking are coming down by about the same amount, meaning that the sales efficiency was kind of flat year over year that this year. Unlike before we expected not reduced.

Susan: But gradually increase to the tune of 10 people.

Susan: But that that was going to be more so on the second half of the year and that you know, it's not going to make a huge difference this year, but it will start building up towards the following year by way of revenue. That's still the case, we haven't changed our thesis again, it's just a small minor changes at the beginning of the year, but we're keeping an eye and we're going to continue to keep an eye on it.

Susan: And what we're here to do is to be effective and efficient and if we're seeing that there's enough breakthrough capacity to move forward is put more people out there to generate growth and we're going to do that if we think we need to wait it out a bit and so that focus more on bottom line than top line growth, we're going to do that as well, we're agile and we'll see where things go but at this point.

Susan: There's no change in our philosophy, the singles to going down market.

Ron Yekutiel: We have continued to show some interesting deals as we go down to SME and departmental, where our plans have not changed to continue to go down that track. I had mentioned on the prior call that we are less looking into going full-on self-serve but more the low-touch mid-market, again, aligned with needing to pick your battles in the years that we have seen. And we're still very much aligned with that. You know, we want to be thoughtful.

Susan: We have continued to show some interesting deals as we go down to SME and departmental and where our plans have not changed to continue to go down that track I had mentioned up from the prior call that we are less looking into going full on self serve but more the low touch mid market again.

Susan: Aligned with needing to pick your battles and the years that we've seen and we're still very much aligned with that you know we want to be thoughtful we don't want to shoot all directions Theres a lot of upside for the company, but we got to choose our battles and we the battles haven't changed.

Ron Yekutiel: We don't want to shoot in all directions. There's a lot of upside for the company, but we've got to choose our battles, and the battles haven't changed. It's been a good start for the year, and we're waiting to see where things continue, and we're continuing forward with the same strategy and the same experience.

Susan: It's been a good start for the year and we're waiting to see where things continue and we're continuing forward with the same strategy in the same execution.

Susan: Yeah.

Speaker Change: Thank you.

Mike: Once again Thats star one if you'd like to register a question at this time. The next question is coming from Mike Alternative Wells Fargo. Please go ahead.

Operator: Once again, that's star number one if you would like to register a question at this time. The next question is coming from Michael Ternan of Wells Fargo. Please go ahead.

Speaker Change: Hey, this is Don it sounds filling in for Michael.

Ron Yekutiel: Hey, this is Ronit Shaw filling in for Michael. I wanted to ask about retention rates: what levers do you guys kind of have to pull to bring these back to where they were about a year ago?

Don: I asked on the retention rates.

Don: What levers do you guys kind of have to pull to bring these back where they were.

Don: About a year ago.

Speaker Change: Thank you for asking on retention it was.

Ron Yekutiel: Thank you for asking about retention. It was good progress. I'm going to repeat some of what I said earlier. This was the third consecutive quarter of improvement. To remind you, we had the lowest gross churn in Q4, and now it was even lower than that, meaning better gross retention. It's actually the best that we've seen since the last quarter of 2022.

Speaker Change: It was a good progress and I'm going to repeat some of what I said earlier. This was the third consecutive quarter of improvement.

Speaker Change: To remind you that we have the lowest gross churn in Q4 and now it was even lower than that and even better gross retention.

Speaker Change:

Speaker Change: It's actually the best that we've seen since the last quarter of 2022.

Ron Yekutiel: And I also mentioned in the prepared remarks that this represents an annual retention rate that's better than the last three years on a quarterly basis. And then if you multiply that by four, you get better results in the last three years. So I would say that where we are now, actually, if this were theoretically to continue, we're definitely back to where we were even better. Not to say that it would be copy-paste and that's what's going to continue, but when we look at the year ahead, and we said in advance, we believe that the year will be a year that is aligned with the prior results of the company prior to last year, which was a tick up, and we remain in that belief that we're in the right direction.

Speaker Change: And I also mentioned in the prepared remarks that it represents an annual retention rate.

Speaker Change: That's better than the last three years on a quarterly basis.

Speaker Change: As many of you multiply that by four or you're getting to better results in the last three years.

Speaker Change: I would say that where we are now actually.

Speaker Change: It's worth theoretically to continue with definitely back to where we were even better.

Speaker Change: Not to say that it would be coffee piece and that's what's going to continue but when we look at the year and that we sit in advance we believe that the year would be a year that is aligned with the prior results of the company prior to last year, which was he pick up and.

Speaker Change: And we remain in that belief that we're in the right direction.

Ron Yekutiel: I'll also add on retention that a smaller piece was a full churn, let's say to the tune of 25% of our churn was full churn, and the majority of it was down cells, call it 75% of the churn. And that's the case in both ENT and MNT.

Speaker Change: I'll also add on retention.

Speaker Change: That's a smaller piece was a full churn, let's say to the tune of 25% of our churn was full churn. The majority of it was down cells call it 75% of the churn.

Speaker Change: And that's the case in both E N T N N T.

Ron Yekutiel: And we continue to see a very small piece, call it less than 10% of our gross churn associated with either a product or service gap. So the rest are either budget limitations, products, or services that are no longer needed. These are things that are aligned with what we've recently seen. I'll just say, you know, as this touches on NDR. We've mentioned, you know, how we fared in Q1, not a surprise for us given last year's performance.

Speaker Change: We continue to see a very small piece call it less than 10% of our gross churn associated with either product or a service gaps.

Speaker Change: So the rest are either budget limitations.

Speaker Change: Services that are no longer needed. These are things that are aligned with what we've recently seen.

Speaker Change:

Speaker Change: I'll just say you know is this touches N D R.

Speaker Change: We've mentioned you know how we fared in Q1, not a surprise for US given last year's churn is a lagging indicator.

Ron Yekutiel: It is a lagging indicator, and as we look forward into the future, we did say kind of cautiously in the prepared remarks that there may be a bit of a decrease into the next quarter. We're not seeing anything significant, so let's wait and see where it goes. If it is, it might be a small decrease. And then, hopefully, as the continued improvement around gross retention and the bookings that we expect will start climbing, we expect to gradually start showing better results there.

Speaker Change: And we also as we look forward into the future. We did say cut a cautiously in the prepared remarks that there may be a bit of a decrease into the next quarter, we're not seeing anything significant so let's wait and see where it goes if it is it might be a small decrease and then hopefully.

Speaker Change: The continued improvement around gross retention and the bookings that we expect will start climbing.

Speaker Change: We expect to gradually start showing better results there so.

Ron Yekutiel: So, that's it. I don't know if you have any other questions about that. John, anything you want to say about that?

Speaker Change: That's it.

Speaker Change: Well if you have any other questions on the John anything you want to stay on it and I think you covered it.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah, Yeah, great. Thanks for the color there just one more if you don't mind.

Ron Yekutiel: Yeah, yeah, great. Thanks for the color there. Just one more, if you don't mind, on the competitive landscape and who you're running into with deals and comments on pricing trends, things like that.

Speaker Change: The competitive landscape and.

Ron Yekutiel: Who you're running into with deals and comments on pricing trends things like that.

John Doherty: Yeah.

Speaker Change: Yeah, we're not seeing anything new.

Ron Yekutiel: Yeah, we're not seeing anything new. No fiercer competition or new players coming in. And on the pricing, it did mention that we were able to increase contractually more so than in the past, and that was by way of a strategy, which I had stated prior that we intend to do so as well this year. So we're not seeing additional pressures.

Ron Yekutiel: No fiercer competition or new players come in.

Ron Yekutiel: And on the pricing you did mentioned that we are we were able to have increased contractually more so than in the past and that was by way of a strategy, which I have stated prior but we intend to do so as well this year.

Ron Yekutiel: So we're not seeing additional pressures come in.

Ron Yekutiel: Yeah.

Speaker Change: Great. Thanks.

Speaker Change: Thank you.

Patrick D. Walravens: Thank you. The next question is coming from Pat Walravens of Citizens JMP. Please go ahead.

Ron Yekutiel: Thank you. The next question is coming from Pat Walraven.

Patrick D. Walravens: Since JMP. Please go ahead.

Patrick D. Walravens: Hey, Great. This is all over cooking dinner on for Pat.

Patrick D. Walravens: Hey, great. This is Oliver Crookenden on for TAT. Going back to competition a little bit, with the seven and six-figure deals that you closed this quarter, can you talk a bit about the extent to which these deals you were involved in were part of a competitive bake-off?

Oliver Crookenden: Going back to competition, a little bit with the seven and six figure deals that you closed this quarter can you talk a bit about the extent to which these deals you were involved in were part of competitive bake off.

Oliver Crookenden: Most of them are not like I said most of the bookings this quarter was more so on upsells, rather than new logos, which isn't indicative that's kind of a life for the industry in recent quarters, given where things are you know people are sticking to their existing vendors.

Ron Yekutiel: Most of them were not. Like I said, most of the bookings this quarter were more so on upsells rather than new logos, which is indicative. It's kind of a lie for the industry in recent quarters, given where things are. People are sticking to their existing vendors more so than in the past because it's just too risky to start making moves. This hasn't changed.

Ron Yekutiel: More so than in the past because it's just too risky to start making moves this hasn't changed but the most of these cases people they love us to bits and they want to stay with us and they're not considering a change in social sticky offering and especially vertical true because unlike the other folks that are quite often offering just kind of a low touch self serve product.

Ron Yekutiel: But in most of these cases, people love us to bits, and they want to stay with us, and they're not considering a change, and it's also a sticky offering, especially for Kaltura because, unlike the other folks that are quite often offering just kind of a low-touch, self-serve product or without a lot of APIs, not necessarily mission-critical, more so an app that's easy to replace. In our case, quite often, what we're offering is something with a lot of API integrations and is harder to switch.

Ron Yekutiel: Or without a lot of AP is not necessarily mission critical more so an app that's easier to replace and arcades quite often what we're offering is something with a lot of API integrations and harder switch again to remind you. When we spoke about even higher churn rates are low retention rates. It was more often than not down cells because people need.

Ron Yekutiel: Again, to remind you, when we spoke about even higher trend rates or lower retention rates, it was more often than not downsells because people needed to use less stuff, not because they wanted to disconnect or were interested in switching. What we're seeing, again, in line with your question, is that, you know, things are going on with Kaltura, there are mainly upsells, and people are not considering doing it with somebody else significantly. It's just a question of how much money they have in order to do what they want to do now versus wait a bit longer.

Ron Yekutiel: To use less stuff not because they wanted to disconnect where we're interested to switch to what were seeing you again in line with your question is that you know things are maintaining with culture, there's mainly upsells.

Ron Yekutiel: People are not considering significantly doing it with somebody else's just a question of how much money. They have in order to do what they wanted to do now versus wait a bit longer.

Speaker Change: Great that's helpful and I guess, a little bit of a follow up I know you powered so the functionalities of the GTC conference than you have in the past there has the growth of that ecosystem helped at all in terms of up sells.

Patrick D. Walravens: Great, that's helpful. And I guess a little bit of a follow up. I know you powered some of the functionalities of the GTC conference in the past. So has the growth of that ecosystem helped at all in terms of upsells?

Patrick D. Walravens: Yeah.

Patrick D. Walravens: Hum.

Patrick D. Walravens: So nvidia is a great partner and customer obviously, a phenomenal company.

Ron Yekutiel: So, NVIDIA's a great partner and customer, obviously a phenomenal company. We're privileged to do some work with them. And, in fact, we're doing a bit more work with them and hopeful that that trend will continue. If it were to mimic historical contracts and we were able to have come and expanded quite significantly, then we're hoping that that will continue to be the story with this amazing company as well.

Ron Yekutiel: We're privileged to do some work with them and Hum in fact, we're doing a bit more work with them and hopeful that that trend will continue as the word mimic our historical contracts and we were able to have come in expanded quite significantly.

Ron Yekutiel: And we're hoping that that will continue to be the story with this amazing company as well.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Ron Yekutiel: Thank you. At this time, I would like to turn it back over to Mr. Yekutiel for closing comments.

Speaker Change: Thank you at this time I would like to turn it back over to Mr. <unk> for closing comments.

Yekutiel: Yeah, well. Thank you all for your good questions a good beginning for a year like I said optimistic trends around retention, which we promised and are currently delivering on.

Ron Yekutiel: Yeah, I want to thank you all for your good questions. A good beginning for a year, like I said, optimistic trends around retention, which we promise and are currently delivering on. We're excited, and we're going to share on the next call how our company conference, Kaltura Connect, is taking place. For those of you who still want to join, San Francisco is happening tomorrow, and London is going to happen later this month.

Ron Yekutiel: We're excited and we're going to share in the next call how our company conference. The cultural connect is taking place for those of you who still want to join San Francisco's happening Tomorrow in London is going to happen later this month.

Ron Yekutiel: Please do come, and you can find it on our website. By the way, we're going to be sharing the recordings from that event, so you'll be able to have a look at them. I think they're quite telling about the breadth and depth of what it is that we offer. Thank you all for joining the call, and have a wonderful day.

Ron Yekutiel: Please do come and you could find it on our website by the way we're gonna be sharing the recordings from that events you'd be able to have a look at them I think they are quite telling.

Ron Yekutiel: <unk> and depths of what it is that we offered.

Ron Yekutiel: Thank you all for shell for joining the call and have a wonderful day.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your line to lock off the webcast at this time and enjoy the rest of your day.

Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

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