Kaltura, Inc. (KLTR) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call showed positive financial performance with record high non-GAAP net profit and strong cash flow. Despite a decline in M&T revenue, the company demonstrated improved operating efficiency and gross margins. The Q&A revealed strong new bookings momentum and strategic customer retention efforts, with growth in AI product offerings. The workforce reduction and cost savings further support profitability. However, management's unclear responses regarding certain declines and AI product impact slightly temper enthusiasm. Overall, the positive financial indicators and strategic initiatives suggest a likely stock price increase in the short term.

Key Financial Performance

Total Revenue $44.5 million for Q2 2025, up 1% year-over-year. Growth was driven by EE&T, while M&T revenue declined due to delayed churn from 2024.

Subscription Revenue $42.4 million for Q2 2025, up 3% year-over-year. Growth attributed to strong renewals and upsells.

ARR (Annualized Recurring Revenue) $170.4 million, up 3% year-over-year. Growth driven by increased subscription revenue.

RPO (Remaining Performance Obligations) $188.1 million, up 6% year-over-year. Growth driven by strong renewals and upsells.

EE&T Revenue $33.2 million for Q2 2025, up 7% year-over-year. Growth attributed to strong subscription revenue and gross retention rates.

M&T Revenue $11.2 million for Q2 2025, down 14% year-over-year. Decline due to delayed churn from 2024.

Non-GAAP Net Profit $2.5 million for Q2 2025, a record high. Improvement driven by strong gross margins and cost management.

Adjusted EBITDA $4.1 million for Q2 2025, consistent with Q1 2025 and up from $1.6 million in Q2 2024. Growth driven by improved operating efficiency.

Non-GAAP Gross Margin 70% for Q2 2025, up from 66% in Q2 2024. Improvement due to cost management and operational efficiency.

Cash Flow from Operations $2.7 million for Q2 2025, the highest second quarter result since 2020. Growth driven by improved operating efficiency.

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Operating Highlights

AI Offerings: Kaltura introduced new AI products, Content Lab and Genie, which automate video workflows and provide hyper-personalized video experiences. These products have already secured three deals and have a pipeline of over 100 opportunities.

Product Enhancements: Enhanced Content Lab to support multilingual video metadata and integrated it into virtual event offerings. Genie agents now pull insights from additional data sources and support anonymous users. Launched live captioning service and improved transcription engine.

Awards and Recognition: Kaltura's AI products won multiple awards, including the e-Learning Innovation of the Year Award and five Eventex Awards. Recognized as a leader in AI-enabled enterprise video platforms by IDC.

Vodafone Contract: Extended and expanded a long-term contract with Vodafone, reinforcing leadership in the cloud TV market.

New Deals: Secured 21 six-digit deals with major companies, including AWS, Xbox, and two of the largest U.S. banks.

Financial Performance: Achieved record non-GAAP net profit of $2.5 million and adjusted EBITDA of $4.1 million. Cash flow from operations was $2.7 million, the highest since 2020.

Workforce Reorganization: Announced a 10% workforce reduction to increase efficiency and align operations, expected to save $8.5 million annually.

AI Strategy: Plans to evolve AI agents into proactive, industry-specific tools for various sectors like financial services and education. Focus on automating content publishing and enhancing user engagement.

Vertical SaaS Solutions: Reorganizing teams to develop vertical SaaS AI-infused video solutions for industries like financial services, pharma, and education.

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Risk or Challenges

M&T Revenue Decline: M&T total revenue declined by 14% year-over-year in Q2 2025, marking its sharpest decline ever. This was attributed to delayed churn from 2024, which impacted retention rates and revenue.

Workforce Reduction: The company announced a reorganization plan involving a 10% workforce reduction to increase efficiency and productivity. While this is expected to save costs, it may impact employee morale and operational capacity in the short term.

Macroeconomic and Geopolitical Uncertainty: The company acknowledged ongoing market uncertainties and geopolitical turbulence, which could impact its financial performance and strategic plans.

Professional Services Revenue Decline: Professional services revenue decreased by 31% year-over-year in Q2 2025, consistent with expected trends, but still a notable challenge for the company.

M&T Retention Challenges: Gross retention rates in the M&T segment were lower in the first and second quarters of 2025 due to delayed churn from 2024, though improvement is expected in Q4.

Dependence on Key Customers: The company highlighted the extension and expansion of its long-term contract with Vodafone, its largest customer. This dependence on a single major customer poses a risk if the relationship changes.

Foreign Exchange Losses: The company incurred material foreign exchange losses in Q2 2025 due to the depreciation of the U.S. dollar against the Israeli shekel, impacting financial results.

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Guidance & Outlook

M&T Revenue Growth: Sequential growth in M&T revenue is expected in the fourth quarter, driven by improved M&T gross retention and increased new bookings.

Vodafone Contract: The extension and expansion of the long-term contract with Vodafone supports M&T revenue growth and highlights leadership in the cloud TV market.

AI Product Sales: Initial sales of new AI products, Content Lab and Genie, have begun, with expectations for more and larger deals in the coming quarters. The sales pipeline includes over 100 additional qualified opportunities across various industries.

AI Product Development: Planned AI developments in the second half of the year include expanding Genie capabilities, introducing a new AI agent for content publishing, and transforming AI agents into proactive automated ambient agents for various use cases.

Cost Savings and Reorganization: A reorganization plan, including a 10% workforce reduction, is expected to save $2.6 million in 2025 and $8.5 million annually. This aligns with the goal of doubling adjusted EBITDA in 2025 and 2026 and achieving a Rule of 30 by 2028.

Revenue Guidance for 2025: Maintained revenue guidance for 2025, with subscription revenue expected to grow 2%-3% year-over-year and total revenue to increase 1%-2% year-over-year.

Adjusted EBITDA Guidance for 2025: Increased adjusted EBITDA guidance to $14.5 million-$16 million, more than doubling the adjusted EBITDA profit and margin compared to 2024.

Cash Flow from Operations: Stronger cash flow from operations is expected in the second half of 2025, aligning with the adjusted EBITDA guidance.

Market Trends and Opportunities: Emerging tailwinds include spend consolidation, digital and AI transformations, and hybrid workplace trends driving demand for video-based offerings.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is driving the incremental new bookings momentum for the back half of the year?

A:Ron Yekutiel highlighted several factors driving new bookings momentum: the maturity of their events offering, consolidation trends as companies reduce the number of video vendors, the integration of AI into their offerings, and further verticalization efforts in industries like education, media, and telecom. He also noted a significant increase in the size of their pipeline.

Q:Why was churn elevated, and what is being done to address it?

A:John N. Doherty explained that churn was elevated due to shifts in the market, such as the move to IP in the cloud, causing companies to reevaluate their strategies. He mentioned that they incorporated this into their guidance and are working closely with major customers like Vodafone, with whom they recently signed an extension and expansion. Ron Yekutiel added that some churn is from less strategic earlier customers, but the core customer base remains strong and satisfied.

Q:How are the new AI products being integrated into the sales process and pricing?

A:Ron Yekutiel stated that the new AI products, such as Content Lab and Genies, are being sold as upsells and are priced based on factors like FTE or associated product usage. He noted that these products are additive to revenue and are expected to play a larger role in the future, potentially becoming a lead engagement tool for sales efforts.

Q:Are there any specific market verticals in EE&T that are performing well?

A:Ron Yekutiel mentioned that all key verticals in EE&T, including education, technology, regulated industries (financial services, pharma, government), and technology, are performing well. He emphasized their efforts to further verticalize their offerings to deepen their presence in these areas.

Q:Why was there a sequential decline in EE&T revenue in Q2?

A:Ron Yekutiel explained that the decline was due to the strength of on-prem revenue in Q1, which was not repeated in Q2. He also noted that Q1 is typically a low bookings quarter, which impacts Q2 revenue.

Q:What is the bookings mix between new logos and upsells, and what is being done to drive new logo acquisition?

A:Ron Yekutiel stated that the mix has shifted more towards upsells in recent years due to industry trends, but they are seeing an increase in new logo opportunities. He highlighted recent wins like Xbox and noted that their pipeline for new logos is growing.

Q:What was the rationale behind the 10% workforce reduction, and what areas were affected?

A:Ron Yekutiel explained that the reduction was aimed at enhancing productivity and streamlining operations, with most cuts in engineering, professional services, and administration. Sales and marketing were not affected. He noted that AI improvements have allowed them to achieve more with less.

Q:What are the expectations for adjusted EBITDA in the coming quarters?

A:John N. Doherty mentioned that Q2 adjusted EBITDA benefited from one-time items, and Q3 is expected to be slightly lower. However, Q4 is expected to be the strongest quarter of the year.

Q:What is driving the 10% lift in cost savings, and how will it impact profitability?

A:Ron Yekutiel and John N. Doherty explained that the cost savings are a result of the workforce reduction and are expected to contribute $2.6 million in savings this year and $8.5 million annually. These savings will support their commitment to growing both revenue and profitability.

Q:What is the status of the 3 big wins and 100 qualified opportunities in the pipeline?

A:Ron Yekutiel stated that the 3 big wins and 100 qualified opportunities are based on existing products, not future roadmaps. He emphasized that their current offerings, such as Content Lab and Genie, are driving these opportunities.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific reasons for the sequential decline in EE&T revenue beyond mentioning on-prem revenue in Q1. Additionally, while they discussed the potential of AI products, they did not provide clear timelines or quantifiable expectations for when these products would significantly impact revenue.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Kaltura, Inc. (KLTR) Q3 2025 Earnings Call Transcript

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The earnings call summary presents a mixed picture: while there are positive developments like AI product sales and improved EBITDA, there are concerns about economic uncertainties, strategic execution risks, and retention challenges. The Q&A section highlights delays in revenue recognition and vague management responses, which may create uncertainty. Despite share repurchases, the overall financial performance, including a slight revenue decline and flat subscription revenue, suggests a neutral sentiment. Without market cap data, predicting strong reactions is difficult, leading to a neutral stock price movement prediction.

Kaltura, Inc. (KLTR) Q2 2025 Earnings Call Transcript

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The earnings call presents a mixed picture. Financial performance is positive, with revenue and margins improving, but concerns exist around M&T churn and vague management responses. The adjusted EBITDA guidance increase and positive cash flow expectations are positives, yet the lack of clarity around macroeconomic impacts and customer spending trends tempers enthusiasm. The market's reaction is likely to be neutral as positive financials are offset by uncertainties.

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The earnings call reflects a positive sentiment with strong financial performance, improved guidance, and strategic leadership changes. Despite some concerns like payment delays and vague management responses, the overall outlook is optimistic with record ARR, improved cash flow, and increased EBITDA guidance. The Q&A section supports this with a focus on growth and profitability, and the absence of major risks. These factors, along with the potential for sustained shareholder returns, suggest a positive stock price movement over the next two weeks.

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