KALTURA INC - 1432133 - 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
OR
Commission File Number: 001-40644
Kaltura, Inc.
(Exact name of Registrant as specified in its Charter)
250 Park Avenue South 10th Floor New York, New York 10003
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (646) 290-5445
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.0001 par value per share KLTR The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES ☐ No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☐
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐ No ☒
The registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and, therefore, cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date.
The number of shares of the registrant’s common stock, par value $0.0001, outstanding as of February 18, 2022 was 127,065,210.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to its 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021, are incorporated herein by reference in Part III.
PART I 4
Item 1. Business 4
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 66
Item 2. Properties 67
Item 3. Legal Proceedings 67
Item 4. Mine Safety Disclosures 67
Item 6. [Reserved] 70
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 91
Item 8. Financial Statements and Supplementary Data 92
Item 9A. Controls and Procedures 93
Item 9B. Other Information 94
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 94
PART III 95
Item 10. Directors, Executive Officers and Corporate Governance 95
Item 11. Executive Compensation 96
Item 14. Principal Accountant Fees and Services 97
Item 15. Exhibits, Financial Statement Schedules 98
Signatures
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements.
We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report
on Form 10-K may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,”
“will,” “should,” “expects,” “plans,” “anticipates,” “could,”
“intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,”
“forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other
similar expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements
regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition,
business strategy, plans and market growth.
The forward-looking statements in this Annual Report on Form
10-K are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements
involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements,
including, but not limited to, the important factors discussed in Part I, Item 1A, “Risk Factors” in this Annual Report on
Form 10-K for the fiscal year ended December 31, 2021. The forward-looking statements in this Annual Report on Form 10-K are based upon
information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable
basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain
and investors are cautioned not to unduly rely upon these statements.
You should read this Annual Report on Form 10-K and the documents
that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K with the understanding
that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify
all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this
Annual Report on Form 10-K. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements
contained in this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise.
As used in this Annual Report on Form 10-K, unless otherwise
stated or the context requires otherwise, references to “Kaltura,” the “Company,” “we,” “us,”
and “our,” refer to Kaltura, Inc. and its subsidiaries on a consolidated basis.
INDUSTRY AND MARKET DATA
Unless otherwise indicated, information contained in this Annual
Report on Form 10-K concerning our industry and the markets in which we operate is based on information from independent industry and
research organizations, other third-party sources, and management estimates. Certain of these publications, studies and reports were published
before the COVID-19 pandemic and therefore do not reflect any impact of COVID-19 on any specific market or globally. Management estimates
are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from
our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets,
which we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently
verified any third-party information. In addition, projections, assumptions, and estimates of the future performance of the industry in
which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those
described in Part I, Item 1A. “Risk Factors” and the section titled “Forward-Looking Statements.” These and other
factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
In particular, certain information identified in this Annual
Report on Form 10-K is contained in the following independent industry publications or reports by Forrester Research, Inc. (“Forrester”)
and Gartner, Inc. (“Gartner”):
• Gartner, Market Guide for Enterprise Video Content Management, September 2020.
• Gartner, Magic Quadrant for Meeting Solutions, October 2020.
• Gartner, Magic Quadrant for Meeting Solutions, October 2021.
• Gartner, Critical Capabilities for Meeting Solutions, October 2021.
GARTNER and MAGIC QUADRANT are registered trademarks and service
marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved.
Gartner does not endorse any vendor, product or service depicted
in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation.
Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements
of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability
or fitness for a particular purpose.
Gartner Peer Insights reviews constitute the subjective opinions
of individual end users based on their own experiences and do not represent the views of Gartner or its affiliates.
1
SUMMARY RISK FACTORS
Our business is subject to numerous risks and uncertainties,
including those described in Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K. You should carefully consider
these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include
the following:
2
• Our international operations and expansion expose us to risk;
3
PART I
Item 1. Business.
Overview
Our mission is to power any video experience, for any organization.
Our Video Experience Cloud powers live, real-time, and on-demand video for webinars, events, virtual classrooms, and video sites. We also
offer robust Application Programming Interfaces ("APIs") and Software Development Kits ("SDKs") for developers and industry solutions
for education and media and telecom. Our Video Experience Cloud is used by leading brands across all industries, reaching millions of
users, at home, at school and at work, for communication, collaboration, marketing, sales, customer care, learning, and entertainment
experiences. With our flexible offerings, customers can experience the benefits of video across a wide range of use cases, while customizing
their deployments to meet their individual, dynamic needs.
Video is everywhere. It has become a driving force for online
interactions and engagement, and has revolutionized how we communicate, work, learn, and entertain. For businesses, video sits at the
heart of digital transformation, with organizations increasingly embracing video solutions to better engage with customers and employees.
Video adoption has been further fueled by the availability of broadband, increased penetration of smartphones, rise of over-the-top streaming
(“OTT”) and cloud technologies, consumerization of enterprise technology, elevation of video to strategic and mission-critical
use cases, the entry of younger professionals into the workforce and the growth in remote and distributed workforces. Furthermore, we
believe the COVID-19 pandemic has accelerated the use and adoption of video.
Our vision and technology are differentiated in the market, addressing
video as a unique data type that can and should be handled by a unified horizontal technology stack that powers all live, real-time, and
on-demand video use cases, maximizing engagement, interactivity and the collection of data. Our Video Experience Cloud powers a wide array
of video applications across industries and use cases. Our core offerings consist of various Software-as-a-Service (“SaaS”)
products and solutions and a Platform-as-a-Service (“PaaS”) offering, including:
4
As of December 31, 2021, we had over 1,000 customers from
a wide range of industries, including financial services, high technology, healthcare, education, public sector, media and telecommunications.
Among our customers are 28 of the US Fortune 100, more than 50% of U.S. R1 educational institutions, including seven of the eight Ivy
League schools and some of the largest global media companies and telecom operators. This subset of customers accounted for approximately
39% of our revenue for the year ended December 31, 2021. Most of our top customers leverage several Kaltura products for a range of use
cases across their organization. Between December 31, 2018 and December 31, 2021, we expanded our base of customers with ARR greater
than $100,000 from 178 to 294, and the number of customers with ARR greater than $1.0 million from 4 to 21.
In 2021, we were recognized as a Visionary in the 2021 Gartner®
Magic QuadrantTM, and we ranked 4th in the ‘External Presentation’ (4.44/5) Use Case, and 5th in the ‘Learning
and Training’ (4.32/5), and ‘Webinars’ (4.16/5) Use Cases in the Gartner 2021 Critical Capabilities for Meeting Solutions
Report. We were also recognized as a Representative Vendor in the 2020 Gartner Market Guide for Enterprise Video Content Management. We
have been included in Gartner research reports on this since 2013, where we were listed as a Leader for 5 consecutive times in the Magic
Quadrant for Enterprise Video Content Management report and ranked highest in all Use Cases in the last-published Critical Capabilities
for Enterprise Video Content Management report. Gartner discontinued publication of this Magic Quadrant for Enterprise Video Content Management
report in 2018 and of the correlating Critical Capabilities report in 2019.
We have also received customer recognition. As of January 19,
2022, we ranked 4.6/5 out of 57 reviews for Meeting Solutions and 4.6/5 out of 28 reviews for Enterprise Video Content Management by customers
on Gartner Peer Insights.
In March 2021, we were also cited as a Strong Performer in The
Forrester WaveTM: B2B Marketing Events Management Solutions, Q1 2021.
To date, we have invested primarily in increasing the scope and
depth of our offerings. At the same time, we have accelerated our year-over-year revenue growth from 12% in 2018 to 18% in 2019, 24% in
2020 and 37% in 2021. We accomplished this growth without materially increasing our sales and marketing spend over 2019 and 2020. In the
fourth quarter of 2020, we began investing significantly in sales and marketing expenses to drive revenue growth, and we expect this trend
to continue for the foreseeable future. Additionally, for the year ended December 31, 2021, we generated net losses of $59.4 million and
had Adjusted EBITDA of $(12.2) million. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Non-GAAP Financial Measures” for a discussion of the limitations of Adjusted EBITDA and a reconciliation
of Adjusted EBITDA to net loss, the most directly comparable GAAP performance measure.
Our platform provides a differentiated and comprehensive value
proposition for our customers. Additionally, we believe the demand for video offerings has reached an inflection point, with several trends
driving strong demand for video applications. We intend to continue expanding our Video Experience Cloud with new Media Services, as well
as new products and industry solutions. We have also begun to increase our sales and marketing investment to capture the significant market
opportunity ahead of us, including increasing the size and reach of our direct sales team, and investing in self-serve products and channel
partnerships to expand our presence with smaller customers across all industries.
5
Key Trends Impacting the Video Market
The nature of video consumption has transformed in recent years.
Several major trends have played a role in this evolution:
Limitations of Existing Video Solutions
While various video solutions exist in the market today, we believe
they are mostly discrete inflexible point solutions that suffer from a lack of modularity, extensibility, and interoperability; offer
limited breadth and depth of functionality, data insights, and end user engagement; and do not provide the required cloud-based enterprise-grade
reliability, scalability, compliance, and security. As a result, these offerings limit the ability of customers to maximize the benefits
of video technology for their businesses and are also too costly and require significant time to value.
6
Kaltura’s Video Experience Cloud
Our Video Experience Cloud powers all types of video experiences:
live, real-time, and on-demand. We designed it from the ground up using API-based building blocks that govern the entire video lifecycle
and provide the foundation for our video applications. We believe our Video Experience Cloud is differentiated by the following characteristics:
7
Growth Strategies
We intend to drive significant growth by executing on the following
key strategies:
8
◦ Future New Offerings, including:
Kaltura Video Experience Cloud
Video experiences are the driving force for online interactions,
at home, at work and at school. Our Video Experience Cloud powers all types of video experiences: live, real-time, and on-demand, engaging
millions of end users daily. We designed our Video Experience Cloud from the ground up using API-based building blocks which govern the
entire video lifecycle and provide the foundation for our video applications.
9
Our Media Services underpin our products and industry solutions,
addressing all Media Services required for creation, transcoding, management, security, distribution, publishing, and analytics across
live, real-time, and on demand video experiences. We believe this offering sets us apart by enabling ease of integration and customization,
and by allowing us to innovate at a very high pace. Our Media Services are also offered to technology companies and developers in the
form of a PaaS that includes APIs, SDKs, and Experience Components.
Companies across all industries use our Video Sites, Virtual
Classroom, Webinars and Events products for communication, collaboration, training, and customer experience (marketing, sales, and customer
care). Our industry solutions are used by educational institutions for in-class and remote teaching and learning, and by media and telecom
companies to power TV and entertainment experiences.
Kaltura Media Services
10
Kaltura Video Products
Kaltura Industry Solutions – Education
11
Kaltura Industry Solutions – Media & Telecom
Customers
As of December 31, 2021, we served over 1,000 customers,
including several of the world’s leading brands across multiple industries, including financial services, high technology, healthcare,
education, public sector, media and telecommunications. We serve 28 of the US Fortune 100, and more than 50% of U.S. R1 educational institutions,
including seven of the eight Ivy League schools. Additionally, our solutions power 16 major global TV initiatives.
Our customers are global, spanning 50 countries, and during the
year ended December 31, 2021, our technology reached end users in over 200 countries. For the year ended December 31, 2021, approximately
62% of our revenue was generated from customers in the Americas, 31% from customers in EMEA and 7% from customers in APAC. We have sold
our products to customers of all sizes, selling to large global enterprises as well as more recently to SMEs.
Sales & Marketing
Our sales organization is primarily comprised of direct sales
and account teams that focus mainly on acquisition, retention, and growth of large customers, including Fortune Global 2000 organizations.
We currently have four direct sales and account teams, as noted below. Each of our teams sells the following offerings:
Additionally, we leverage reseller relationships globally to
help market and sell our products to customers worldwide, especially in areas in which we have a limited presence.
We are investing in initiatives to more efficiently reach new
customers and expand our partnerships with existing ones. For example, we recently launched the option to purchase our Webinars, Virtual
Classroom, and Media Services offerings directly from our website, allowing us to reduce our cost of customer acquisition, drive additional
opportunities to our direct sales team, reach smaller customers, and broaden our target market.
Our marketing efforts are focused on creating preference for
our brand, and driving leads to Kaltura through thought leadership, participation in industry events, analyst and press coverage, customer
referrals, community work, customer user groups, and Kaltura produced customer and industry events like “Kaltura Connect”
and “Kaltura Virtually Live”. We also leverage digital campaigns and make free trials available for many of our products to
drive engagement and conversion.
12
Research & Development
Our business has been driven by constant innovation, anticipating
trends ahead of other participants in the market. We believe we are one of the first organizations to recognize the importance and mission-critical
nature of video experiences, and the subsequent need for Media Services that allow both us and our customers to support any video experience
and workflow. Our ability to be a leader in our target markets and rapidly introduce new applications depends on the constant expansion
of our Media Services, and the development of new products and industry solutions that rely on them.
We work closely with our customers to address their growing needs
for video experiences across all areas of operation. Our engineers aim to stay on the cutting edge of video experiences and have released
over 100 new and enhanced features a year, on average for the last several years.
Our main research and development facility is located near Tel
Aviv, Israel, which we believe is a strategic advantage for us, allowing us to leverage a talented pool of engineers and product experts.
Technology & Operations
We believe our unique specialized Video Experience Cloud and
technology enable a high level of reliability, scalability, performance, and security. Our cloud platform was specifically designed to
address the entire lifecycle of video, addressing the need for intense computing resources for encoding, processing, synchronization,
and delivery, as well as a higher level of bandwidth and network utilization and performance. We have addressed this in our platform design
and development from the start. Our SaaS and PaaS offerings are deployed on AWS across several regions, including in Virginia, Oregon,
Canada, Ireland, Frankfurt, Singapore, and Australia. In each region we are deployed on several availability zones for improved availability
and resilience. We are also in the process of deploying our platform on Oracle Cloud Infrastructure, which we believe will further enhance
the resilience, reach and scale of our operations.
Our technology and platform are cloud agnostic, allowing us to
also offer private cloud, on-premise, and hybrid deployment options. While the great majority of our customers are deployed on our AWS
public cloud infrastructure, some customers are hosted on separate and dedicated AWS private cloud environments that are also managed
by us. Some customers have a hybrid cloud deployment, running our platform from the public cloud alongside a locally hosted Kaltura Enterprise
CDN service or with locally hosted content storage. We also cater to self-hosted on-premise customers that deploy the same Kaltura Video
Experience Cloud fully on their own infrastructure, and manage it for themselves.
Our cloud operation teams are responsible for maintaining and
upgrading our production environments, and for our system availability service-level agreements which vary from 99.9% to 99.995% (depending
on the service).
Our customer care teams are located around the world and operate
on a “follow-the-sun” model, providing 24/7 service and ensuring that issues with our products and platform are addressed
quickly, and according to our service level agreements.
Our Video Operations Center (“VOC”) is responsible
for monitoring our applications and services 24/7, responding to system alerts, and managing incidents.
13
Partner Ecosystem
We have built an ecosystem consisting of over 125 partners that
have integrated with our solutions, and extend our products and platform capabilities with creation, AI, transcripts, and delivery capabilities.
We make our partners’ solutions available to our customers through our marketplace, complete with a variety of plugins and out-of-the-box
integrations with our platform. This ecosystem further simplifies our customers’ workflows, enabling them to weave video capabilities
into non-video workflows and discover new technologies to further enhance their own offerings, ultimately increasing their satisfaction
and stickiness with our platform. It also allows us to test new experiences and components with our customers and determine which of the
partnerships or technologies are strategic to our business.
We also leverage a network of value-add resellers that add additional
services or integrations to our products, helping us drive the acquisition of new customers around the world, notably those in regions
in which we do not have significant presence.
We also maintain relationships with cloud partners, most notably
Amazon Web Services (“AWS”). We are an AWS Technology Partner and certified as an AWS competency partner in Education and
Digital Workspace, with validated qualifications in Public Sector. As a member of the AWS ISV Accelerate Program, we are able to co-sell
with the AWS sales organization to accelerate sales cycles and drive new business. Additionally, our offerings are available in the AWS
marketplace.
Human Capital Resources
As of December 31, 2021, we had 758 employees operating
across 34 countries on 5 continents.
We aim to provide our employees with a competitive salary and
benefits that will enable them to achieve a good quality of life and plan for the future. In addition to competitive base salaries and
cash compensation, we maintain equity incentive plans to attract, retain and reward personnel through share-based compensation awards.
We are committed to ensuring a culture of diversity and equality.
Our culture embraces our employees’ differences in age, race, gender and gender identity, sexual orientation and nationality.
Except for certain of our employees in Brazil, our employees
are not represented by a labor union in respect to their employment or covered by a collective bargaining agreement.
We have not experienced any work stoppages and largely
consider our relationship with our employees to be good and mutually beneficial.
Competition
We believe our technology positions us well to compete with other
video solution providers. Our key competitors vary based on market and industry.
• Our main competitors for Video Sites are Microsoft and Vimeo
• Our main competitors for Webinars are Zoom and Cisco
• Our main competitors for Events are Cvent, Intrado and Hopin
14
• Our main competitor for Virtual Classroom is Adobe Connect
We believe the principal competitive factors in our markets include,
but are not limited to:
• breadth and scale of products, solutions, and Media Services;
• flexibility to build and support custom workflows using video technology;
• ease of customization and integration with other products;
• quality of service and customer satisfaction;
• flexibility of deployment options;
• ability to innovate quickly;
• data capabilities, including advanced analytics and AI;
• enterprise-grade reliability, security, and scalability;
• cost of implementation and ongoing use;
• brand recognition; and
• corporate culture.
We believe that we compare favorably on the basis of the factors
listed above. However, many of our competitors have substantially greater financial, technical, and marketing resources; relationships
with large vendor partners; larger global presence; larger customer bases; longer operating histories; greater brand recognition; larger
and more mature intellectual property portfolios; and more established relationships in the industry than we do. Furthermore, new entrants
not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. See Part
I, Item 1A. “Risk Factors—Risks Related to Our Business and Industry—The markets in which we compete are nascent and
highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial,
technical, and other resources than we do. If we do not compete successfully, our business, financial condition and results of operations
could be harmed.”
Intellectual Property
Intellectual property is an important aspect of our business
and we seek protection for our intellectual property rights as appropriate. To establish and protect our proprietary rights, we rely on
a combination of patent, copyright, trade secret and trademark laws, know-how and continuing innovation, and contractual restrictions
such as confidentiality agreements, licenses, and intellectual property assignment agreements.
15
As of December 31, 2021, we owned nine issued U.S. patents
and eleven non-U.S. patents and patent applications. The issued U.S. patents are expected to expire between 2028 and 2035.
We pursue the registration of our domain names, trademarks and
service marks in the United States and in certain locations outside the United States. To protect our brand, we file trademark registrations
in the United States and in some other jurisdictions. As of December 31, 2021, we owned five registered trademarks in the United
States and three registered trademarks in foreign jurisdictions, including the European Union and Brazil, that we consider material to
the marketing of our products, including the “Kaltura” name and logo.
We generally seek to enter into confidentiality agreements and
proprietary rights agreements with our employees and consultants and to control access to, and distribution of, our proprietary information.
However, we cannot guarantee that all applicable parties have executed such agreements. Such agreements can also be breached, and we may
not have adequate remedies for such breach.
Intellectual property laws, procedures, and restrictions provide
only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed, misappropriated
or otherwise violated. Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same
extent as the laws of the United States, and we therefore may be unable to protect our proprietary technology in certain jurisdictions.
Moreover, our platform and many of our products and services incorporate software components licensed to the general public under open-source
software licenses. We obtain some components from software developed and released by contributors to independent open-source components
of our platform. Open-source licenses grant licensees broad permissions to use, copy, modify and redistribute certain components of our
platform. As a result, open-source development and licensing practices can limit the value of our proprietary software assets.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or obtain and use our technology to develop products and services with the same functionality as our platform.
Policing unauthorized use of our technology is difficult. Our competitors could also independently develop technologies like ours, and
our intellectual property rights may not be broad enough for us to prevent competitors from selling products and services incorporating
those technologies. For more information regarding the risks relating to intellectual property, see Part I, Item 1A. “Risk Factors—Risks
Related to Information Technology, Intellectual Property and Data Privacy and Security.”
Seasonality
Historically, we have experienced seasonality in bookings and
collections from customers within the education market, with a pattern of higher sales and new academic customers in the second and third
quarters of the year as a result of school procurement periods, resulting in lower sequential sales and customer growth in other quarters
of the year. We also experience increased usage by these customers during periods when school is in session, leading to higher cost of
revenue during the first and fourth quarters of the year. Because the agreements for certain of our solutions do not limit usage or increase
pricing for usage in excess of a specified amount, these additional costs may not result in a corresponding increase in revenue.
The rapid growth we have experienced in recent years may have
masked the full effects of these seasonal factors on our business to date, and as such, these factors may have a greater effect on our
results of operations in future periods.
16
Additional Information
Kaltura, Inc. was incorporated as a Delaware corporation in October
2006. We completed our initial public offering of our common stock in July 2021.
Our website is www.kaltura.com. At our Investor Relations website,
investors.kaltura.com, we make available free of charge a variety of information for investors, including our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after
we electronically file that material with or furnish it to the SEC. The information found on our website is not part of this or any other
report we file with, or furnish to, the SEC.
Item 1A. Risk Factors.
Our business involves a high degree of risk. You should carefully
consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K. The
occurrence of any of the events described below could harm our business, operating results, financial condition, liquidity, or prospects.
In any such event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks
and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business. See “Forward-Looking
Statements.”
Risks Related to Our Business and Industry
Our business and operations have
experienced rapid growth, and if we do not appropriately manage this growth and any future growth, or if we are unable to improve our
systems, processes and controls, our business, financial condition, results of operations and prospects will be adversely affected.
We have experienced rapid growth and increased demand for our offerings
in recent periods, including in response to the COVID-19 pandemic, and we plan to make continued investments in the growth and expansion
of our business and customer base. The growth and expansion of our business places a continuous and significant strain on our management,
operational, financial, and other resources. In addition, as customers adopt our offerings for an increasing number of use cases, we have
had to support more complex commercial relationships. In order to manage our growth effectively, we must continue to improve and expand
our information technology and financial infrastructure, our security and compliance requirements, our operating and administrative systems,
our customer service and support capabilities, our relationships with various partners and other third parties, and our ability to manage
headcount and processes in an efficient manner.
We may not be able to sustain the pace of improvements to our
platform, products and solutions, or the development and introduction of new offerings, successfully, or implement systems, processes,
and controls in an efficient or timely manner or in a manner that does not negatively affect our results of operations. Our failure to
improve our systems, processes, and controls, or their failure to operate in the intended manner, may result in our inability to manage
the growth of our business and to forecast our revenue, expenses, and earnings accurately, or to prevent losses.
As we continue to expand our business and operate as a public
company, we may find it difficult to maintain our corporate culture while managing our employee growth. Any failure to manage our anticipated
growth and related organizational changes in a manner that preserves our culture could negatively impact future growth and achievement
of our business objectives. Additionally, our productivity and the quality of our offerings may be adversely affected if we do not integrate
and train our new employees quickly and effectively. These challenges have been, and likely will continue to be, heightened due to the
ongoing pandemic related to COVID-19 and its variants and the related stay-at-home, travel and other restrictions instituted by governments
around the world. Failure to manage our growth to date and any future growth effectively could result in increased costs, negatively affect
customer satisfaction, and adversely affect our business, financial condition, results of operations, and growth prospects.
17
Our recent growth may not be indicative of
our future growth, and we may not be able to sustain our revenue growth rate in the future. Our growth also makes it difficult to evaluate
our current business and future prospects and may increase the risk that we will not be successful.
Our total revenue for the years ended December 31, 2021 and 2020
was $165.0 million and $120.4 million, respectively, representing an annual growth rate of 37%. You should not rely on the revenue
growth of any prior period as an indication of our future performance. As we operate in new and rapidly changing markets, widespread adoption
and use of our platform, products and solutions is critical to our future growth and success. We believe our revenue growth will depend
on a number of factors, including, among other things, our ability to:
• provide excellent customer and end user experiences;
• maintain the security and reliability of our platform, products and solutions;
• hire, integrate, train and retain skilled personnel;
• adequately expand our sales force and distribution channels;
• expand into new technologies, industries and use cases;
• expand and maintain our partner ecosystem;
• price our offerings effectively and determine appropriate contract terms;
• determine the most appropriate investments for our limited resources;
• increase awareness of our brand on a global basis.
If we are unable to accomplish any of these objectives, our revenue
growth will be impaired, and even if our revenue continues to increase, we expect that our revenue growth rate will decline in future
periods. Many factors may contribute to declines in our growth rate, including greater market penetration, increased competition, slowing
demand for our offerings, a failure by us to continue capitalizing on growth opportunities, the maturation of our business, and global
economic downturns, among others. Additionally, it is difficult to estimate the extent to which our recent growth has benefited from the
effects of the COVID-19 pandemic, which increased demand from new and existing customers across all of our offerings beginning in the
second quarter of 2020 and contributed to an acceleration in our revenue growth when compared to prior periods. While market demand for
our offerings was growing at a robust rate prior to the pandemic, we are unable to predict the duration, degree, or volatility of our
recent or any future growth with any degree of certainty. If our growth rate declines as a result of this or any of the other factors
described above, investors’ perceptions of our business and the market price of our common stock could be adversely affected.
In addition, our rapid growth may make it difficult to evaluate
our current business and future prospects. Our ability to forecast our future results of operations is subject to a number of uncertainties,
including our ability to effectively plan for and model future growth. We have encountered in the past, and may encounter in the future,
risks and uncertainties frequently experienced by growing companies in rapidly changing industries that may prevent us from achieving
the objectives outlined above. If we fail to achieve the necessary level of efficiency in our organization as it grows, or if we are not
able to accurately forecast future growth, our business would be adversely affected. Moreover, if the assumptions that we use to plan
our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue
growth, the market price of our common stock could be volatile, and it may be difficult to achieve and maintain profitability.
18
We have a history of losses and may not be
able to achieve or maintain profitability.
We have incurred losses in each year since our incorporation
in 2006, including net losses of $59.4 million, $58.8 million, and $15.6 million in the years ended December 31, 2021, 2020
and 2019, respectively. As a result, we had an accumulated deficit of $(322.6) million as of December 31, 2021. We intend to continue
to expend substantial financial and other resources on, among other things:
• continuing to grow our international operations; and
These efforts may prove more expensive than we currently anticipate,
and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. In addition, to the extent
we are successful in increasing our customer base, we may also incur increased losses because the costs associated with acquiring customers
are generally incurred up front, while the subscription revenue is generally recognized ratably over the subscription term. This will
be particularly true as we acquire new customers for our Events product and TV Solution, which entail significant non-recurring up-front
costs as compared to our other offerings, and because we expect to significantly increase our sales and marketing spend in anticipation
of future revenue growth. If our revenue does not increase to offset the expected increases in our operating expenses, we will not achieve
profitability in future periods and our net losses may increase. Revenue growth may slow or revenue may decline for a number of possible
reasons, many of which are beyond our control, including slowing demand for our platform, products or solutions, increasing competition,
or any of the other factors discussed in this Risk Factors section. Any failure to increase our revenue as we grow our business could
prevent us from achieving profitability at all or on a consistent basis, which would cause our business, financial condition, and results
of operations to suffer and the market price of our common stock to decline.
The ongoing COVID-19 outbreak could adversely
affect our business, financial condition, and results of operations.
In December 2019, an outbreak of a novel coronavirus disease
(“COVID-19”) was first identified and began to spread across the globe and, in March 2020, the World Health Organization declared
it a pandemic. This contagious disease has spread across the globe and is impacting economic activity and financial markets worldwide,
including countries in which our end users and customers are located, as well as the United States and Israel where we have business operations.
As a result of the COVID-19 pandemic, government authorities around the world have ordered schools and businesses to close, imposed restrictions
on non-essential activities and required people to remain at home while imposing significant restrictions on traveling and social gatherings.
19
In light of the uncertain and rapidly evolving situation relating
to the spread of COVID-19, as well as government mandates, we took precautionary measures intended to minimize the risk of the virus to
our employees, our customers, our partners and the communities in which we operate, which could negatively impact our business. In the
first quarter of 2020, we temporarily closed all of our offices and enabled our entire work force to work remotely. We also suspended
all travel worldwide for our employees for non-essential business. In the second quarter of 2020, we reopened selected offices, however
most of our employees continued to work remotely, a majority of whom continue to do so as of the date of this Annual Report on Form 10-K.
These changes could extend into future quarters.
While the pandemic related to COVID-19 and its variants has not
had a material adverse impact on our operations through the date of this Annual Report on Form 10-K, the impact of COVID-19 and its variants
on our ability to attract, serve, retain, or upsell customers is inherently uncertain and depends on the duration, severity and potential
resurgence of the outbreak and its impact on end users, customers, and the macroeconomic environment as a whole. Prior to the COVID-19
pandemic, our employees traveled frequently to establish and maintain relationships with one another, as well as our customers, partners,
and investors. Although we continue to monitor the situation and may adjust our current policies as more information and public health
guidance become available, continued limitations on travel and doing business in person may negatively affect our customer success efforts,
sales and marketing efforts, challenge our ability to enter into customer contracts in a timely manner, slow down our recruiting efforts,
or create operational or other challenges, any of which could adversely affect our business, financial condition and results of operations.
In addition, as a result of the increase in usage we experienced
as a result of the pandemic, in the third quarter of 2020, we accelerated our existing plans to move from our own data centers to public
cloud infrastructure in order to provide required stability, reliability, scalability and elasticity. Though we do not believe our transition
to and reliance on public cloud infrastructure will materially increase our cost of revenue over the long-term, our cost of revenue did
increase in the third and fourth quarters of 2020, and we incurred additional costs related to this transition in 2021 as we continued
the process of scaling our network infrastructure. Our gross margin and results of operations have also been impacted by, and may continue
to be impacted by, the increased usage of certain of our offerings, primarily in the education market, for which the terms of our customer
agreements do not limit customer usage or increase pricing for usage above a certain amount. In addition, in connection with our transition
to public cloud infrastructure, we recorded a one-time expense during the third quarter of 2020 related to the abandonment of data center
equipment. We also experienced an initial period of unstable service during the first few months of this transition, causing us
to fall below the service-level commitments in our customer agreements, which could negatively impact customer renewals and, as a result,
our Net Dollar Retention Rate, in future periods.
Furthermore, the pandemic related to COVID-19 and its variants
has disrupted and may continue to disrupt the operations of our customers and technology partners for an indefinite period of time, including
as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business, financial condition,
and results of operations. More generally, the COVID-19 outbreak has adversely affected economies and financial markets globally, leading
to an economic downturn, which could decrease technology spending and adversely affect demand for our offerings and harm our business,
financial condition, and results of operations. Existing and potential customers may choose to reduce or delay technology investments
in response to the pandemic related to COVID-19 and its variants, or attempt to renegotiate contracts and obtain concessions, which may
materially and negatively impact our operating results, financial condition and prospects. The pandemic related to COVID-19 and
its variants has also resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability
to access capital, which could in the future negatively affect our liquidity. It is also possible that continued widespread remote work
arrangements may have a negative impact on our operations, the execution of our business plans, the productivity and availability of key
personnel and other employees necessary to conduct our business, and on third-party service providers who perform critical services for
us, or otherwise cause operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental
actions. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to
work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
The increase in remote working may also result in privacy, data protection, data security, and fraud risks, and our understanding of applicable
legal and regulatory requirements, as well as the latest guidance from regulatory authorities in connection with the pandemic related
to COVID-19 and its variants, may be subject to legal or regulatory challenge, particularly as regulatory guidance evolves in response
to future developments.
20
It is not possible at this time to estimate the long-term impact
that COVID-19 and its variants could have on our business, financial condition and results of operations as the impact will depend on
future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the
outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating
conditions can resume. Even after the outbreak of COVID-19 and its variants has subsided, we may experience materially adverse impacts
to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
The markets for our offerings are new and evolving
and may develop more slowly or differently than we expect. Our future success depends on the growth and expansion of these markets and
our ability to adapt and respond effectively to evolving market conditions.
The markets in which we operate are relatively new and rapidly
evolving. Accordingly, it is difficult to predict customer adoption, renewals and demand, the entry of new competitive products, the success
of existing competitive products, and the future growth rate, expansion, longevity, and size of the markets for our platform, products,
and solutions. The expansion of these new and evolving markets depends on a number of factors, including the cost, performance, and perceived
value associated with the technologies that we and others in our industry develop. If we or other companies in our industry experience
security incidents, loss of customer data, or disruptions in delivery or service, the market for these applications as a whole, including
the demand for our offerings, may be negatively affected. If video products and solutions such as ours do not continue to achieve market
acceptance, or there is a reduction in demand caused by decreased customer acceptance, technological challenges, weakening economic conditions,
privacy, data protection and data security concerns, governmental regulation, competing technologies and products, or decreases in information
technology spending or otherwise, the market for our offerings might not continue to develop or might develop more slowly than we expect,
which could adversely affect our business, financial condition, results of operations and growth prospects. Similarly, we do not know
whether recent trends, such as the increased utilization of cloud-based live and real-time video experiences as an alternative to in-person
experiences, which has accelerated during the COVID-19 pandemic, will continue in the future.
Our results of operations are likely to fluctuate
from quarter to quarter and year to year, which could adversely affect the trading price of our common stock.
Our results of operations, including our revenue, cost of revenue,
gross margin, operating expenses, cash flow, and deferred revenue, have fluctuated from quarter to quarter and year to year in the past
and may continue to vary significantly in the future so that period-to-period comparisons of our results of operations may not be meaningful.
Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Our quarterly financial
results may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and
may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our quarterly financial results
include:
• the loss of existing customers;
• subscription renewals, and the timing and terms of such renewals;
21
• mix of our revenue;
• our ability to gain new partners and retain existing partners;
• fluctuations in stock-based compensation expense;
• changes in the spending patterns of our customers;
• network outages;
• general economic, industry, and market conditions;
• the impact of political uncertainty or unrest;
• changes in our pricing policies or those of our competitors;
• fluctuations in the growth rate of the markets that our offerings address;
• the business strengths or weakness of our customers;
• our ability to collect timely on invoices or receivables;
• the cost and potential outcomes of future litigation or other disputes;
• future accounting pronouncements or changes in our accounting policies;
• fluctuations in the mix of on-premise and SaaS/PaaS deployments;
22
• fluctuations in foreign currency exchange rates; and
In particular, our cost of revenue is generally higher in periods
during which we acquire new customers for our Events product, which can entail significantly higher up-front costs compared to our other
offerings. Historically, we have also experienced seasonality in bookings and collections from customers within the education market,
with a pattern of higher sales and new academic customers in the second and third quarters of the year as a result of school procurement
periods, resulting in lower sequential sales and customer growth in other quarters of the year. We also experience increased usage by
these customers during periods when school is in session, leading to higher cost of revenue during the first and fourth quarters of the
year. Because the agreements for certain of our solutions do not limit usage or increase pricing for usage in excess of a specified amount,
these additional costs may not result in a corresponding increase in revenue.
In addition, beginning in the second quarter of 2020 and continuing
through the second quarter of 2021, we experienced a significant increase in the usage of our offerings due to the COVID-19 pandemic.
As a result of this usage and increased demand from our customers, we have incurred and expect to continue to incur significant costs