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.
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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.
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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.
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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.
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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;
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• 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;
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• 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
associated with upgrading our infrastructure and expanding our capacity. In addition, operating on public cloud infrastructure has increased
our variable costs, which may lead to higher overall costs, particularly in the near term as our usage scales.
The impact of one or more of the foregoing or other factors may
cause our results of operations to vary significantly. Such fluctuations make forecasting more difficult and could cause us to fail to
meet the expectations of investors and securities analysts, which could cause the trading price of our common stock to fall substantially,
resulting in the loss of all or part of your investment, and subject us to costly lawsuits, including securities class action suits. Additionally,
the rapid growth we have experienced in recent years may have masked the full effects of 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.
We have identified a material weakness in our
internal control over financial reporting which, if not remediated, could cause us to fail to timely and accurately report our financial
results and result in restatements of our consolidated financial statements. As a consequence, stockholders could lose confidence in our
financial reporting and our stock price could suffer.
We are a public reporting company subject to the rules and regulations
established from time to time by the SEC and the Nasdaq Stock Market LLC (“Nasdaq”). These rules and regulations require,
among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting.
Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes
and controls, as well as on our personnel.
In addition, as a public company, we are required to document
and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify
as to the effectiveness of our internal control over financial reporting. Though we will be required to disclose changes made to our internal
controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over
financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. Furthermore,
as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness
of our internal control over financial reporting pursuant to Section 404 until the later of our second annual report required to be filed
with the SEC and our annual report for any fiscal year following such date that we are no longer an emerging growth company. This assessment
will need to include disclosure of any material weaknesses identified in our internal control over financial reporting. A material weakness
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely
basis.
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In connection with the preparation of the consolidated financial
statements included in in our final prospectus dated July 20, 2021, filed with the Securities and Exchange Commission (“SEC”)
in accordance with Rule 424(b) of the Securities Act on July 22, 2021 (the “Prospectus”) in connection with our initial public
offering (“IPO”), we concluded that there was a material weakness in our internal control over financial reporting. In particular,
we concluded that we did not have effective controls over the estimation of fair value in connection with stock-based compensation expenses
and re-measurement of liabilities in connection with warrants to purchase preferred and common stock. As a result, we restated our
consolidated financial statements. For additional details, see Note 20 to our consolidated financial statements included in the Prospectus.
Our management and independent registered public accounting firm
did not perform an evaluation of our internal control over financial reporting during any period in accordance with the provisions of
Sarbanes-Oxley Act. Had we performed an evaluation and had our independent registered public accounting firm performed an audit of our
internal control over financial reporting in accordance with the provisions of Sarbanes-Oxley Act, additional material weaknesses may
have been identified. We are in the very early stages of the costly and challenging process of compiling the system and processing documentation
necessary to perform the evaluation needed to comply with Section 404(a) of Sarbanes-Oxley Act and we are taking steps to remediate the
material weakness.
Although we are in the process of remediating this material weakness,
we have not yet been able to complete our remediation efforts. It will take additional time and expenditures to design, implement, and
test the controls and procedures required to enable our management to conclude that our internal control over financial reporting is effective.
We cannot at this time estimate how long it will take to complete our remediation efforts, and we cannot assure you that measures we plan
to take will be effective in mitigating or preventing significant deficiencies or material weaknesses in our internal control over financial
reporting in the future. Any failure to maintain effective internal control over financial reporting could severely inhibit our
ability to accurately report our financial condition or results of operations.
If we fail to remediate this material weakness or identify new
material weaknesses by the time we have to issue our first Section 404(a) assessment on the effectiveness of our internal control over
financial reporting, we will not be able to conclude that our internal control over financial reporting is effective, which may cause
investors to lose confidence in our financial statements, and the trading price of our common stock may decline. If we fail to remedy
any material weakness, our financial statements may be inaccurate, we could be subject to litigation from investors and stockholders,
we could be subject to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities, our access to the capital markets
may be restricted and the trading price of our common stock may suffer.
The loss of one or more of our significant
customers, or any other reduction in the amount of revenue we derive from any such customer, would adversely affect our business, financial
condition, results of operations and growth prospects.
Our future success is dependent on our ability to establish and
maintain successful relationships with a diverse set of customers. We currently derive a significant portion of our revenue from a limited
number of customers. Our top ten customers in the aggregate accounted for approximately 31.0%, 29.4% and 27.0% of our revenue for the
years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2020, and 2019, Vodafone accounted for
approximately 11.6% and 12.0% of our revenue, respectively. Although in the year ended December 31, 2021 no individual customer accounted
for more than 10% out of our total revenue, both Vodafone and Amazon continued to contribute a significant portion of our overall revenue
during the period. While the identity of the customers may vary from period to period, it is likely that we will continue to derive a
significant portion of our revenue from a limited number of customers in the future and, in some cases, the portion of our revenue attributable
to individual customers may increase. The loss of one or more significant customers or a reduction in the amount of revenue we derive
from any such customer could significantly and adversely affect our business, financial condition, and results of operations. Customers
may choose not to renew their subscriptions or may otherwise reduce the breadth of the offerings to which they subscribe for any number
of reasons. See “—If our existing customers do not renew their subscriptions, or if they renew on terms that are less economically
beneficial to us, it could have an adverse effect on our business, financial condition and results of operations.” We are also subject
to the risk that any such customer will experience financial difficulties that prevent them from making payments to us on a timely basis
or at all.
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If we are not able to keep pace with technological
and competitive developments and develop or otherwise introduce new products and solutions and enhancements to our existing offerings,
our offerings may become less marketable, less competitive or obsolete, and our business, financial condition and results of operations
may be adversely affected.
The markets in which we compete are characterized by rapid technological
change, frequent introductions of new products, services, features and capabilities, and evolving industry standards and regulatory requirements.
Our ability to grow our customer base and increase our revenue will depend in significant part on our ability to develop or otherwise
introduce new products and solutions; develop or otherwise introduce new features, integrations, capabilities, and other enhancements
to our existing offerings on a timely basis; and interoperate across an increasing range of devices, operating systems, and third-party
applications. The success of any new products or solutions, or enhancements to our existing offerings, will depend on a number of factors
including, but not limited to, the timeliness and effectiveness of our research and product development activities and go-to-market strategy,
our ability to anticipate customer needs and achieve market acceptance, our ability to manage the risks associated with new product releases,
the effective management of development and other spending in connection with the product development process, and the availability of
other newly developed products and technologies by our competitors.
In addition, in connection with our product development efforts,
we may introduce significant changes to our existing products or solutions, or develop or otherwise introduce new and unproven products
or solutions, including technologies with which we have little or no prior development or operating experience. These new products, solutions
and updates may not perform as expected, may fail to engage our customer base or other end users of our products, or may otherwise create
a lag in adoption of such new products. New products may initially suffer from performance and quality issues that may negatively impact
our ability to market and sell such products to new and existing customers. We have in the past experienced bugs, errors, or other defects
or deficiencies in new products and product updates and delays in releasing new products, deployment options, and product enhancements
and may have similar experiences in the future. As a result, some of our customers may either defer purchasing our offerings until the
next upgrade is released or switch to a competitor if we are not able to keep up with technological developments. To keep pace with technological
and competitive developments we have in the past invested, and may in the future invest, in the acquisition of complementary businesses,
technologies, services, products, and other assets that expand our offerings. We may make these investments without being certain that
they will result in products or enhancements that will be accepted by existing or prospective customers or that will achieve market acceptance.
The short- and long-term impact of any major change to our offerings, or the introduction of new products or solutions, is particularly
difficult to predict. If new or enhanced offerings fail to engage our customer base or other end users of our products, or do not perform
as expected, we may fail to generate sufficient revenue, operating margin, or other value to justify our investments in such products,
any of which may adversely affect our reputation and negatively affect our business in the short-term, long-term, or both. If we are unable
to successfully enhance our existing offerings to meet evolving customer requirements, increase adoption and use cases of our offerings,
develop, or otherwise introduce new products and solutions and quickly resolve security vulnerabilities or other errors or defects, or
if our efforts in any of these areas are more expensive than we expect, our business, financial condition, and results of operations would
be adversely affected.
If we do not maintain the interoperability
of our offerings across devices, operating systems, and third-party applications that we do not control, and if we are not able to maintain
and expand our relationships with third-party technology partners to integrate our offerings with their products and solutions, our business,
financial condition, and results of operations may be adversely affected.
Our success depends in part on our ability to integrate our platform,
products, and solutions with a variety of network, hardware, and software platforms, and we need to continuously modify and enhance our
offerings to adapt to changes in hardware, software, networking, browser and database technologies. Several of our competitors own, develop,
operate, or distribute operating systems, application stores, cloud hosting services and other software applications, and/or have material
business relationships with companies that own, develop, operate, or distribute operating systems, application stores, cloud hosting services
and other software that our offerings rely on to operate. Moreover, some of these competitors have inherent advantages developing products
and services that more tightly integrate with their software and hardware platforms or those of their business partners.
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Third-party products and services are constantly evolving, and
we may not be able to modify our offerings to ensure their compatibility with those of other third parties following development changes.
In addition, some of our competitors may be able to disrupt the operations or compatibility of our offerings with their products or services,
or exert strong business influence on our ability to, and terms on which we, operate and distribute our offerings. For example, certain
of our offerings directly compete with several large technology companies that we rely on to ensure the interoperability of our offerings
with their products or services. As our respective products evolve, we expect this level of competition to increase. Should any of our
competitors modify their products or standards in a manner that degrades the functionality of our offerings or gives preferential treatment
to competitive products or services, whether to enhance their competitive position or for any other reason, we may not be able to offer
the functionality that our customers need, which would negatively impact our ability to generate revenue and adversely affect our business.
Furthermore, any losses or shifts in the market position of the providers of these third-party products and services could require us
to identify and develop integrations with new third-party technologies. Such changes could consume substantial resources and may not be
effective. Any expansion into new geographies may also require us to integrate our offerings with new third-party technologies, products
and services and invest in developing new relationships with these providers. If we are unable to respond to changes in a cost-effective
manner, our offerings may become less marketable, less competitive, or obsolete, and our business, financial condition and results of
operations may be negatively impacted.
In addition, a significant percentage of our customers choose
to integrate our platform, products, and solutions with certain capabilities of third-party publishers and software providers using application
programming interfaces, or APIs. The functionality and popularity of our platform, products and solutions depends, in part, on their ability
to integrate with a wide variety of third-party applications and software. Third-party providers of applications may change the features
of their applications and software, restrict our access to their applications and software or alter the terms governing use of their applications
and access to those applications and software in an adverse manner. Such changes could functionally limit or eliminate our ability to
use these third-party applications and software in conjunction with our offerings, which could negatively impact customer demand, our
competitive position and adversely affect our business.
Further, we have created mobile applications and mobile versions
of our offerings to respond to the increasing number of people who access the internet and cloud-based software applications through mobile
devices, including smartphones and handheld tablets or laptop computers. If these mobile applications do not perform well, our business
may suffer. We are also dependent on third-party application stores that may prevent us from timely updating our offerings, building new
features, integrations, capabilities, or other enhancements, or charging for access. Certain of these companies are now, or may in the
future become, competitors of ours, and could stop allowing or supporting access to our offerings, could allow access for us only at an
unsustainable cost, or could make changes to the terms of access in order to make our offerings less desirable or harder to access, for
competitive reasons, which would also have a negative impact on our business.
A version of our Media Services is licensed
to the public under an open source license, which could negatively affect our ability to monetize our offerings and protect our intellectual
property rights.
We make a version of our Media Services, Kaltura Community Edition
(“Kaltura CE”), available to the public at no charge under an open source license, the Affero General Public License version
3.0 (“AGPL”). Although Kaltura CE does not include many widely used Kaltura applications, it can be used on a self-hosted
basis as a standalone video platform. The AGPL grants licensees broad freedom to view, use, copy, modify and redistribute the source code
of Kaltura CE. Anyone can download a free copy of this version of our platform from the internet, and we neither know who all of our AGPL
licensees are, nor have visibility into how Kaltura CE is being used by licensees, so our ability to detect violations of the open source
license is extremely limited. Additionally, even if we become aware of any violations, open source licenses, including the AGPL, have
not been widely interpreted by courts, leading to uncertainty surrounding any ability to enforce such licenses.
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The AGPL is a “copyleft” license, requiring that
any redistribution by licensees of Kaltura CE, or any modifications or adaptations to Kaltura CE, be made pursuant to the AGPL as well.
This leads some commercial enterprises to consider AGPL-licensed software to be unsuitable for commercial use. However, the AGPL would
not prevent a commercial licensee from taking this open source version of our platform under AGPL and using it for internal purposes for
free. AGPL also would not prevent a commercial licensee from taking this open source version of our platform under AGPL and using it to
compete in our markets by providing it to others for free.
This competition can develop without the degree of overhead and
lead time required by traditional proprietary software companies, due to the permissions allowed under AGPL. It is also possible for competitors
to develop their own software based on Kaltura CE. Although this software would also need to be made available for free under the AGPL,
it could reduce the demand for and put pricing pressure on our offerings. We cannot guarantee that we will be able to compete successfully
against current and future competitors, some of which may have greater resources than we have, or that competitive pressure or the availability
of new open source software will not result in price reductions, reduced operating margins, and loss of market share. Any of the foregoing
could harm our business, financial condition, results of operations and cash flows.
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.
Our Video Experience Cloud consists of our Media Services offerings
and multiple products and solutions, and we compete in each product or solution category as well as on the platform level as a whole.
The market for our offerings is highly fragmented, quickly evolving, and subject to rapid changes in technology. We believe that our ability
to compete successfully depends upon many factors both within and beyond our control, including the following:
• 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.
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Our key competitors vary based on market and industry, and include:
• Microsoft and Vimeo for Video Sites;
• Zoom and Cisco for Webinars;
• Intrado, Cvent and Hopin for Events;
• Adobe Connect for Virtual Classroom;
• Zoom, Microsoft and Cisco for our education solutions; and
Additionally, we compete with home-grown, start-up, and open
source technologies across the categories described above. With the rise in travel restrictions and shelter-in-place policies resulting
from the COVID-19 pandemic, as well as the passage of time, the introduction of new technologies and the entrance of new market participants,
competition has intensified, and we expect it to continue to intensify in the future. Established companies are also developing their
own video platforms, products, and solutions within their own core product lines, and may continue to do so in the future. Established
companies may also acquire or establish product integration, distribution, or other cooperative relationships with our current competitors.
New competitors or alliances among competitors may emerge from time to time and rapidly acquire significant market share due to various
factors such as their greater brand name recognition, larger existing user or customer base, consumer preferences for their offerings,
a larger or more effective sales organization and greater financial, technical, marketing, and other resources and experience. Furthermore,
with the recent increase in large merger and acquisition transactions in the technology industry, particularly transactions involving
cloud-based technologies, there is a greater likelihood that we will compete with other larger technology companies in the future. Companies
resulting from these potential consolidations may create more compelling product offerings and be able to offer more attractive pricing
options, making it more difficult for us to compete effectively.
Many of our competitors have, and some of our potential competitors
may have, greater financial, technical, and other resources, longer operating histories, greater brand recognition, larger sales forces
and marketing budgets, broader distribution networks, more diverse product and services offerings, larger and more mature intellectual
property portfolios, more established relationships in the industry and with customers, lower cost structures and greater customer experience
resources. These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards, and customer requirements. They may be able to leverage these resources to gain business in a manner that discourages customers
from purchasing our offerings, including through selling at zero or negative margins, product bundling, forced product migrations, auto-installation
of applications, or closed technology platforms. Potential customers may also prefer to purchase from companies with which they have an
existing relationship rather than a new supplier, regardless of product performance or features. Furthermore, we expect that our industry
will continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand
into new markets and encounter additional competitors in such markets. These competitive pressures in the markets in which we operate,
or our failure to compete effectively, may result in price reductions, fewer customers, reduced revenue, gross profit and gross margins,
increased net losses and loss of market share. Any failure to effectively address these factors could significantly and adversely affect
our business, financial condition, and results of operations.
If we are unable to increase sales of our subscriptions
to new customers, expand the offerings to which our existing customers subscribe, or expand the value of our existing customers’
subscriptions, our future revenue and results of operations will be adversely affected.
Our success depends on our ability to sell our subscriptions
to new customers and to expand within our existing customer base by selling subscriptions for additional offerings to our existing customers
and expanding the value of existing customers’ subscriptions, and to do so in a cost-effective manner. Our ability to sell new subscriptions
and expand the number and value of existing subscriptions depends on a number of factors, including the prices of our offerings and their
functionality, the prices of products offered by our competitors, and the budgets of our customers. We serve customer needs with multiple
tiers of subscriptions that differ based on product depth and functionality. We also offer an initial trial period for certain of our
offerings. To the extent prospective customers utilize this trial period without becoming, or lead others not to become, paying customers,
our expenses may increase as a result of associated hosting costs, and our ability to grow our business may be adversely affected. We
also offer an open source version of our Media Services called Kaltura CE. Our open source version is intended to increase the visibility
and familiarity of our platform among the developer communities. We invest in developers and developer communities through multiple channels,
including the introduction of new open source projects. There is no guarantee that such events will translate into new customers, or that
open source users will convert to paying subscribers.
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In addition, a significant aspect of our sales and marketing
focus is to expand deployments within existing customers. The rate at which our customers purchase subscriptions for additional offerings
and expand the value of their existing subscriptions depends on a number of factors, including, among other things, customers’ level
of satisfaction with our offerings and customer support, the nature and size of the deployments, the desire to address additional use
cases, and the availability of, and customers’ awareness of and perceived need for, additional features, integrations, capabilities
or other enhancements, as well as general economic conditions. If our customers do not recognize the potential of our offerings, our business
would be materially and adversely affected.
If our existing customers do not renew their
subscriptions, or if they renew on terms that are less economically beneficial to us, it could have an adverse effect on our business,
financial condition, and results of operations.
We expect to derive a significant portion of our revenue from
renewals of existing subscriptions. Our customers have no contractual obligation to renew their subscriptions after the completion of
their subscription term. Subscriptions for most of our offerings are offered on either an annual or multi-year basis. Our subscriptions
also generally include committed usage amounts. As a result, we cannot provide assurance that customers will renew their subscriptions
for a similar contract period or with the same or greater product depth, number of users, functionality or other terms that are equally
or more economically beneficial to us, if they renew at all.
Our customers’ renewals may decline or fluctuate as a result
of a number of factors, including their satisfaction with our products and our customer support, the frequency and severity of product
outages, our product uptime or latency, the pricing of our offering in relation to competing offerings, additional new features, integrations,
capabilities or other enhancements that we offer, updates to our products as a result of updates by technology partners, and customers
or users no longer having a need for our offerings (including customers or users acquired during the COVID-19 pandemic that may subsequently
reduce or discontinue their use after the impact of the pandemic has subsided). Renewal rates may also be impacted by general economic
conditions or other factors that reduce customers’ spending levels. For example, many educational institutions and other customers
in the public sector depend substantially on government funding, and any general decrease, delay, or other change in the availability
of such funding could cause current and prospective customers to decide not to renew their subscriptions or to reduce the scope of their
subscriptions at the end of the applicable subscription term, any of which could cause us to lose customers and revenue. If our customers
do not renew their subscriptions or renew on terms less economically favorable to us, our revenue may decline or grow less quickly than
anticipated, which would adversely affect our business, financial condition, and results of operations.
We recognize a significant portion of revenue
from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately
reflected in full in our results of operations.
The majority of our revenues are derived from SaaS and PaaS subscriptions,
and we recognize a significant portion of our subscription revenue over the term of the relevant subscription period. As a result, much
of the subscription revenue we report each fiscal quarter is the recognition of deferred revenue from subscription contracts entered into
during previous fiscal quarters. Consequently, a decline in new or renewed subscriptions in any one fiscal quarter will not be fully or
immediately reflected in revenue in that fiscal quarter and will negatively affect our revenue in future fiscal quarters. Accordingly,
the effect of significant downturns in new or renewed sales of our subscriptions is not reflected in full in our results of operations
until future periods.
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If we fail to meet contractual commitments
under our customer agreements, we could be subject to contractual penalties, litigation, and other liabilities, and could experience an
increase in contract terminations or decrease in contract renewals in future periods, which would lower our revenue, increase our costs,
and otherwise adversely affect our business, financial condition, and results of operations.
Our customer agreements typically contain service-level commitments.
If we are unable to meet the stated service-level commitments, including failure to meet the uptime and response time requirements under
our customer agreements, we may be contractually obligated to provide these customers with service credits, or customers could elect to
terminate and receive refunds for prepaid amounts related to unused subscriptions, either of which could significantly affect our revenue
in the periods in which the failure occurs and the credits are applied or refunds paid out. In addition, customer terminations or any
reduction in renewals resulting from service-level failures could significantly affect both our current and future revenue. For example,
during the third quarter of 2020, we experienced an initial period of service instability in connection with the acceleration of our existing
plans to transition our technology to public cloud infrastructure, causing us to fall below the service-level commitments in our customer
agreements for the first few months of this transition. Though this did not result in a significant increase in customer terminations
and we have not seen a material decrease in customer renewals to date, we cannot guarantee that we will not experience a material decrease
in customer renewals in future periods as additional customers cycle through their subscription terms.
In addition, the agreements we enter into with our TV Solution
customers typically provide for committed delivery schedules and milestones with which we are required to comply in connection with the
deployment of our offerings. The deployment process for our TV Solution offering is often complex, and our ability to comply with our
obligations under these agreements depends on a variety of factors both within and outside of our control, including the timely performance
of front-end software developers and other third-parties. If we fail to meet our committed delivery schedules and milestones, we could
be subject to contractual penalties, including liquidated damages, as well as breach of contract claims, which could result in litigation
and cause us to incur additional costs, including in the form of additional damages or settlement payments. Affected customers may also
elect to terminate their agreements with us.
Furthermore, any service-level failures or failure to meet committed
delivery schedules and milestones could also create negative publicity and damage our reputation, which may discourage prospective customers
from adopting our offerings. In addition, if we modify the terms of our contractual commitments in future customer agreements in a manner
customers perceive to be unfavorable, demand for our offerings could be reduced. The occurrence of these or any of the events discussed
above could have a significant adverse effect on our business, financial condition, results of operations and cash flow, as well as our
ability to grow our business.
We rely on third parties, including third parties
outside the United States, for some of our software development, quality assurance, operations, and customer support.
We currently depend on various third parties for some of our
software development efforts, quality assurance, operations, and customer support services. Specifically, we outsource some of our software
development and design, quality assurance, and operations activities to third-party contractors that have employees and consultants located
in Russia, Ukraine and Belarus. Our dependence on third-party contractors creates a number of risks, in particular, the risk that we may
not maintain development quality, control, or effective management with respect to these business operations. In addition, poor relations
between the United States and Russia, sanctions by the United States and the European Union (“EU”) against Russia, and any
escalation of political tensions or economic instability in the area could have an adverse impact on our third-party software development
in Russia, Ukraine and Belarus. In particular, increased tensions among the United States, the North Atlantic Treaty Organization and
Russia, including any actual or threatened invasion of Ukraine by Russia, could increase the threat of armed conflict, cyberwarfare and
economic instability that could disrupt or delay the operations of our resources in Russia, Belarus and Ukraine, disrupt or delay our
communications with such resources or the flow of funds to support their operations, or otherwise render our resources unavailable. We
anticipate that we will continue to depend on these and other third-party relationships in order to grow our business for the foreseeable
future. If we are unsuccessful in maintaining existing and, if needed, establishing new relationships with third parties, our ability
to efficiently operate existing services or develop new services and provide adequate customer support could be impaired, and, as a result,
our competitive position or our results of operations could suffer.
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We depend on our management team and other
key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely
affect our business.
Our future success depends, in part, on our ability to continue
to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain
qualified personnel, or delays in hiring required personnel, particularly in engineering and sales, may seriously and adversely affect
our business, financial condition, and results of operations. Although we have entered into employment offer letters with our key personnel,
their employment is for no specific duration and constitutes at-will employment. We are also substantially dependent on the continued
service of our existing engineering personnel because of the complexity of our products.
Our future performance also depends on the continued services
and continuing contributions of our senior management team, which includes Ron Yekutiel, our co-founder and Chief Executive Officer, to
execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of our senior
management team, particularly our Chief Executive Officer, could significantly delay or prevent the achievement of our development and
strategic objectives, which could adversely affect our business, financial condition, and results of operations.
Additionally, the industry in which we operate is generally characterized
by significant competition for skilled personnel, as well as high employee attrition. There is currently a high demand for experienced
software industry personnel, particularly for engineering, research and development, sales, and support positions, and we may not be successful
in attracting, integrating, and retaining qualified personnel to fulfill our current and future needs. This intense competition has resulted
in increasing wages, especially in Israel, where most of our research and development positions are located, and in New York, where our
headquarters is located, which may make it more difficult for us to attract and retain qualified personnel, as many of the companies against
which we compete for personnel have greater financial resources than we do. These competitors may also actively seek to hire our existing
personnel away from us, even if such employee has entered into a non-compete agreement. We may be unable to enforce these agreements under
the laws of the jurisdictions in which our employees work. For example, Israeli labor courts have required employers seeking to enforce
non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a
limited number of material interests of the employer that have been recognized by the courts, such as the protection of a company’s
confidential information or other intellectual property, taking into account, among other things, the employee’s tenure, position,
and the degree to which the non-compete undertaking limits the employee’s freedom of occupation. We may not be able to make such
a demonstration. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly
solicited or that they have divulged their former employers’ proprietary or other confidential information or incorporated such
information into our products, which could include claims that such former employers therefore own or otherwise have rights to their inventions
or other work product developed while employed by us.
In addition, in making employment decisions, particularly in
the internet and high-technology industries, job candidates often consider the value of the equity they are to receive in connection with
their employment. Employees may be more likely to leave us if the shares they own or the shares underlying their equity incentive awards
have significantly appreciated or significantly reduced in value. Many of our employees may receive significant proceeds from sales of
our equity in the public markets, which may reduce their motivation to continue to work for us and could lead to employee attrition. If
we fail to attract new personnel, or fail to retain and motivate our current personnel, our business, financial condition, results of
operations and growth prospects could be adversely affected.
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If we are not able to maintain and enhance
awareness of our brand, especially among developers and IT operators, our business, financial condition, and results of operations may
be adversely affected.
We believe that developing and maintaining widespread awareness
of our brand, especially with developers and IT operators, is critical to achieving widespread acceptance of our platform, products and
solutions and attracting new users and customers. Brand promotion activities may not generate user or customer awareness or increase revenue,
and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote
and maintain our brand, we may fail to attract and retain users and customers necessary to realize a sufficient return on our brand-building
efforts, and may fail to achieve the widespread brand awareness that is critical for broad customer adoption of our offerings.
Our corporate culture has contributed to our
success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and entrepreneurial spirit we have
worked to foster, which could adversely affect our business.
We believe that our corporate culture, which is based on openness,
flexibility, and collaboration, has been and will continue to be a key contributor to our success. We expect to continue to hire aggressively
as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity,
and entrepreneurial spirit we believe we need to support our growth. The growth and expansion of our business and our transition from
a private company to a public company may result in changes to our corporate culture, which could adversely affect our business, including
our ability to recruit and retain qualified personnel.
Our failure to offer high quality customer
support would have an adverse effect on our business, reputation, and results of operations.
Our customers depend on our customer success managers to resolve