Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, “Risk Factors” and other factors set forth in other parts of this Annual Report on Form 10-K.
This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the fiscal years ended December 31, 2025 and 2024, and year-to-year comparisons between fiscal 2025 and fiscal 2024. A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2023 and year-to-year comparisons between fiscal 2024 and fiscal 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 20, 2025
Overview
We, Kaltura, Inc. (“Kaltura,” “we,” “us,” or “our”), are a market-leading provider of video and rich media offerings for enterprises. Our mission is to power rich, agentic digital experiences across organizational journeys for customers, employees, learners, and audiences.
Kaltura's Digital Experience Platform enables organizations to create, manage, and deliver video and rich media experiences that increasingly incorporate agentic artificial intelligence (“AI”) capabilities, including conversational interfaces, workflow automation, and outcome-oriented engagement across digital touchpoints. We believe this combination of video, rich media and agentic capabilities enables organizations to move beyond static, one-size-fits-all digital experiences toward more personalized, contextual, and interactive agentic digital experiences at scale.
Video and other forms of rich media - including interactive, data-driven, and conversational media - are central to digital interaction and engagement, transforming how people communicate, work, learn, and consume content. For organizations, rich media increasingly sits at the core of digital transformation initiatives, with businesses adopting media-driven solutions to engage customers, employees, learners, and audiences across a growing range of use cases. At the same time, advances in generative artificial intelligence (“Gen AI”) are enabling the real-time and automated creation of highly personalized and contextually relevant content, including video and other forms of rich media. We believe the convergence of rich media and AI is increasing the scale, speed, and strategic importance of digital experiences and driving demand for platforms that support more interactive, contextual, and outcome-oriented engagement.
Founded in 2006, Kaltura was among the pioneers to recognize the potential of integrating video into enterprise workflows and to offer a system for enterprise video content management and online video publishing. Over time, we expanded our platform to support additional experiences, including virtual events and webinars and cloud-based television services. Today, Kaltura provides a cloud-based rich media platform designed to help organizations create, manage, and deliver rich media experiences at scale across customer-facing, employee-facing, learner-facing, and audience-facing use cases.
Our Digital Experience platform is designed around three core layers: rich media content creation, rich media content management, and rich media experiences. Together, these layers enable organizations to produce and generate live and on-demand video and other forms of rich media, securely manage content, users, permissions, and metadata across enterprise and media environments, and deliver media-rich experiences across a wide range of internal and external workflows. The platform increasingly incorporates agentic AI-driven capabilities designed to enable more interactive, contextual, and goal-oriented experiences, while maintaining enterprise-grade security, privacy, and governance.
As video usage continues to accelerate across communication, work, and learning environments, organizations are increasingly deploying sophisticated video solutions to further engage with their customers, partners, and employees. The introduction of generative AI (“Gen AI”) further amplifies this demand and is expected to have a substantial impact on our business by enabling the automatic production of hyper-personalized and contextually relevant video experiences in real time. We believe this powerful new tool will expand opportunities for increased video creation, consumption, and monetization, and drives a need for advanced video content management solutions.
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To support our AI capabilities, in 2025, we acquired eSelf AI, a multimodal AI lab developing technology for agentic interactions with live avatars. Through this acquisition, we expanded our content creation and experience capabilities to include AI-generated video and avatar-based interactions, enhancing our rich media content creation layer. In addition, in March, 2026, we entered into a definitive agreement to acquire PathFactory, a provider of content journey orchestration and engagement analytics solutions. We believe this acquisition, once completed, would strengthen our position in the emerging conversation automation and agentic engagement solutions market and complement our recent acquisition of eSelf AI by adding journey-level orchestration, intent data, analytics, and integrations across additional content types and enterprise systems. The transaction has not yet closed, and there can be no assurance that it will be completed or that the anticipated benefits will be realized.
We generate revenue primarily from the sale of Software-as-a-Service (“SaaS”) subscriptions, and we also derive revenue from platform usage license subscriptions and associated professional services. Our sales typically target medium to large enterprises, educational institutions, technology providers, and media and telecom companies. In addition, we are expanding our go-to-market approaches to support a wider range of adoption models and customer sizes. Our professional services revenue is generally driven by implementation and support services for new and existing customers.
In August 2025, our Board of Directors approved a reorganization plan (the “2025 Reorganization Plan) that included, among other things, downsizing approximately 10% of our workforce and adapting our organizational structure, roles, and responsibilities accordingly. The total cost reduction from the downsizing in connection with the 2025 Reorganization Plan on an annualized basis is expected to be approximately $8.5 million. The 2025 Reorganization Plan, which was completed in the third quarter of 2025, is focused on realigning the Company’s operations to further increase efficiency and productivity, alongside our integration of enhanced AI-based technologies, to align the Company’s business strategy in light of uncertainties in the current macro-economic climate, and to support the Company’s growth and profitability initiatives.
We organize our business into two reporting segments: (i) Enterprise, Education, and Technology (“EE&T”); and (ii) Media and Telecom (“M&T”). Accordingly, our financial reporting distinguishes between revenue and gross profit from Subscription and Professional Services from customers who use our products and services to address Entertainment & Monetization use cases (for their audiences), reported in our M&T segment, and those that are attained from customers who are using us to address all other use cases (for their customers, employees, and learners), reported in our EE&T segment. These segments share a common underlying platform consisting of our API-based architecture, as well as unified product development, operations, and administrative resources.
•Enterprise, Education & Technology: In the EE&T segment, subscription revenue is primarily generated on a per full‐time equivalent or platform usage‐license basis for all of our products, in addition to revenue derived from associated professional services. This segment encompasses customers utilizing Kaltura’s solutions to deliver agentic rich-media experiences for their customers, employees, and learners such as buyer enablement, employee recruiting, learning and teaching. Contracts in this segment typically range from 12 to 24 months, with billing generally executed on an annual basis.
•Media & Telecom: The M&T segment includes revenue from customers using Kaltura to deliver entertainment and streaming use cases to their audiences, along with the associated professional services. For customers of our telecom TVCMS and TV Streaming Applications, revenue is recognized primarily on a per end‐subscriber basis, while media customers leveraging our Online Video Platform are billed on a platform usage‐license basis. Contracts in this segment generally extend for two to five years, with billing performed on either a quarterly or annual basis. Implementation of TV offerings typically requires six to 12 months, with upfront resource requirements generally higher than those for our other offerings. Consequently, there is an extended period from initial booking to go‐live, accompanied by a higher proportion of professional services revenue relative to overall revenue. Additionally, a greater share of revenue in this segment is derived from customers licensing our offerings through private cloud and on‐premise deployments, which has an impact on our gross margin.
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Reflected below is a summary of reportable segment revenue and reportable segment gross profit for the years ended December 31, 2025, 2024 and 2023.
For the Year Ended December 31,
(in thousands)
Revenue
Gross Profit
We employ a “land and expand” strategy with the aim of having our customers increase their usage of our offerings and/or purchase additional offerings over time. For the years ended December 31, 2025 and 2024, our Net Dollar Retention Rate was 100%. Our Annualized Recurring Revenue (as defined below), declined by 3% in the year ended December 31, 2025, compared to the year ended December 31, 2024.
For any given year, a large majority of our revenue comes from existing customers, with whom we are in active dialogue and tend to have visibility into their expected usage of our offerings.
We are expanding our go-to-market approaches to support a wider range of adoption models and customer sizes. We believe certain of our newer offerings, particularly AI-assisted content creation tools and conversational rich media agents, are well suited for more targeted departmental deployments, self-service adoption, and product-led growth (“PLG”) motions. These offerings may enable us to engage smaller organizations, teams, and departments, including small and medium-sized businesses (“SMBs”) and individual groups within larger enterprises, while remaining complementary to our core enterprise business. In addition, we are investing in developer-led growth (“DLG”) initiatives by expanding our APIs, SDKs, and developer tools, including planned offerings such as an Agentic Avatar SDK. These capabilities are designed to enable independent software vendors (“ISVs”), system integrators, partners, and developers to embed Kaltura-powered rich media and conversational interfaces into their own products, workflows, and applications. We also intend to continue expanding our ecosystem of channel partners, including co-sell, resell, OEM, and marketplace relationships. We believe that broader partner distribution, including through cloud marketplaces and digital channels, may increase reach, reduce customer acquisition costs, and accelerate adoption across both enterprise and self-service use cases.
Key Factors Affecting Our Performance
Expansion of our Platform
We believe our platform is ideally suited for expansion across solutions, industries, and use cases. For example, in 2020, we entered the real-time conferencing market with the introduction of our Virtual and Hybrid Events, Webinars, and Online Learning products, focusing on learning, training, events, and marketing. Since then, we expanded the capabilities of our Virtual & Hybrid Events product to support a broader range of event types and use cases, fitted them to also address low-touch and self-serve sales and introduced a set of Gen AI-powered capabilities designed to increase productivity in creating content and setting up events and to foster user engagement. We plan to continue enhancing our platform’s capabilities—including by further integrating Gen AI features that enable automatic video creation, advanced personalization, and real-time analytics. Our robust API-first architecture supports deep integration into multiple workflows, which we believe is critical for driving adoption and delivering enhanced value for our customers.
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Acquiring New Customers
We remain focused on acquiring customers across our key verticals (technology, education, regulated industries, professional and commercial services, and media & telecom). Our approach includes direct enterprise sales for larger customers, as well as channel partnerships and more self-serve or inside sales–led motions to capture small and medium enterprises (“SMEs”). We believe that increasing brand awareness and continued product innovation will help us attract new customers across geographies and industries. We also continue to provide our self-serve offering that can be purchased completely online, which serves as a demand generation engine for our low-touch and enterprise offerings. We believe this will enable us to efficiently acquire smaller customers across all industries over time – expanding beyond enterprises into SMEs, beyond universities into K-12 schools, beyond tier 1 media and telecom companies to tier 2 and 3 media and telecom companies, and beyond providing our platform to large technology companies to also addressing smaller technology firms and startups.
Increasing Revenue from Existing Customers
Many of our customers run multiple Kaltura products for various use cases, ranging from employee training and collaboration to external marketing and virtual events. By cross-selling and upselling additional solutions — such as our newly introduced Gen AI-powered capabilities and expanded application suites — we aim to drive higher usage and expand overall revenue. Our strong integration, ongoing support, and a commitment to evolving security and compliance requirements also helps us support sustained customer adoption and usage growth. We are focused on increasing sales within our existing customer base through increased usage of our platform and the cross-selling of additional products and solutions. For the year ended December 31, 2025, our Net Dollar Retention Rate was 100%. In order for us to increase revenue within our customer base, we will need to maintain engineering-level customer support and continue to introduce new products and features as well as innovative new use cases that are tailored to our customers' needs.
Continued Investment in Growth
Although we have invested significantly in our business to date, we believe that we still have a significant market opportunity ahead of us. We intend to continue to make investments to support the growth and expansion of our business and to increase revenue. We believe there is a significant opportunity to continue our growth. We expect that our cost of revenue and operating expenses will fluctuate over time.
Key Financial and Operating Metrics
We measure our business using both financial and operating metrics. We use these metrics to assess the progress of our business, make decisions on where to allocate capital, time, and technology investments, and assess the near-term and long-term performance of our business. The key financial and operating metrics we use are:
For the Year Ended December 31,
(in thousands, except percentages)
As of December
(in thousands)
(1)Remaining Performance Obligations as of December 31, 2024 and December 31, 2023 reflect a reassessment of the historical treatment of certain customer contracts that contain “termination for convenience” clauses, which has resulted in a negative adjustment of $26,432 and,$20,295, respectively.
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Annualized Recurring Revenue
We use Annualized Recurring Revenue ("ARR") as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring customer contracts. We calculate ARR by annualizing our recurring revenue for the most recently completed fiscal quarter. Recurring revenues are generated from SaaS and PaaS subscriptions, as well as term licenses for software installed on the customer’s premises (“On-Prem”). For the SaaS and PaaS components, we calculate ARR by annualizing the actual recurring revenue recognized for the latest fiscal quarter.
For the On-Prem components for which revenue recognition is not ratable across the license term, we calculate ARR for each contract by dividing the total contract value (excluding professional services) as of the last day of the specified period by the number of days in the contract term and then multiplying by 365.
Recurring revenue excludes revenue from one-time professional services and setup fees. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases.
The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to new bookings, cancellations, upgrades or downgrades, pending renewals, professional services revenue, foreign exchange rate fluctuations and acquisitions or divestitures. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.
Net Dollar Retention Rate
Our Net Dollar Retention Rate, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our Net Dollar Retention Rate for a given period as the recognized recurring revenue from the latest reported fiscal quarter from the set of customers whose revenue existed in the reported fiscal quarter from the prior year (the numerator), divided by recognized recurring revenue from such customers for the same fiscal quarter in the prior year (denominator). For annual periods, we report Net Dollar Retention Rate as the arithmetic average of the Net Dollar Retention Rate for all fiscal quarters included in the period. We consider subdivisions of the same legal entity (for example, divisions of a parent company or separate campuses that are part of the same state university system) ,as well as Value-add Resellers (“VARs”) (meaning resellers that directly manage the relationship with the customer) and the customers they manage, to be a single customer for purposes of calculating our Net Dollar Retention Rate. Our calculation of Net Dollar Retention Rate for any fiscal period includes the positive recognized recurring revenue impacts of selling new services to existing customers and the negative recognized recurring revenue impacts of contraction and attrition among this set of customers. Our Net Dollar Retention Rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. Our calculation of Net Dollar Retention Rate may differ from similarly titled metrics presented by other companies.
Remaining Performance Obligations
Remaining Performance Obligations represents the amount of contracted future revenue that has not yet been delivered, including both subscription and professional services revenues. Remaining Performance Obligations consists of both deferred revenue and contracted non-cancelable amounts that will be invoiced and recognized in future periods. As of December 31, 2025, our Remaining Performance Obligations was $166.3 million, which consists of both billed consideration in the amount of $62.4 million and unbilled consideration in the amount of $103.9 million that we expect to invoice and recognize in future periods. We expect to recognize 64% of our Remaining Performance Obligations as revenue over the next 12 months and the remainder over the next four years.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe that EBITDA and Adjusted EBITDA, non-GAAP financial measures, are useful in evaluating the performance of our business.
We define EBITDA as net profit (loss) before financial expenses (income), net, provision for income taxes and depreciation and amortization expenses. Adjusted EBITDA is defined as EBITDA (as defined above), adjusted for the impact of certain non-cash and other items that we believe are not indicative of our core operating performance, such as non-cash stock-based compensation expenses, facility exit and transition costs, war-related expenses, restructuring charges, certain professional consulting and other expenses associated with strategic initiatives and acquisition related expenses.
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EBITDA and Adjusted EBITDA are supplemental measures of our performance, are not defined by or presented in accordance with GAAP, and should not be considered in isolation or as an alternative to net profit (loss) or any other performance measure prepared in accordance with GAAP. EBITDA and Adjusted EBITDA are presented because we believe that they provide useful supplemental information to investors and analysts regarding our operating performance and are frequently used by these parties in evaluating companies in our industry. By presenting EBITDA and Adjusted EBITDA, we provide a basis for comparison of our business operations between periods by excluding items that we do not believe are indicative of our core operating performance. We believe that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Additionally, our management uses Adjusted EBITDA as a supplemental measure of our performance because it assists us in comparing the operating performance of our business on a consistent basis between periods, as described above.
Although we use EBITDA and Adjusted EBITDA, as described above, EBITDA and Adjusted EBITDA, have significant limitations as analytical tools. Some of these limitations include:
•such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•such measures do not reflect changes in, or cash requirements for, our working capital needs;
•such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•such measures do not reflect our tax expense or the cash requirements to pay our taxes;
•although depreciation and amortization expense and non-cash stock-based compensation expense are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate such measures differently than we do, thereby further limiting their usefulness as comparative measures.
Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. Adjusted EBITDA includes an adjustment for non-cash stock-based compensation expenses. It is reasonable to expect that this item will occur in future periods. However, we believe this adjustment is appropriate because the amount recognized can vary significantly from period to period, does not directly relate to the ongoing operations of our business, and complicates comparisons of our internal operating results between periods and with the operating results of other companies over time. Each of the normal recurring adjustments and other adjustments described above help to provide management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Nevertheless, because of the limitations described above, management does not view EBITDA, or Adjusted EBITDA in isolation and also uses other measures, such as revenue, operating loss, and net loss, to measure operating performance.
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The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net loss:
Year Ended December 31,
(in thousands)
Financial expenses (income), net (a) 4,047 (434) (1,200)
Facility exit and transition costs (b) — — 154
War related costs (d) — 44 331
Strategic initiatives expenses (e) 1,284 — —
Acquisition related expenses (f) 428 — —
(a)The years ended December 31, 2025, 2024 and 2023 include $2.2 million, $2.7 million and $3.2 million, respectively, of interest expenses, and $3.0 million, $3.4 million and $2.7 million, respectively, of interest income.
(b)Facility exit and transition costs for the year ended December 31, 2023 include losses from sale of fixed assets and other costs associated with moving to our temporary office in Israel.
(c)The year ended December 31, 2025, includes employee termination benefits incurred in connection with the 2025 Reorganization Plan and the year ended December 31, 2023 includes employee termination benefits incurred in connection with the 2023 Restructuring Plan.
(d)The years ended December 31, 2024 and December 31, 2023 include costs related to conflicts in Israel. These costs are attributable to the temporary relocation of key employees from Israel for business continuity purposes, the purchase of emergency equipment for key employees, charitable donations to communities directly impacted by the war, and office fixes and modifications.
(e)Strategic initiatives expenses for the year ended December 31, 2025 relate to professional fees, consulting services and other costs associated with strategic initiatives.
(f)Acquisition related expenses for the year ended December 31, 2025 consist of professional fees, consulting services and other transaction-related costs incurred in connection with the acquisition of eSelf AI.
Components of Results of Operations
Revenue
Subscription
Our revenues are mainly comprised of revenue from SaaS and PaaS subscriptions. SaaS and PaaS subscriptions provide access to our Video Experience Cloud which powers all types of video experiences: live, real-time, and on-demand video. We provide access to our platform either as a cloud-based service, which represent most of our SaaS and PaaS subscriptions, or, less commonly, as a term license to software installed on the customer's premises. Revenue from SaaS and PaaS subscriptions is recognized ratably over the time of the subscription, beginning from the date on which the customer is granted access to our Video Experience Cloud.
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Revenue from the sale of a term license is recognized at a point in time in which the license is delivered to the customer. Revenue from post-contract services (“PCS”) included in On-Prem deals is recognized ratably over the period of the PCS.
Professional Services
Our revenue also includes professional services, which consist of consulting, integration and customization services, technical solution services and training related to our video experience. In some of our arrangements, professional services are accounted for as a separate performance obligation, and revenue is recognized upon rendering of the service.
In some of our SaaS and PaaS subscriptions, we determined that the professional services are solely set up activities that do not transfer goods or services to the customer and therefore are not accounted for as a separate performance obligation and are recognized ratably over the time of the subscription.
Cost of Revenue
Cost of subscription revenue consists primarily of employee-related costs including payroll, benefits and stock-based compensation expense for operations and customer support teams, costs of cloud hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology and allocated overhead costs.
Cost of professional services consists primarily of personnel costs of our professional services organization, including payroll, benefits, and stock-based compensation expense, allocated overhead costs and other third-party service providers.
The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscriptions due to the labor costs of providing professional services. As such, the implementation and professional services costs relating to an arrangement with a new customer are more significant than the costs to renew an existing customer’s license and support arrangement.
Cost of revenue decreased in absolute dollars from the year ended December 31, 2024 to the year ended December 31, 2025. For the years ended December 31, 2025 and 2024, our cost of revenue was $53,185 and $59,611, respectively.
Gross Margins
Gross margin has improved year-over-year since 2020, and while it has and will continue to vacillate between quarters, we expect it to continue the growth trend in the coming years. Gross margins have been, and will continue to be, affected by a variety of factors, including the average sales price of our products and services, volume growth, the mix of revenue between software licenses, maintenance and support, professional services, onboarding of new media and telecom customers, hosting of major virtual events, and changes in cloud infrastructure and personnel costs. In particular, the gross margins in the M&T segment are lower than in the EE&T segment because of resources required for implementing solutions for TV experiences, which generally exceed those of other offerings. This results in a longer period for M&T from initial booking to go-live and a higher proportion of professional services revenue as a percentage of overall revenue. Additionally, a higher proportion of M&T revenue comes from customers who choose to license our offerings through private cloud and on-premise deployments, which also impacts our M&T gross margin. Going forward, we expect to see a gradual improvement in gross margins for both EE&T and M&T, driven by enhanced efficiencies in both production and professional services costs.
For the years ended December 31, 2025, 2024 and 2023, our gross margins were 71% (77% for subscription and (54)% for professional services), 67% (75% for subscription and (55)% for professional services) and 64% (73% for subscription and (51)% for professional services), respectively.
For our EE&T segment, gross margins for the years ended December 31, 2025, 2024 and 2023 were 77% (83% for subscription and (138)% for professional services), 75% (82% for subscription and (97)% for professional services) and 73% (79% for subscription and (78)% for professional services), respectively.
For our M&T segment, gross margins for the years ended December 31, 2025, 2024 and 2023 were 51% (57% for subscription and 2% for professional services), 44% (55% for subscription and (25)% for professional services) and 41% (55% for subscription and (35)% for professional services), respectively.
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Research and Development
Our research and development expenses consist primarily of costs incurred for personnel-related expenses for our technical staff, including salaries and other direct personnel-related costs. Additional expenses include consulting and professional fees for third-party development resources and software subscriptions. We expect our research and development expenses to gradually decrease as a percentage of revenue. Subsequent costs incurred for the development of future upgrades and enhancements, which are expected to result in additional functionality, may qualify for capitalization under internal-use software and therefore may cause research and development expenses to fluctuate.
Sales and Marketing Expenses
Our sales and marketing expenses consist primarily of personnel related costs for our sales and marketing functions, including salaries and other direct personnel-related costs, such as sales commissions.
Additional expenses include marketing program costs and amortization of acquired customer relationships intangible assets. We expect our sales and marketing expenses to increase as a percentage of revenue.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel-related costs for our executive, finance, human resources, information technology, and legal functions, including salaries and other direct personnel-related costs. Additional expenses include costs for other operational and administrative functions, professional fees for external legal, accounting, and consulting services, directors’ and officers’ insurance, and strategic initiatives. We expect our general and administrative expenses to gradually decrease as a percentage of revenue.
We allocate overhead costs such as rent, utilities, and supplies to all departments based on relative headcount to each operating expense category.
Financial Expenses (Income), Net
Financial expenses (income), net consists of interest expense accrued or paid on our indebtedness, net of interest income earned on our cash balances and marketable securities. Financial expenses (income), net also includes foreign exchange gains and losses and bank fees.
We expect interest expenses to vary each reporting period depending on the amount of outstanding indebtedness and prevailing interest rates.
We expect interest income will vary in each reporting period depending on our average cash and marketable securities balances during the period and applicable interest rates.
Provision for Income Taxes
We are subject to taxes in the United States as well as other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax. Due to cumulative losses, we maintain a valuation allowance against our deferred tax assets. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Realization of our U.S. deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as share-based compensation, and changes in our valuation allowance.
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Results of Operations
The following table summarizes key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.
Year Ended December 31, Period-over-Period Change
Revenue: (in thousands, except percentages)
Operating expenses:
Comparison of the Years Ended December 31, 2025 and 2024
Segments
We currently manage and report operating results through two reportable segments.
•Enterprise, Education & Technology (74% and 72% of revenue for the year ended December 31, 2025 and 2024, respectively): Our EE&T segment represents revenues from all of our products, industry solutions for education customers, and Media Services (except for M&T customers), as well as associated professional services for those offerings.
•Media & Telecom (26% and 28% of revenue for the year ended December 31, 2025 and 2024, respectively): Our M&T segment primarily represents revenues from our TV Solution and Media Services sold to media and telecom customers.
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Enterprise, Education & Technology
The following table presents our EE&T segment revenue and gross profit (loss) for the years indicated:
Year Ended December 31, Period-over-Period Change
(in thousands, except percentages)
Enterprise, Education & Technology revenue:
Total Enterprise, Education & Technology gross profit (loss):
Enterprise, Education & Technology Revenue
Total EE&T revenue increased by $5.7 million , or 4%, to $134.4 million for the year ended December 31, 2025, from $128.7 million for the year ended December 31, 2024. The increase is mainly attributable to a $1.6 million increase in revenue from new customers, and a $4.1 million increase from existing customers.
EE&T subscription revenue increased by $6.7 million, or 5%, to $130.9 million for the year ended December 31, 2025, from $124.2 million for the year ended December 31, 2024.
EE&T professional services revenue decreased by $0.9 million, or 21%, to $3.6 million for the year ended December 31, 2025, from $4.5 million for the year ended December 31, 2024. The decrease in professional services revenue mainly reflects the transition of certain development projects to ongoing support and maintenance, now recognized as subscription revenue.
Enterprise, Education & Technology Gross Profit
EE&T gross profit increased by $7.0 million, or 7%, to $104.0 million for the year ended December 31, 2025, from $96.9 million for the year ended December 31, 2024. This increase was mainly due to a $5.7 million increase in revenue, lower headcount and reduction in production costs, which is a result of improved efficiency.
EE&T subscription gross profit increased by $7.6 million, or 7%, to $108.9 million for the year ended December 31, 2025, from $101.3 million for the year ended December 31, 2024.
EE&T professional services gross loss increased by $0.6 million, or 13%, to $4.9 million for the year ended December 31, 2025, from a gross loss of $4.4 million for the year ended December 31, 2024. The increase was primarily due to a reduction in professional services revenue.
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Media & Telecom
The following table presents our M&T segment revenue and gross profit for the periods indicated:
Year Ended December 31, Period-over-Period Change
(in thousands, except percentages)
Media & Telecom revenue:
Media & Telecom gross profit (loss):
Media & Telecom Revenue
Total M&T revenue decreased by $3.6 million, or 7% to $46.4 million for the year ended December 31, 2025, from $50.0 million for the year ended December 31, 2024. The decrease is mainly attributable to $3.6 million decrease in revenue from existing customers.
M&T subscription revenue decreased by $2.4 million, or 6%, to $41.1 million for the year ended December 31, 2025, from $43.5 million for the year ended December 31, 2024.
M&T professional services revenue decreased by $1.2 million, or 18%, to $5.4 million for the year ended December 31, 2025, from $6.5 million for the year ended December 31, 2024.
Media & Telecom Gross Profit
M&T gross profit increased by $1.5 million, or 7%, to $23.7 million for the year ended December 31, 2025, from $22.2 million for the year ended December 31, 2024. This increase was mainly due to reduction in production and other costs, which is a result of improved efficiency, and reductions in headcount and subcontractor costs following organizational changes implemented at the end of 2024 and in August 2025.
M&T subscription gross profit decreased by $0.3 million, or 1%, to $23.6 million for the year ended December 31, 2025, from $23.8 million for the year ended December 31, 2024.
M&T professional services gross profit increased by $1.8 million, or 108%, to a gross profit of $0.1 million for the year ended December 31, 2025, from a gross loss of $1.7 million for the year ended December 31, 2024. The increase in professional services gross profit was primarily driven by reductions in headcount and subcontractor costs following organizational changes implemented at the end of 2024 and in August 2025.
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Operating Expenses
Research and Development Expenses
Year Ended December 31, Period-over-Period Change
(in thousands, except percentages)
Research and development expenses decreased by $3.4 million, or 7%, to $46.0 million for the year ended December 31, 2025, from $49.4 million for the year ended December 31, 2024. The decrease was primarily due to a $2.9 million decrease in compensation expenses which were driven by the full recognition of high fair value RSUs granted in December 2021, which were fully expensed prior to 2025. In addition the decrease was also due to a $1.0 million decrease in subcontractor and consultant costs, primarily attributable to reduced use of outsourced resources.
Sales and Marketing Expenses
Year Ended December 31, Period-over-Period Change
(in thousands, except percentages)
Sales and marketing expenses decreased by $2.9 million, or 6%, to $44.9 million for the year ended December 31, 2025, from $47.8 million for the year ended December 31, 2024. The decrease was primarily due to a $3.2 million decrease in compensation expenses mainly due to lower headcount and full recognition of high fair value RSUs granted in December 2021, which were fully expensed prior to 2025.
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General and Administrative Expenses
Year Ended December 31, Period-over-Period Change
(in thousands, except percentages)
Unused cloud hosting commitment expense — 1,312 (1,312) NM
Acquisition related expenses 428 — 428 NM
General and administrative expenses decreased by $5.2 million or 11% , to $40.8 million for the year ended December 31, 2025, from $46.0 million for the year ended December 31, 2024. The decrease was primarily due to a $4.8 million decrease in compensation costs mainly driven by expense acceleration recognized in the comparative period in connection with the cancellation of unvested market-based equity awards granted to the Chief Executive Officer, and by lower stock-based compensation costs, largely reflecting the full recognition of high fair value options and RSUs granted in December 2021, which were fully expensed prior to 2025. The decrease also reflects a $1.3 millionone-time expense in 2024 associated with the termination of commitments with a cloud hosting service provider. These were partially offset by a $1.3 million increase in strategic initiatives costs, primarily due to professional, consulting, and other expenses, as well as by a $0.4 million increase in acquisition related expenses, incurred in connection with the acquisition of eSelf AI.
Restructuring
Restructuring expenses were $0.9 million for the year ended December 31, 2025 due to the 2025 Reorganization Plan being implemented in the third quarter of 2025 and consisting of employee severance and related costs.
Financial Expenses (Income), net
Financial expense (income), net changed by $4.5 million, to $4.0 million expense, for the year ended December 31, 2025, from $0.4 million income for the year ended December 31, 2024. The change was mainly related to increased expense of $4.5 million related to exchange rate differences primarily driven by the revaluation of NIS‐denominated liabilities. As the USD weakened against the NIS during 2025, these liabilities were remeasured at a lower USD–ILS exchange rate, resulting in a higher carrying amount in USD terms and consequently higher foreign exchange expenses.
Provision for Income Taxes
Provision for income taxes decreased by $4.6 million, or 60%, to $3.1 million for the year ended December 31, 2025, from $7.7 million for the year ended December 31, 2024, primarily due to a decreased tax liability related to income generated by our subsidiaries organized under the laws of Israel.
Liquidity and Capital Resources
Overview
Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. Our principal sources of liquidity are expected to be our cash on hand and borrowings available under our Revolving Credit Facility. As of December 31, 2025, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million is available for future borrowings.
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We believe that our net cash provided by operating activities, cash on hand, and availability under our Revolving Credit Facility will be adequate to meet our operating, investing, and financing needs for at least the next 12 months.
Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, increases in general and administrative costs and many other factors as described under Part I, Item 1A. “Risk Factors” and “—Key Factors Affecting Our Performance.” In addition, our cash and cash equivalents are maintained at financial institutions in amounts that exceed federally insured limits.
In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.
If necessary, we may borrow funds under our Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the current global economic volatility, including due to uncertainty around U.S. and foreign tariffs and other trade barriers, rising inflation and uncertainty with respect to interest rates, price increases and supply chain issues, deteriorating global political conditions and various other factors, has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. Our ability to access capital may also be impacted by political, economic, and military conditions in Israel, including the current security situation or any escalation of conflicts with Israel, and in other regions in which we operate, or changes in the business environment in those regions. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected.
Repurchase Program
In June 2024, the Company’s Board of Directors authorized a stock repurchase program of the Company’s outstanding common stock (the “2024 Repurchase Program”), which provided for repurchases up to a total of $5 million thereunder. Subsequently, in March 2025, the Board approved a new repurchase program (the “2025 Repurchase Program”), providing for repurchases up to a total of $15 million thereunder, which superseded the 2024 Repurchase Program.
On November 7, 2025, pursuant to additional repurchase authority approved by the Board, the Company entered into a stock purchase agreement (the “2025 Stock Purchase Agreement” ) with Special Situations Investing Group II, LLC (the “Sellers”), pursuant to which the Company has repurchased 14,443,739 shares of Common Stock from the Sellers at a purchase price of $16,610,300, representing a price per share of $1.15 for each of the Company’s share of common stock, calculated on the basis of a 25% discount over the average daily VWAP over the 30-day period ending on November 5, 2025. In addition, the Board terminated the 2025 Repurchase Program.
During the year ended December 31, 2025, the Company repurchased 19,087,579 shares of common stock at an weighted average price of $1.37 per share (excluding broker and transaction fees of $139).
Credit Facilities
In January 2021, we entered into a credit agreement (as amended, the “Credit Agreement”) with one of our existing lenders, which provided for a senior secured term loan facility in the aggregate principal amount of $40.0 million (the “Term Loan Facility”) and a senior secured revolving credit facility in the aggregate principal amount of $10.0 million (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”), which thereafter were extended and amended to align our business needs and other developments. In December 2023, we refinanced all amounts outstanding under the then-existing Credit Agreement, and entered into a new amendment to the credit agreement (the “Fifth Amendment”) with an existing lender, which provides for an additional term loan facility of $3.5 million in addition to the existing $31.5 million in term loans outstanding immediately prior to the Fifth Amendment. Commitments under the Revolving Credit Facility decreased to $25.0 million.
In July 2024, we entered into an amendment to the Credit Agreement with an existing lender, in connection with our share repurchase program, which updated the aggregate amount of permitted Restricted Payments (as defined in the Credit Agreement, which term includes, among other things, the repurchase of the Company’s outstanding common stock) and conditions for making such payments.
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In March 2025 and October 2025, the Company entered into additional amendments to the Credit Agreement, each of which provided for, among other things, an increase to the aggregate amount of permitted Restricted Payments and updates to the conditions for making such payments to facilitate the Company’s repurchases of securities.
On October 20, 2025, the Company entered into an amendment to the Credit Agreement, which provided for, among other things, an increase to the aggregate amount of permitted Restricted Payments and updates to the conditions for making such payments to facilitate the Company’s repurchases of securities.
The amount available for borrowing under the Revolving Credit Facility is limited to a borrowing base, which is equal to the product of (a) 500% (which will automatically reduce to 350% on the date the Term Loan Facility is repaid in full), multiplied by (b) monthly Recurring Revenue for the most recently ended monthly period, multiplied by (c) the Retention Rate (in each case, as defined in the Credit Agreement).
The Revolving Credit Facility includes a sub-facility for letters of credit in the aggregate availability amount of $10.0 million and a swingline sub-facility in the aggregate availability amount of $5.0 million, each of which reduces borrowing availability under the Revolving Credit Facility.
Following the effectiveness of the Fifth Amendment, borrowings under the Credit Facilities are subject to interest, determined as follows: (a) SOFR loans accrue interest at a rate per annum equal to Term SOFR (as defined in the Credit Agreement) plus 0.10% per annum plus a margin of 2.50% (the Adjusted Term SOFR (as defined in the Credit Agreement) is subject to a 1.00% floor), and (b) ABR loans accrue interest at a rate per annum equal to the ABR plus a margin of 1.50% (ABR is equal to the highest of (i) the prime rate and (ii) the Federal Funds Effective Rate plus 0.50%, subject to a 2.00% floor). As of December 31, 2025, the current rate of interest under the Credit Facilities was equal to a rate per annum of 6.27%, consisting of 3.67% (the 3-month SOFR rate as of December 31, 2025), 0.10% credit spread adjustment and the margin of 2.50%.
We are required to prepay amounts outstanding under the Term Loan Facility with 100% of the net cash proceeds of any indebtedness incurred by us or any of our subsidiaries other than certain permitted indebtedness. In addition, we are required to prepay amounts outstanding under the Credit Facilities with the net cash proceeds of any Asset Sale or Recovery Event (each as defined in the Credit Agreement), subject to certain limited reinvestment rights.
Amounts outstanding under the Credit Facilities may be voluntarily prepaid at any time and from time to time, in whole or in part, without premium or penalty.
All voluntary prepayments (other than ABR loans borrowed under the Revolving Credit Facility) must be accompanied by accrued and unpaid interest on the principal amount being prepaid and customary “breakage” costs, if any, with respect to prepayments of SOFR loans.
The Term Loan Facility is payable in consecutive quarterly installments on the last day of each fiscal quarter in an amount equal to (i) $0.4 million for installments payable on December 31, 2023 (deferred to January 9, 2024), through September 30, 2024 (ii) $0.7 million for installments payable on December 31, 2025 ($0.2 million of the amount deferred to January 2025), through September 30, 2025, and (iii) $1.3 million for installments payable on and after December 31, 2025. The remaining unpaid balance on the Term Loan Facility is due and payable on December 21, 2026, together with accrued and unpaid interest on the principal amount to be paid to, but excluding, the payment date. Amounts outstanding under the Credit Facilities may be voluntarily prepaid at any time and from time to time, in whole or in part, without premium or penalty.
Our obligations under the Credit Facilities are currently guaranteed by Kaltura Europe Limited, and are required to be guaranteed by all of our future direct and indirect subsidiaries other than certain excluded subsidiaries and immaterial foreign subsidiaries. Our obligations and those of Kaltura Europe Limited are, and the obligations of any future guarantors are required to be, secured by a first priority lien on substantially all of our respective assets.
The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability, and the ability of our subsidiaries, to:
•create, issue, incur, assume, become liable in respect of or suffer to exist any debt or liens;
•consummate any merger, consolidation or amalgamation, or liquidate, wind up or dissolve, or dispose of all or substantially all of our or their respective property or business;
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•dispose of property or, in the case of our subsidiaries, issue or sell any shares of such subsidiary’s capital stock;
•repay, prepay, redeem, purchase, retire or defease subordinated debt;
•declare or pay dividends or make certain other restricted payments;
•make certain investments;
•enter into transactions with affiliates;
•enter into new lines of business; and
•make certain amendments to our or their respective organizational documents or certain material contracts.
The Credit Agreement also contains certain financial covenants that require us to maintain (i) a minimum amount of Consolidated Adjusted EBITDA (as defined in the Credit Agreement) as of the last day of each fiscal quarter (which minimum amount increased through the fiscal quarter ended December 31, 2025) (the “Adjusted EBITDA Covenant”), and (ii) Liquidity (as defined in the Credit Agreement) of at least $20 million as of the last day of any calendar month.
We were in compliance with these covenants as of December 31, 2025.
The Credit Agreement also contains certain customary representations and warranties and affirmative covenants, and certain reporting obligations. In addition, the lenders under the Credit Facilities will be permitted to accelerate all outstanding borrowings and other obligations, terminate outstanding commitments and exercise other specified remedies upon the occurrence of certain events of default (subject to certain grace periods and exceptions), which include, among other things, payment defaults, breaches of representations and warranties, covenant defaults, certain cross-defaults and cross-accelerations to other indebtedness, certain events of bankruptcy and insolvency, certain judgments and Change of Control events (as defined in the Credit Agreement).
As of December 31, 2025, we had no balance outstanding under the Revolving Credit Facility and the total revolving commitment of $25.0 million remains available for future borrowings. As of December 31, 2025, we had approximately $29.0 million of borrowings outstanding under the Term Loan Facility.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended December 31,
(in thousands)
Net cash provided by operating activities $ 14,541 $ 12,233
Net cash provided by (used in) investing activities 9,050 (12,414)
Net cash used in financing activities (29,651) (3,534)
Net decrease in cash, cash equivalents, and restricted cash (5,538) (3,625)
Cash, cash equivalents, and restricted cash at beginning of period 33,159 36,784
Cash, cash equivalents and restricted cash at end of period $ 27,621 $ 33,159
Operating Activities
Net cash flows provided by operating activities increased by $2.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024.
Net cash provided by operating activities of $14.5 million for the year ended December 31, 2025, was primarily due to $12.1 million in incremental net loss, adjusted for non-cash charges of $31.3 million, and net cash of $4.7 million due to changes in our operating assets and liabilities.
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Non-cash charges primarily consisted of depreciation and amortization of $4.5 million, stock-based compensation expenses of $16.5 million and amortization of deferred contract acquisitions and fulfillment costs of $11.2 million, partially offset by non-cash interest income, net of $0.3 million and gain on foreign exchange of $0.5 million. The main drivers of net cash outflows that were derived from the changes in operating assets and liabilities were related to an increase in deferred contract acquisition costs of $5.1 million, an increase of $2.8 million in prepaid expenses and other current assets, a total decrease in employee accruals, accrued expenses, and other liabilities of $1.9 million, a decrease in deferred revenue of a $0.8 million, partially offset by a decrease in trade receivables of a$3.6 million, a net change in operating right-of-use asset and lease liability of $1.5 million and an increase in trade payables of $0.7 million.
Net cash provided by operating activities of $12.2 million for the year ended December 31, 2024, was primarily due to $31.3 million in incremental net loss, adjusted for non-cash charges of $41.6 million, and net cash of $2.1 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $5.1 million, stock-based compensation expenses of $26.3 million and amortization of deferred contract acquisitions and fulfillment costs of $11.4 million. The main drivers of net cash inflows that were derived from the changes in operating assets and liabilities were related to an increase of $5.4 million in accrued expenses and other current liabilities, a decrease in trade receivables of $3.3 million, an increase of $2.7 million in employees and payroll accruals and an increase of $0.5 million in deferred revenue, partially offset by an increase in deferred contract acquisition costs of $7.5 million, an increase of $1 million in prepaid expenses and other current assets and a decrease in trade payables of $0.5 million.
Investing Activities
Net cash flows provided by investing activities increased by $21.5 million to $9.1 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Net cash provided by investing activities of $9.1 million for the year ended December 31, 2025 was related to maturities of available-for-sale marketable securities of $71.0 million, partially offset by investment in available-for-sale marketable securities of $54.1 million, payments for businesses acquired of $7.1 million and $0.7 million in capital expenditures.
Net cash used in investing activities of $12.4 million for the year ended December 31, 2024 was related to investment in available-for-sale marketable securities of $50.9 million and $0.5 million in capital expenditures, partially offset by maturities of available-for-sale marketable securities of $39.0 million.
Financing Activities
Net cash flows used in financing activities increased by $26.1 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Net cash used in financing activities of $29.7 million for the year ended December 31, 2025 was primarily due to repurchase of common stock of $26.2 million, $3.5 million of loan repayments, cash settlement of equity classified share-based payment awards of $3.1 million partially offset by proceeds from the exercise of stock options of $3.1 million.
Net cash used in financing activities of $3.5 million for the year ended December 31, 2024 was primarily due to repurchase of common stock of $2.9 million and $2.2 million of loan repayments partially offset by proceeds from the exercise of stock options of $1.6 million.
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Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of December 31, 2025:
Payments Due by Period
(in thousands)
Less than 1 year 1-3 years More than 3 years
Debt obligations 1 $ 31,051 $ — $ —
(1) Represents borrowings outstanding under our Term Loan Facility as of December 31, 2025, together with estimated interest payments thereon based on the interest rates in effect for such indebtedness as of December 31, 2025. See “—Liquidity and Capital Resources - Credit Facilities.”
(2) Represents the lease payments under our operating leases in the U.S. and Israel. The operating lease payments for our lease in Israel assume our exercise of the first extension option for an additional five years. See Note 8, Leases, to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
(3) Consists of minimum purchase commitments mainly for our use of certain cloud and other services with third-party providers with a term of 12 months or longer. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.
We reported other liabilities of $17.7 million in our consolidated balance sheet at December 31, 2025, which principally consists of unrecognized tax benefits. See Note 12, Income Taxes, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information. We have excluded these liabilities from the contractual obligations table above. A variety of factors could affect the timing of payments for the liabilities related to unrecognized tax benefits. Therefore, we cannot reasonably estimate the timing of such payments.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
We believe that the accounting policies described below require management’s most difficult, subjective or complex judgments. Judgments or uncertainties affecting the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. See Note 2, Significant Accounting Policies, to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding these and our other significant accounting policies.
Revenue Recognition
Revenue is recognized when the customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We apply judgment in identifying and evaluating terms and conditions in contracts that may impact revenue recognition. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). When applicable, we allocate the transaction price between the separate performance obligations according to their SSP, which is based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we estimate the SSP taking into account available information, including, but not limited to, pricing practices, market conditions, and the economic life of the software.
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Income Taxes
We are subject to income taxes in Israel, the U.S., and other foreign jurisdictions. Significant judgement is required in determining the provision for income taxes, including evaluating uncertainties in the application of accounting principles and complex tax laws. We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. We evaluate uncertain tax positions on a quarterly basis, based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits, and effective settlement of audit issues.
Recent Accounting Pronouncements
Please see Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recent accounting pronouncements.
Jumpstart Our Business Startups Act of 2012
Under the JOBS Act, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an “emerging growth company” to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies.
We meet the definition of an “emerging growth company” and have elected to use this extended transition period for complying with new or revised accounting standards until the earlier of the date we (x) are no longer an emerging growth company, or (y) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements and the reported results of operations contained therein may not be directly comparable to those of other public companies. We expect to cease being an emerging growth company as of December 31, 2026.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk from changes in exchange rates, interest rates and inflation. All of these market risks arise in the ordinary course of business, as we do not engage in speculative trading activities. The following analysis provides additional information regarding these risks.
Foreign Currency and Exchange Risk
Our revenue and expenses are primarily denominated in U.S. dollars. Our functional currency is the U.S. dollar. Our sales are mainly denominated in U.S. dollars and Euros. A significant portion of our operating costs are in Israel, consisting principally of salaries and related personnel expenses, and facility expenses, which are denominated in NIS.
These foreign currency exposures give rise to market risk associated with exchange rate movements of the U.S. dollar against the NIS and Euros. Furthermore, we anticipate that a significant portion of our expenses will continue to be denominated in NIS as well as that a significant portion of our revenue will continue to be denominated in Euros.
To reduce the impact of foreign currency exchange risks associated with forecasted future cash flows and certain existing assets and liabilities and the volatility in our consolidated statements of operations, we established a hedging program in March 2022. Currently, our hedging activity relates to U.S. dollar/NIS exchange rate exposure. We do not intend to enter into derivative instruments for trading or speculative purposes. We account for our derivative instruments as either assets or liabilities and carry them at fair value in the consolidated balance sheets. The accounting for changes in the fair value of the derivative depends on the intended use of the derivative and the resulting designation. Our hedging activities are expected to reduce but not eliminate the impact of currency exchange rate movements.
A hypothetical 10% change in foreign currency exchange rates applicable to our business would have had an impact on our results for the year ended December 31, 2025, of $1.2 million due to NIS (after considering cash-flow hedges) and $5.3 million due to Euros.
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Interest Rate Risk
As of December 31, 2025, we had outstanding floating rate debt obligations of $29.0 million (consisting of the outstanding principal balance under our credit facilities). Accordingly, fluctuations in market interest rates may increase or decrease our interest expense which will, in turn, increase or decrease our net income and cash flow. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. At this time, we do not use derivative instruments to mitigate our interest rate risk. A hypothetical 10% change in interest rates during the periods presented would have resulted in a change to interest expense of $0.2 million for the year ended December 31, 2025.
Impact of Inflation
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we do not believe inflation has had a material effect on our historical results of operations and financial condition. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset higher costs through price increases or other corrective measures, and our inability or failure to do so could adversely affect our business, financial condition, and results of operations.
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Item 8. Financial Statements and Supplementary Data
KALTURA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281) 108
Consolidated Balance Sheets 109
Consolidated Statements of Operations 111
Consolidated Statements of Comprehensive Loss 112
Consolidated Statements of Stockholders' Equity 113
Consolidated Statements of Cash Flows 114
Notes to Consolidated Financial Statements 116
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Kaltura, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Kaltura, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
We have served as the Company's auditor since 2007.
Tel-Aviv, Israel
March 16, 2026
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KALTURA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
December 31,
ASSETS
CURRENT ASSETS:
Prepaid expenses and other current assets 13,938 9,481
Deferred contract acquisition and fulfillment costs, current 8,508 10,765
LONG-TERM ASSETS:
Deferred contract acquisition and fulfillment costs, noncurrent 9,403 13,605
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term loans 29,035 3,110
Accrued expenses and other current liabilities 15,592 14,262
NONCURRENT LIABILITIES:
Deferred revenue, noncurrent 2,159 67
Long-term loans, net of current portion — 29,153
Operating lease liabilities, noncurrent 14,398 15,263
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KALTURA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
December 31,
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY:
Accumulated other comprehensive income 2,759 959
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 164,697 $ 181,305
The accompanying notes are an integral part of the consolidated financial statements.
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KALTURA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
Year Ended December 31,
Revenue:
Cost of revenue:
Operating expenses:
The accompanying notes are an integral part of the consolidated financial statements.
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KALTURA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands)
Year Ended December 31,
Other comprehensive loss:
Net unrealized gains (losses) on cash flow hedges 1,760 (62) 1,118
The accompanying notes are an integral part of the consolidated financial statements.
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KALTURA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
U.S. dollars in thousands (except share data)
Number Amount Number Amount
— — — — — — — —
Stock-based compensation expenses — — — — 30,756 — — 30,756
Other comprehensive loss — — — — — 1,348 — 1,348
Stock-based compensation expenses — — — — 26,632 — — 26,632
Other comprehensive loss — — — — — (88) — (88)
Stock-based compensation expenses — — — — 16,167 — — 16,167
Other comprehensive income — — — — — 1,800 — 1,800
The accompanying notes are an integral part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31,
Cash flows from operating activities:
Gain on foreign exchange (522) (90) (728)
Changes in operating assets and liabilities:
Increase (Decrease) in trade payables 706 (534) (5,884)
Increase in accrued expenses and other current liabilities 1,145 5,376 797
Increase (Decrease) in employees and payroll accruals (682) 2,748 (2,233)
Increase (Decrease) in other liabilities, noncurrent (2,366) (14) 443
Increase (Decrease) in deferred revenue (757) 458 1,626
Operating lease right-of-use assets and lease liabilities, net 1,530 (840) (863)
Net cash provided by (used in) operating activities 14,541 12,233 (8,303)
Cash flows from investing activities:
Purchases of property and equipment (661) (521) (2,607)
Payments for businesses acquired, net of acquired cash (7,147) — —
Capitalized internal-use software development costs — — (1,493)
Investment in restricted bank deposit — — (1,751)
Net cash provided by (used in) investing activities 9,050 (12,414) (1,583)
Cash flows from financing activities:
Proceeds from long-term loans — — 3,500
Cash settlement of equity classified share-based payment awards (3,089) — —
Payment of debt issuance costs — (17) (274)
Payments on account of repurchase of common stock 30 (30) —
Net cash provided by (used in) financing activities (29,651) (3,534) 109
The accompanying otes are an integral part of the consolidated financial statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31,
Supplemental disclosure of non-cash activity:
Capitalized stock-based compensation cost $ — $ 645 $ 845
Pending proceeds from option exercises $ 136 $ 217 $ 79
Lease incentive recognized as leasehold improvements $ — $ — $ 4,924
Supplemental disclosure of cash flow information
Restricted cash included in other assets, noncurrent 100 100 100
Total cash, cash equivalents, and restricted cash $ 27,621 $ 33,159 $ 36,784
The accompanying notes are an integral part of the consolidated financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: GENERAL
Kaltura, Inc. (together with its subsidiaries, the “Company”) was incorporated in October 2006 and commenced operations in January 2007. The Company’s business operations are allocated between two main segments, Enterprise, Education, and Technology (“EE&T”) and Media and Telecom (“M&T”). The Company is a provider of video and rich media offerings for enterprises, with a mission to power rich, agentic digital experiences across organizational journeys for customers, employees, learners, and audiences. The Company’s cloud-based rich media platform is designed to help organizations create, manage, and deliver rich media experiences at scale across customer-facing, employee-facing, learner-facing, and audience-facing use cases. The Company’s core offerings consist of various Software-as-a-Service (“SaaS”) products and solutions and a Platform-as-a-Service (“PaaS”).
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP“).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, income tax uncertainties, incremental borrowing rate for operating leases, fair value of financial assets and liabilities, including fair value of derivatives, fair value and useful life of intangible assets, as well as in estimates used in applying the revenue recognition policy. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.
Financial Statements in U.S. Dollars
The currency of the primary economic environment in which the operations of Kaltura Inc. and its subsidiaries are conducted is the U.S. dollar; thus, the dollar is the functional currency of Kaltura Inc. and its subsidiaries.
Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are remeasured into U.S. dollars in accordance with Statement of the Accounting Standard Codification (“ASC”) 830 “Foreign Currency Matters” (“ASC 830”). All transaction gains and losses of the remeasured monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
Cash and Cash Equivalents
Cash equivalents are short term, highly liquid investments that are readily convertible to cash with original maturities of three months or less, at the date acquired.
Restricted Cash
Restricted cash is primarily invested in deposits held to maturity, stated at cost, which also approximates their fair value, and are used as security for the Company's liabilities. These deposits are used mainly as security for rent payments, and the Company's credit cards. Restricted cash is presented in the balance sheet as part of other assets, noncurrent.
Marketable Securities
The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments - Debt Securities”. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date. The Company classifies all of its debt securities as available-for-sale. Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Realized gains and losses on sale of investments are included in financial expenses (income), net and are derived using the specific identification method for determining the cost of securities sold.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net.
The Company periodically evaluates its available-for-sale debt securities for impairment. If the amortized cost of an individual security exceeds its fair value, the Company considers its intent to sell the security or whether it is more likely than not that it will be required to sell the security before recovery of its amortized basis. If either of these criteria are met, the Company writes down the security to its fair value and records the impairment charge in financial expenses (income), net in the Consolidated Statements of Operations. If neither of these criteria are met, the Company determines whether credit loss exists. Credit loss is estimated by considering changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, as well as other factors.
Trade Receivables
Trade receivables are recorded at the invoiced amount and includes also amounts for which revenue has been recognized but not invoiced. The allowance for credit losses is based on the Company's assessments of factors that may affect a customer's ability to pay. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors, including an assessment of the current customer's aging balance, the nature and size of the customer, the financial condition of the customer, and the amount of any receivables in dispute. There were no material write-offs for allowance of doubtful accounts recognized in the periods presented. The Company does not have any off-balance sheet credit exposure related to its customers.
Derivatives and Hedging
Derivatives are recognized at fair value as either assets or liabilities in the consolidated balance sheets in accordance with ASC Topic 815, “Derivatives and Hedging.” The gain or loss of derivatives that are designated and qualify as hedging instruments in a cash flow hedge, is recorded under accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Derivatives are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments.
Property and Equipment, net
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets:
Years
Computers and peripheral equipment 3
Office furniture and equipment 7-15
Impairment of Long-Lived Assets
The long-lived assets of the Company are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairment charges to long-lived assets during the periods presented.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Intangible Assets, net
Intangible assets consist primarily of customer relationships and technology. The intangible assets are amortized over their estimated useful lives in proportion to the economic benefits realized. Intangible assets consist primarily of customer relationships and technology.
Amortization for the intangible assets was recognized over the following periods:
Years
Customer relationships 7-9
Technology 5
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values.
Goodwill is subject to an impairment test at the reporting unit level at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company identified two reporting units - EE&T and M&T. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. An impairment loss is recognized in an amount equal to the excess. There were no impairment charges to goodwill during the periods presented.
Leases
The Company determines if an arrangement is a lease at inception. The Company currently does not have any finance leases.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company elected the practical expedient to not separate lease and non-lease components for its lease. Operating lease ROU assets also include any prepaid lease payments and lease incentives. Certain lease agreements include rental payments adjusted periodically for the consumer price index (“CPI”). The ROU and lease liability were calculated using the initial CPI and will not be subsequently adjusted, unless the liability is reassessed for other reasons. Payments for variable lease costs are expensed as incurred and not included in the operating lease ROU assets and liabilities. For short-term leases with a term of 12 months or less, operating lease ROU assets and liabilities are not recognized and the Company records lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.
The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Many of the Company’s lease agreements provide one or more options to renew. When determining lease terms, the Company uses the non-cancellable period of the leases and do not assume renewals unless it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
Severance Pay
The majority of Kaltura Israel's agreements with its employees in Israel are in accordance with section 14 of the Israeli Severance Pay Law. Upon contribution of the full amount of the employee's monthly salary and release of the policy to the employee, no additional legal obligation exists between the parties and no additional payments are made by the Company to the employee; therefore, related assets and liabilities are not presented in the balance sheet.
For Kaltura Israel employees who are not subject to section 14, the Company calculated the liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these employees multiplied by the number of years of employment as of the balance sheet date. Kaltura Israel's liability for these employees is fully provided for via monthly deposits with severance pay funds, insurance policies and an accrual. The value of these deposits is recorded as an asset on the Company's balance sheet in other assets, noncurrent.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Severance expenses recorded in Kaltura Israel for the years ended December 31, 2025, 2024 and 2023 amounted to $3,056, $2,902 and $3,194, respectively.
The Company's employees in the U.S. receive severance benefits in the event of an involuntary termination that increase in accordance with their tenure and base salary. The Company accounts for post-employment benefits in accordance with ASC Topic No. 712, Compensation – Nonretirement Post-employment Benefits. These benefits, primarily severance, are not accrued until the amount can be reasonably estimated.
Severance expenses recorded in Kaltura U.S. for the years ended December 31, 2025, 2024 and 2023, amounted to $27, $343 and $2, respectively.
Israeli Employees Defined Contribution Plan
The Company has established a pension contribution plan with respect to Kaltura Israel's employees. Under the plan, Kaltura Israel contributed up to 6.5% of each employee's monthly salary toward the plan. Employees are entitled to amounts accumulated in the plan upon reaching retirement age, subject to any applicable law.
Defined contribution pension plan expenses for the years ended December 31, 2025, 2024 and 2023 amounted to $2,336, $2,316 and $2,397, respectively.
Revenue Recognition
The Company recognizes revenue under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies judgment in identifying and evaluating terms and conditions in contracts which may impact revenue recognition. To determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:
1. Identify the contract with a customer
The Company considers the terms and conditions of contracts with customers and its customary business practices in identifying contracts under ASC 606. The Company determines it has a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. The Company engages in formal, written, and binding contracts with its customers that create enforceable rights and obligations between the parties and state each party’s rights regarding the license and services to be transferred and the terms of payment. The Company evaluates the probability of collection of the consideration that it is entitled to receive in exchange for the subscriptions and professional services it transfers to the customer. The Company records trade receivables and related contract liabilities for non-cancelable contracts with customers when the right to consideration is unconditional.
2. Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from the Company or from third-parties, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.
The Company provides subscriptions and post-contract services (“PCS”) to its Video Experience Cloud, which powers live, real-time, and on-demand video experiences. The Company provides access to its platform either as a cloud-based service (“SaaS” or “PaaS”) or, less commonly, as a license to software installed on the customer's premises (“On-Prem”) all together defined as subscriptions in the statement of operations.
Professional Services (“PS”) consist of integration, configuration and customization activities. In some of the Company's arrangements, PS are accounted for as a separate performance obligation. However, in some of the Company’s SaaS and PaaS arrangements the Company determined that the PS are solely set up activities that do not transfer goods or services to the customer and therefore are not accounted for as a separate performance obligation.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
3. Determine the transaction price
The transaction price is determined based on the consideration which the Company is expected to be entitled to in exchange for transferring the promised goods or services to the customer. This transaction price is exclusive of amounts collected on behalf of third parties, such as sales tax and value-added tax. The Company rarely provides its customers with price concessions.
The Company's contracts usually include a fixed amount of consideration, as well as variable consideration for overage usage that, in most cases, is not considered probable at the inception of the contract. Revenue accounted for as variable consideration for overages usage is recognized when the uncertainty is resolved, usually when the customer exceeds its committed usage threshold (i.e., overages are consumed) and the overages are invoiced.
The Company rarely has contracts for which the difference between the payment date and the revenue recognition timing is more than 12 months. The primary purpose of the Company’s payment terms is to provide customers with a simple and predictable way to purchase the Company’s subscriptions, not to provide customers with financing.
In addition, the Company has elected to apply the practical expedient for financing component for transactions in which the difference between the payment date and the revenue recognition timing is up to 12 months.
4. Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”).
When applicable, the Company allocates the transaction price between the separate performance obligations according to their SSP, which is based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, the Company estimates the SSP taking into account available information, including, but not limited to, pricing practices, market conditions, and the economic life of the software.
5. Recognize revenue when or as the Company satisfies a performance obligation
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised good or service to the customer. Revenue is recognized when control of the good or services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. A customer obtains control of a good or service if it has the ability to direct the use of and obtain substantially all of the remaining benefits from the good or service.
Revenue from SaaS and PaaS subscriptions is recognized ratably over the time of the subscription,because the company transfers control evenly over the contractual period, beginning from the date in which the customer is granted access to the subscription. Revenue from the sale of a term license in On-Prem deals is recognized at a point in time in which the license is delivered to the customer.
Revenue from post-contract services included in On-Prem projects is recognized ratably over the time of the PCS.
Revenue from PS that is accounted for as a separate performance obligation is recognized upon rendering of the service.
Contract Costs
Some of the sales commissions and bonuses earned by the Company's employees and management are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions and bonuses for new contracts are deferred and then amortized consistently with the pattern of revenue recognition for each performance obligation for contracts for which the commissions were earned, mainly on a straight-line basis, over a period of benefit that the Company has estimated to be mainly five years. This period of benefit was determined by taking into consideration the technology's useful life.
Sales bonuses for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period.
The Company classifies deferred costs as current or noncurrent based on the timing of when the Company expects to recognize the expense.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Amortization of sales commissions are consistent with the pattern of revenue recognition of each performance obligation and are included in sales and marketing expense in the consolidated statements of operations.
The Company periodically reviews these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. There were no impairment losses recorded during the periods presented.
The Company capitalizes costs incurred to fulfill its contracts when the costs relate directly to a contract and are expected to generate resources that will be used to satisfy the performance obligation under the contract and are expected to be recovered through revenues generated under the contract. Costs to fulfill contracts are expensed to cost of revenue on a straight-line basis over a period of five years which reflects the technological useful life.
Cost of Revenue
Cost of subscription revenue consists primarily of employee-related costs including payroll, benefits and stock-based compensation expense for operations and customer support teams, production costs mainly consist of cloud hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology and allocated overhead costs.
Cost of professional services consists primarily of personnel costs of our professional services organization, including payroll, benefits, and stock-based compensation expense, allocated overhead costs and other third-party service providers.
Research and Development Costs
Research and development costs are charged to the statements of operations as incurred, except to the extent that such costs are associated with internal-use software that qualifies for capitalization.
Internal-Use Software
Costs incurred to develop internal-use software are capitalized and amortized over the estimated useful life of the software, which is generally five years. In accordance with ASC Topic, 350-40, “Internal-Use Software,” capitalization of costs to develop internal-use software begins when preliminary development efforts are successfully completed, the Company has committed project funding and it is probable that the project will be completed and the software will be used as intended. Costs related to the maintenance of internal-use software are expensed as incurred.
The Company periodically reviews internal-use software costs to determine whether the projects will be completed, placed in service, removed from service or replaced by other internally developed or third-party software. If the asset is not expected to provide any future benefit, the asset is retired, and any unamortized cost is expensed. Capitalized internal-use software costs are recorded under property and equipment, net.
When events or changes in circumstances require, the Company assesses the likelihood of recovering the cost of internal-use software. If the net book value is not expected to be fully recoverable, internal-use software would be impaired to its fair value. During the year ended December 31, 2025 and December 31, 2024 the Company did not capitalize software development costs. During the year ended December 31, 2023, the Company capitalized $1,660 of software development costs. No impairment was recorded for the years ended December 31, 2025, 2024 and 2023.
Advertising Costs
Advertising costs are expensed as incurred and include marketing activities, demand generation, events, public relations and brand-building activities. Advertising costs for the years ended December 31, 2025, 2024 and 2023, amounted to $3,244, $3,366 and $3,951, respectively, and are included in sales and marketing expenses in the consolidated statements of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718,“Compensation - Stock Compensation” (“ASC 718”). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Service-Based Awards
The Company grants stock option awards and restricted stock units (“RSUs”), that vest only based upon the satisfaction of a service condition. For RSUs with performance conditions, expenses are recognized when it is probable that the performance condition will be achieved. The probability of achievement is assessed periodically to determine whether the performance metric continues to be probable. When there is a change in the probability of achievement, any cumulative effect of the change is recognized in the period of the change and the remaining unrecognized compensation will be amortized prospectively over the respective vesting period. The Company selected the Black-Scholes option-pricing model as the most appropriate fair value method for its option awards. The option-pricing model requires a number of assumptions, of which the most significant are the fair value of its common stock, the expected stock price volatility, expected option term, risk-free interest rates and expected dividend yield.
The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. For RSUs, the Company determines the grant-date fair value of the RSUs as the fair value of the Company’s common stock on the grant date.
The Company recognizes compensation cost for options and stock awards that have a graded vesting schedule and contain only service condition on a straight-line basis over the requisite service period for the entire award. Forfeitures are accounted for as they occur instead of estimating the number of awards expected to be forfeited.
Market-Based Awards
The Company has granted three of its executives stock options that vest only upon the satisfaction of market-based conditions. The market-based conditions reflect specific prices for the Company’s common stock, which must be exceeded for each tranche of the grant to vest.
For market-based awards, the Company determined the grant-date fair value utilizing a Monte Carlo simulation model, which incorporates various assumptions including expected stock price volatility, risk-free interest rates, expected exercise behavior for vested options, expected date of a qualifying event and expected form and timing of a liquidity event. The Company estimated the volatility of the common stock on the date of grant based on the weighted average historical stock price volatility of comparable publicly-traded companies. Because the option does not qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, the expected term cannot be estimated based on the simplified model described in the Bulletin. In order to address the term, the Monte Carlo simulation model includes an assumption about the price level at which vested options are expected to be exercised (the “Sub Optimal Exercise” factor). The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The rate used is based on the expected term of the option.
The Company recognizes compensation expenses for the value of its market-based awards based on the accelerated attribution method over the estimated requisite service period of each of the awards. The Company has determined that there is no explicit or implicit service period for the awards, and therefore the requisite service period is based on the derived service period. The derived service period is the term calculated in the Monte Carlo valuation model as described above. The derived service period is the median duration of the simulated price paths in which the option tranche vests, which is determined by the above assumptions.
Business Combination
The Company accounted for business combination in accordance with ASC 805, “Business combinations”. ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at fair values as of that date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings.
Acquisition related costs are expensed to the statement of operations in the period incurred.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. This codification prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and for carry-forward tax losses.
Deferred taxes are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, “Income Taxes”. Accounting guidance addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements, under which a company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Accordingly, the Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return (see also Note 12).
Net Loss per Share Attributable to Common Stockholders
The Company's basic net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. The diluted net loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, restricted cash and trade receivables.
The majority of the Company's and its subsidiaries' cash and cash equivalents and restricted cash are invested with major banks in Israel, the United Kingdom and the United States. Such investments in the United States may be in excess of insured limits and are not insured in other jurisdictions. However, in general, these investments may be redeemed upon demand and therefore bear minimal risk.
The Company's trade receivables are geographically dispersed and derived from sales to customers mainly in the United States, Europe and Asia. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures.
Major customer data as a percentage of total revenues:
The following table sets forth a customer that represented 10% or more of the Company’s total revenue in each of the periods set forth below:
Year ended December 31,
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements and Disclosures”, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
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