Good morning everyone, and welcome to the Kaltura Second Quarter 2022 Earnings Call. Please note that this event is being recorded. All material contained in the webcast is sole property of and copyright of Kaltura, with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Thank you and good morning. With me today from Kaltura are Ron Yekutiel, Co-founder, Chairman, and Chief Executive Officer, and Yaron Garmazi, Chief Financial Officer. Ron will begin with a summary of the results for the second quarter ended June 30, 2022, and the trends and areas of focus that are expected to impact the remainder of 2022. Yaron will then review in greater detail the financial results for the second quarter, followed by the company's outlook for the third quarter and full year of 2022. We will then open the call for questions. Please note that this call will include forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding Kaltura's expected future financial results and management's expectations and plans for the business.
These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Important factors that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Kaltura's annual report on Form 10-K for the fiscal year ended December 31, 2021, and other periodic SEC filings, including the quarterly report on Form 10-Q for the quarterly period ended June 30, 2022, to be filed with the SEC. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Kaltura assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Please note, we will be discussing a non-GAAP financial measure, adjusted EBITDA, during this call.
For a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric, please refer to our earnings release, which is available on our website at www.investors.kaltura.com. Now, I'd like to turn the call over to Ron.
Thank you, Erica, and thanks to everyone for joining us on the call this morning. Today, we reported total revenue for the second quarter of 2022 of $42 million, up 1% year-over-year, and subscription revenue of $38 million, up 4% year-over-year. Adjusted EBITDA for the quarter was negative $8.5 million. In the second quarter, we resumed sequential growth across a number of metrics, including total revenue, subscription revenue, ARR and RPO, and saw leading indicators such as conversion of longer sales cycle deals, sales force productivity, and new subscription bookings, which we believe support an expected increase in growth in quarter four. One of the drivers of this increase in demand is the recent commercialization of our event platform.
This product transcends our initial event offering that powered mainly large flagship events along with event services to now also power centrally all events of all sizes across the organization with minimal ongoing event services. As an example, during the quarter, we signed several important events deals, including with one of the Big Four accounting firms, who chose to use our platform to power thousands of internal and external events globally. Elevating and tracking the level of engagement in virtual events is very important for them as they're digitizing their internal and external communication to increase efficiency and productivity, reduce costs, and to achieve their net zero emissions goal. In this multimillion-dollar deal, our event platform is consolidating and replacing several existing webcasting technologies while providing a high-quality engaging experience with brand consistency across regions and departments and providing insightful and actionable analytics.
Beyond our event offering, we also closed video and TV content management and live streaming deals across all of our markets. For example, a major U.S. bank selected Kaltura, signing a multimillion-dollar contract to manage their internal video content and support corporate communication, and two other existing major bank customers purchased additional offerings. Kaltura now powers video content management and live streaming for five of the six largest U.S. banks. On the product development front, we had another busy quarter, adding to our event platform new and improved templates, support for custom URLs, advanced analytic dashboards, and additional unique broadcast flows and management features. We continued to boost our video quality, optimize our end-user interface, and further consolidate our on-demand, live, and real-time components into a single comprehensive and streamlined offering that is simple, intuitive to use, and cost-effective.
We're continuing to advance towards the release of a new advanced version of our self-serve webinar product, which among other things, includes full integration with our powerful video content management and publishing capabilities. We continue to gain market recognition for our product leadership, including winning the digital or hybrid event platform of the year award at the annual B2B Marketing MarTech Awards and being included as a representative vendor in the 2022 Gartner Market Guide for Event Technology Platforms report. On November fifteenth, we plan to host our second annual Virtually Live! event focusing on the future of events. Be sure to save the date, and you're also invited to tune in to our recently launched Virtually Live! The Podcast, which includes weekly episodes of leading marketers from around the globe and across industries.
While the growth engines that we discussed at the beginning of the year are producing results, given the macroeconomic outlook, IT budgets are being reevaluated, presenting headwinds to the slope of a rebound. While this delay reduces our forecasted revenue for the full fiscal year of 2022, we still expect a return to growth in quarter four and stronger year-over-year growth in 2023. It's important to note that most of the forecasted growth in Q4 this year is a result of already booked deals, not future ones. Moving on to discuss our bottom line. Earlier this year, we took certain preliminary saving actions and reduced our hiring, and now given the fluid market outlook, we're adjusting our spending accordingly. Today, we announced a cost reduction and reorganization plan that includes, among other things, downsizing approximately 10% of our current employees.
The plan is heavily focused on realigning our operations to further increase our efficiency and productivity. Given the maturity of the E&T and M&T business units, including how their sales cycles, deployment cycles, and margins continue to converge, we've decided to merge the two segments together and take advantage of operational overlaps. Going forward, we will have a single horizontal structure with mostly cross-company functions in product development, marketing, sales, and professional services. For years of incubating these business units separately, we could benefit from great synergies by merging them together. When you consider the cuts and our path back to profitability, remember that even before COVID in 2019, we achieved positive adjusted EBITDA and cash flow from operations, and then continued delivering positive adjusted EBITDA and cash flow from operations in 2020. In 2019 and 2020, we also accelerated our year-over-year revenue growth rate.
We have done it before, and we believe we can do it again. Translating the cash flow, while we experienced high operational spend in the first half, we expect to see a reversal in the second half of the year, throughout which we expect to post a single-digit cash flow from operations loss. In summary, while it has been a challenging year for the tech world, video industry, and Kaltura, we're encouraged to enter the second half of the year with increased booking levels, a fully commercialized event platform, and new self-serve products on the way, and a more nimble and agile organization that we believe will bring us back to profitable growth. With that, I'll turn it over to Yaron, our CFO, to discuss our financial results in more detail. Yaron.
Thank you, Ron, and good morning, everyone. As I review our second quarter results today, please note that I will be referring to a non-GAAP metric adjusted EBITDA. A reconciliation of GAAP to non-GAAP financial is included in today earnings, which is available on our website at www.investors.kaltura.com. Total revenue for the second quarter ended June 30, 2022 was $42 million, up 1% year-over-year. Subscription revenue was $38 million, up 4% year-over-year, while professional services revenue contributed $4 million, down 22% year-over-year. This figure also embodied an approximate revenue reduction of $485,000 as a result of currency headwinds that occurred during the quarter. These headwinds are forecasted to continue and weigh our revenue during the second half of this year as well.
The remaining performance obligation were $172.7 million, up 10% year-over-year, of which we expect to recognize 62% of revenue over the next twelve months. Annualized recurring revenue was $151 million, up 4% year-over-year. Our net dollar retention rate was 100% in the second quarter compared to 107% in Q1 2022. Note that this quarter, net dollar retention metrics incorporates in full impact of the large customer that, as mentioned in our last earnings call, reduced some of their business with us in the fourth quarter of 2021. This customer has since renewed various existing projects and has partnered with us on new ones. Within our E&T segment, total revenue for the second quarter was $30.4 million, up 1% year-over-year.
Subscription revenue was $28.3 million, up 4% year-over-year, while professional services revenue contributed $2.1 million, down 30% year-over-year. Within our M&T segment, total revenue for the second quarter was $11.6 million, up 2% year-over-year. Subscription revenue was $9.7 million, up 5% year-over-year, while professional services revenue contributed $1.9 million, down 10% year-over-year. GAAP gross profit in the quarter was $26.7 million, representing a gross margin of 64%, up from 62% gross margin in Q2 2021.
Within our E&T segment, gross profit for the second quarter was $20.7 million, representing a gross margin of 68%, down from 70% gross margin in Q2 2021. Within our M&T segment, gross profit for the second quarter was $6 million, representing a gross margin of 52%, up from 42% gross margin in Q2 2021. R&D expenses for the second quarter were $14.4 million, or 34% of revenue, compared to 28% in Q2 2021. The increase was driven by additional head count and payroll expenses. Sales and marketing expenses for the second quarter were $16.4 million, or 39% of revenue, compared to 25% in Q2 2021. This increase was driven by additional sales and marketing investment, including head count and personnel-related expenses.
G&A expenses for the second quarter were $11.3 million, or 27% of revenue, compared to 23% in Q2 2021. The increase was driven by additional head count and third party related to expenses related to being a public company. GAAP net loss in the quarter was $17.3 million, or 0.13 per diluted share. Adjusted EBITDA was negative $8.5 million, decreasing from negative $1 million in Q2 2021. The result is in line with our former plan to increase our strength in order to further fuel our growth, as discussed earlier. Turning to the balance sheet and cash flow. We ended the quarter with $94 million in cash and marketable securities.
Net cash used in operating activities was $22.5 million in the quarter compared to $0.9 million net cash provided by operating activities in Q2 2021. The increasing use of cash was driven by a couple of major customers, the delayed payments, both already collected in July. As Ron stated, we are expecting a single-digit net cash flow loss from operations throughout the whole second half of 2022, and in Q3, we have already seen a strong collection momentum. Now I will provide some information regarding our cost reduction and reorganization process. In the second half of 2022, total charges related to the restructuring are expected to be around $1 million. Total cost reduction on an annualized basis from head count downsizing is expected to be around $18 million. As Ron mentioned, we believe this will enable us to achieve a profitable growth faster.
I would now like to turn to our outlook for the third quarter of 2022 and for the fiscal year ending December 31, 2022. In the third quarter, we expect subscription revenue to grow by 0% to 2% to between $37.7 million to $38.4 million, and total revenue to decrease by 5% to 3% to between $40.8 million and $41.7 million. We expect a negative adjusted EBITDA to be between $8 million and $10 million. For the full year, we expect subscription revenue to grow by 5% to 7% to between $152.1 million and $155.1 million, and total revenue to grow by 2% to 4% to between $168.4 million and $171.6 million.
We expected the full-year negative adjusted EBITDA between $27 million and $32 million. In summary, as Ron mentioned, our outlook reflects an expected return to growth in the fourth quarter of this year, in line with our original focus of acceleration during the second half of this year, albeit a little delayed within the second half because of this year's unforeseen macro circumstances. The cost reduction and the reorganization that we are conducting is planned to help bring us back to profitable growth. We are looking forward to realizing synergies to combine our two business units. Lastly, our total cash flow from operations throughout the whole second half of 2022 are forecasted to be in the single-digit loss. With that, we will open the call for questions. Operator?
Thank you. We'll now begin the question and answer session. To ask a question, please press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes with Gabriela Borges with Goldman Sachs. Please go ahead.
Good morning. Thanks for taking the question. Ron, I wanted to start on your comment on the reevaluation of budget. Can you give us a little more color here? How are you seeing the trend difference between M&T versus E&T? And what are the incremental changes that you're seeing in the pipeline or the willingness to invest that maybe wasn't contemplated three months ago or at the beginning of the year?
Again, I wanna make sure I understand the question. It's not so much about the reevaluation of our budget, but more what's the underlying business trends?
Yes, correct. What you're hearing from customers.
Okay, great. I would love to do that. Thank you, Gabriela. So first of all, I mean, as mentioned, booking rebounded this quarter to a level that we've not seen since Q3 2021. I mean, that Salesforce productivity was the highest that it's been in over one year. The EMP sales reps that are doing new logos, it was as good as it was at 2020, and for the customer success folks, it was back to Q2 2021 levels. If you're looking at the proportion of new logos versus upsells, the new logos picked up again after quite a lot of time that it was more upsells than new logos. New logos was kind of a big push forward. We spoke last time about various deals that have been prolonged and the pipeline building up.
Now basically a lot of them have come together, and a lot of them close now, and some of them are in advanced discussions for Q3. In the longer cycles, that initially we said that people were having less urgent stuff like they had in COVID to address an immediate need. It's less about usage, it's more about thoughtful response to strategic need around video. It took longer, but we're seeing these close. An example of that is the move from the flagship events to the new event platform. We've given examples. I'll give you a couple more about the event platforms that are closing. In any case, demand is coming across all segments. The largest one is still enterprise. Geographically, it's more or less still the same blend. In E&T, it's mainly North America, followed by Europe and then APAC.
Media and telecom, most of the bookings this quarter were upsells and not new logos coming from EMEA, then APAC, then North America. No change in our channel business. It's still on or about 10%. Less professional services. As we've seen before, the percent of professional services out of the new bookings is lower. We have not heard from customers direct discussions on reduced interest because of recession, but obviously we're cautious. I did mention in our last call that we feel that at least a good portion of our business is somewhat more recession-proof, education, watching more TV. In some areas, we're replacing multiple vendors and introducing savings because of economies of scale. Also in general, our event platform is much more economical than a flagship event with a lot of services.
That's kind of the high level of what we've seen. If you're looking at a bit of sample deals across enterprise versus media and telecom events, we've given an example of a multimillion-dollar deal around a new customer that's one of the Big Four. We had another customer that's a leading European public sector IT service provider that needed us for webcasting. We had a global asset management firm that's had their two-day investor event, several mid-sized tech companies holding their flagship events. In the traditional content management, we mentioned a bank, a new one, and now we're in five out of six. Bunch of existing ones use this more to support workflows for both wealth management and live streaming.
EDU continues to be a combination of learning, management systems, lecture capture and virtual classroom, and we continue our global expansion, closing new deals in U.S., Italy, Switzerland, and U.K. In media and telecom, we expanded our customers into new countries. We have a big telco in Eastern Europe, which we went into multiple new countries with them. We have a lot more services that we provided around the world for existing customers in the U.S., Europe and Asia. In the pipeline, we have major existing banks that are moving forward to add event platform on top of content management. One of them, by the way, closed already in July, and there's more tech companies that are holding flagship events. By the way, some of them are through AWS as a partner.
This hopefully gives you a feel of the current deal flow. Is that good for you, Gabriela?
Yes. Thank you. Thank you for the detail. The other question I have is a little bit of a strategy question, which is: You have the offer on the table for an acquisition. We saw the shareholder rights plan press release from earlier in the week or last week. Could you give us an update on?
Yep.
How you're thinking about Kaltura's path as a standalone company versus via potential acquisition?
Yeah. Well, you saw the two press releases that we issued out. Insofar as Panopto's offer, our board will evaluate the offer in due course, as noted. Insofar as the accumulation of Kaltura shares by Panopto's sponsor, K1 Investment Management, then we did adopt a limited duration stockholder rights plan to help promote fair and equal treatment of all stockholders. We also wanna make sure that the board remains in the best position to discharge our fiduciary duties. It's an available standard tool for this type of situation, and we're using it. Obviously, we can't comment further on the topic at this point, and the board will provide its feedback in due course.
That makes sense. Thank you.
Thank you.
The next question comes with Matt Niknam, with Deutsche Bank. Please go ahead.
Hey, guys. Thank you for taking the question. My question is on adjusted EBITDA. You'd mentioned the headcount reductions are expected to drive annualized savings of about $18 million. I'm just wondering, when do you hit that run rate cost savings level? And then ultimately, what does that imply for adjusted EBITDA in terms of just getting back to breakeven or positive timing-wise? I have just one housekeeping question as well. You mentioned single-digit cash flow from operations loss. Is that for 2H or is that for the full year? I just wanna clarify. Thanks.
Hi, Matt Niknam. It's Yaron. Thank you for the question. Regarding the actions that we took around reducing our head count and some other savings.
Yeah, the full impact of the $18 million is going to be as soon as we basically complete the process, which will take us another couple more months probably to do it. We will start to see the fruits of the improvement in profitability in Q4. Even if you are doing the math right now in order to see the adjusted EBITDA that we guided for Q3 and the remaining for Q4, you will see a significant improvement. The full impact will hit us on next year on 2023. Based on the fact that we, as Ron mentioned, we see a very nice momentum in booking and very controlled churn levels, we do believe that we will see the acceleration in revenue continuing to next year.
Taking the two line items of the revenue continue to accelerate and at the same time save at least $18 million on an annual basis, we believe that next year, adjusted EBITDA is going to be in the one digit, and we will do our best to take it as close to the break-even. This is regarding the profitability, especially going to next year. Compared to the number of this year, which is around $30 million, it's going to go all the way to a negative one digit probably for next year. In terms of the cash flow, you will see a one digit negative cash flow from H2 as a whole.
I can tell you that we started this quarter with a very, very strong collection momentum, which by the way, some of it was the downside that we saw in Q2. We feel very comfortable that it's going to be a mirror situation in H2 compared to where it was in H1 in terms of the cash flow.
If I could just follow up one.
Yeah.
One other, question I had. Go ahead, sorry.
Yeah. One more comment. The future cash flow is at this point lagging a bit, a little bit behind the adjusted EBITDA as you can see. As soon as we are improving the adjusted EBITDA going to next year, we do believe that going into 2024, we will be able to take it to a positive territory, at least to break even. As we said before, we are managing our financials in order that we will not need to raise additional cash in the future.
Got it. The follow-up I had is just more around the longer sales cycles. Has that varied at all across verticals, geographies? I'm just wondering if there's any context. There's more of a general statement in terms of macro impacting the base. Thanks.
I think we've seen it most in enterprise, more so than any other vertical. Not so much geographically different, both U.S. and Europe. Part of that was a function or is a function of maybe that rebound post-COVID. Part of it is a function of the fact that we're moving to an event platform that applies to many more users, and as such, requires a more strategic review and further consensus across different buyers. Obviously, the benefit is it's a much more stickier experience that's year long, and part of it might be related to the current macroeconomic condition. It's largely seen in the enterprise, but it is also seen to some extent in education.
Media telecom is always hard to tell because it's a clunkier business that does not come with the same volume of deals and not the same frequency of deals, and so it's a bit hard to say.
That's great. I appreciate the color from both. Thank you.
The next question comes from DJ Hynes with Canaccord. Please go ahead.
Hey, good morning, guys. Ron, I think at the time of the IPO, the business, just in ballpark terms, was roughly evenly split corporate education and M&T revenue. Would love to get an update like how does that break down today, what are the growth rates of the respective efforts, and how does each contribute to margins?
Insofar as, between the three in E&T or in media and telecom as well? What was the question there?
All three of them. Corporate, education, M&T. Would love just get an update on kinda how each is contributing to revenue, what are the growth rates of each business, how do they contribute to margins?
Happy to do that. In the IPO or at the IPO time, we were looking at about a third of the business coming from media and telecom, and then somewhere around 30% more or less coming from enterprise and another 30% coming from education, another probably 10% coming from tech OEM side of the business. Insofar as trends we've seen, I'll give you an example. This quarter, what we've seen now, EDU was the fastest year-over-year revenue grower, followed by media and telecom, then enterprise, then tech OEM by way of order. If you look by way of bookings, then enterprise was the fastest grower by way of bookings. It's a bit of a dance there that sometimes you're pulling forward, sometimes you're pulling back.
All in all, you know, where is the greatest momentum we believe this year? I think the greatest momentum is in enterprise. The reason is that it is the largest TAM, and it is the largest gain. When we moved from content management into also supporting events and webinars and the rest of it, this is something that is a big market opportunity for us in a post-COVID world. Insofar as margin structure, you would have seen the improvements on the media and telecom side that they've pulled up. We said prior that there's gonna be the biggest change there, which indeed has been happening. It has become more effective on the recurring subscription revenue with economies of scale and merging environments as it becomes more SaaS-y. The percentage of professional services have dropped as we become more transactional there.
We've gained quite a lot of points on gross margin in M&T. There's been a bit of a shrinking of the gross margin on the ENT side of the business. If you look quarter by quarter, not very significant, but a bit there. Big portion of it is as we move more towards live and real-time, the cost of goods there for cloud resources, et cetera, are weighing a bit down. The total of it together had caused for an increase in gross margin for the company, which we expect will continue to occur in the quarters ahead of us per the original plan, the multi-year plan that we've provided.
What's interesting, and we said that as it pertains to the restructuring plan, is that while M&T gross margins go up and ENT went down a bit, in both cases, representing their trends, in one less professional services, in the other a bit more through the events, they become even more similar to each other, which both operationally and financially is a good direction for us as we merge these activities. Does that address your question?
Yeah. No, it's super helpful color. One follow-up just in the process with K1. I mean, can you comment on how much engagement you've had with their team and where the board stands in the evaluation of the offer that's on the table?
Yeah, obviously, I'm not privileged to share that. The moment we will be in a position to, we'll absolutely share it. But thank you for asking.
Okay. Thanks, guys.
Thank you. Appreciate it.
The next question comes from Michael Turrin with Wells Fargo. Please go ahead.
Hey, guys. This is Austin Williams on for Michael Turrin. I just wanted to drill down into the FX headwinds in the quarter and the guide. Is there anything specific that we should be aware of as it relates to currency exposures and how those impacted the full year guide? Conversely, just have you seen a benefit to OpEx as a result of the stronger dollar?
Yeah, it's a great question because obviously all of us are trying to handle the situation around currency for always. Let me give you a very quick overview. On top line, definitely there is a pressure due to the weakness of the euro compared to the dollar. We mentioned it in my statement that there was an impact of roughly $0.5 million on Q2 because of the euro compared to the dollar. Definitely when we build the guidance for the year, we were very thoughtful to where it can go, and there is a negative impact on the rest of the year, but we took it into consideration in the number. Roughly close to 30% of our business is coming from Europe, so there is an impact there.
The other side of the coin is that, we have some savings coming from the Israeli operation, which obviously we have less expenses in terms of dollars based on the fact that dollar is also stronger compared to the Israeli currency. We also took it into consideration in the way that we guided through the rest of the year in terms of the adjusted EBITDA. As I mentioned, to make a long story short, there is a pressure on top line, which by the way, this is one of the main reason for the fact that we'll reduce the numbers for the rest of the year. From the Israeli shekel, there is some benefit, and we already took into consideration in initiating the guidance for the adjusted EBITDA.
That's great. I just had one follow-up. Dollar-based expansion was down in the quarter. I'm just wondering how or if churn is impacting this number and if you have any thoughts on just where this number can return in the longer term. Thank you.
Yeah. Yeah. I can tell you that growth churn, other than the impact that we had from the specific customer that we mentioned at the beginning of the year, we are still taking the hit because of this customer. Other than this specific customer, we didn't have any significant change in our gross retention, so gross churn. It was very similar to the numbers that we had before. Most of the impact that you see in NDR, which went down, some of it came definitely from this specific customer. Other than that, some of the booking that we had in this quarter, despite the fact that, as Ron mentioned, it was a very strong quarter, much stronger than previous quarters.
It came at the last part of the quarter, in the last few weeks of the quarter, and therefore have a very limited impact on the actual revenue for the quarter. But if you look going forward, and we are not guiding for the NDR going forward, at least for the near term, it will probably stay around the same level and will be under some pressure. But we do believe that we see the path going into back into the numbers that we had pre-COVID. I would not assume that we will go at this point to the numbers that we saw in COVID, which is close to the 120%, but definitely we see a path later in the year to go back to the numbers that we had before COVID.
I'll just add one point to this, and we said that in the last call when we were throwing what we expect to happen to NDR, and we said it's gonna probably come down. The reason is that Q2 2021 last year is a tougher comparison than Q1 2021 given the COVID increases. The base by which we're comparing is rising. Conversely, as we look into the continuation of this year, that base starts balancing off. At quarter two, it's a tougher comparison, and we knew the numbers are gonna come down.
The last point is that the euro, regarding your regional previous question, the euro definitely put some pressure on NDR as well in this quarter compared to last year quarter.
The next question comes from Ryan Koontz of Needham & Company. Please go ahead.
Thanks for the question. Nice to hear about the, you know, higher productivity there on the sales front. Any color you can help us understand the, you know, adapting go-to-market to this new environment and your kinda near-term tangible opportunities, you know, any changes in sales motion or progress with your partners, your channel partners like AWS would be helpful. Any color there. Thank you.
Yeah. We are, as I said, a bunch of deals are closing with AWS. They're a good partner. I think it's the maturity of the event platform is supporting an acceleration here, and a good amount of deals are coming from that direction. As I mentioned, it's a new product that has come to be throughout this year, given birth at the beginning of this year and is now in this quarter in earnest for the very first time contributing in a more significant manner, and the same is expected to happen next quarter. It's quite significant. I'd say that a lot of these deals, we said that we've never lost them, but just that they came in, and they took longer, and then they start closing.
We said that the pipeline was getting stronger, and we could see the impact of that, and that's happening. It's not a big surprise for us. We were waiting for these deals to happen, and now they have, and we expect more of that to happen. There's a question, how much of this was more a kind of a COVID reflex that went down over the first few quarters and now kinda come back up, especially as I mentioned, when people move from the immediate need that they have for the next month for an event to a more strategic thought process around when and how they're gonna replace the whole infrastructure for the company. Even now, as we get more into questions around IT budgets, the fact that we could replace multiple vendors and do that in a more cost-effective way, that's really important.
I think that's all leading towards higher productivity. We expect that to continue to be there. You know, one very important thing to note as we think about the future and the numbers that could be there. As part of the reorg that we did now, we said we're obviously combining the two business units in a way that's enabling us to balance better between growth and profitability, but at the same time, trim and optimize and get a lot more synergies. From a sales perspective, we're continuing to kind of freeze. We said that earlier, that we're gonna slow down the addition. We're kind of freezing at the current level of the ramped headcount that the company has.
What's interesting is that the acceleration on the second half of the year is not affected by it because it's already kind of backed in into all the numbers that you have and the people that we have now. But if we maintain the same overall productivity that happened this year, not this quarter, but all the way, including the bad first quarter, everything till now, and even less than that, then we apply the same gross retention level of this year, that is the same gross retention as last year. Kind of the base gross retention, we're set to more than double growth rates next year.
Again, obviously, we're not providing guidance, but the idea here is that the acceleration that we see coming for Q4 based on existing deals and the general notion that it doesn't take a revolution or even an evolution competitive this year, which was a very, very tough year to bring about a significantly higher growth rate, is something that we could expect to see given existing year results. Let alone the productivity of this quarter continues forward, that's a higher number. If we start assuming upsides that are associated with other factors like the economy doing better, our new event platform bringing more business, et cetera, it could jump up materially.
That coupled with the fact that as mentioned, the adjusted EBITDA profitability of a single digit, hopefully mid-single digit next year, and the break even on the cash, that's gonna come after, and specifically in the second half of this year being at that, single digit cash, I think puts us in a different place, and, we're looking forward to that.
Got it. That success with the events platform, is that primarily coming from enterprise versus tech OEM or anything like that?
All of them are consuming it. In the tech OEM, we're actually supporting folks that are looking to insert key components of that into their capabilities. We have some very interesting cycles there. On the education front, we have multiple schools that have taken our event platform. I mean, one thing to note as we generally think about events and where events could go and what's events about, you know, events are a lot of different things. Events is internal and external, it's marketing, it's customer education, it's training and executive communication. It's all the way from small webinar to user group, to digital gathering, to trade shows. The way we've built the product, it actually touches all these different things across spectrum.
You know, as we look into the future, one, there's immense benefit to market peers for using these virtual event platforms, you know, more so than physical just events in terms of reach and cost and data and stuff like that, than the budgets, as we said, post-COVID that are lower, and that can apply. Generally, if there's a recession, that's gonna be probably more effective. We see that used in a lot of different places. We think it kinda brings together the best of what we could offer. It's a dramatic shift for the company compared to what we were a couple of years ago. It's a multi-year move, and we're completing it.
You know, the reason we continued to invest over the last couple of years was to get to this point, and I think we're now at a point that enables that.
Got it. Thanks, Ron.
Thanks.
Once again, if you have a question, please press star one. The next question comes from Patrick Walravens with JMP Securities. Please go ahead.
All right. Great. Thank you. I mean, Ron, it's been a rough go so far as a public company. You know, there's some green shoots, but just big picture, as CEO, what do you think is the best way for Kaltura to maximize shareholder value?
That's an important question then. Thank you, Pat. Look, at the end of the day, the goal of any company is to create free cash flows and to create profits and to be able to distribute these profits over time. Obviously, you need to strike the right balance between growth and profitability, which we're attempting to do. It's different things in different times. It's not always the same balance. I think we've now adjusted that balance, and we're going into thoughtful growth and more profitable growth into the future. I think it was important for us to have moved from the smaller pond of content management into the larger pond of additional real-time and events, et cetera, just because the world is converging. It's not that we picked a different fight.
It's all the vendors are coming to offer an end-to-end solution that's VOD live in real time into these use cases. I think that kind of electron jump that we needed to have done was important to invest in the potential of the company in the next few years. I think now that we are coming to be with the right product set, we need to more quickly come back to what we've done before, which is to show profitable growth. I think this has not been a typical year. You know, COVID wasn't a typical year, but the year after COVID has not been for the industry and for us. There obviously have been a few specific things that pertain to Kaltura.
There's a lot of things that are beyond specific, and I think that regression to the mean is a powerful force, and things are gonna come back, and we are seeing them come back. Like I said, we have leading indicators to talk about productivity and about booking, and so we believe that we're gonna be able to come back to profitable growth.
Okay. I mean, do you think that evaluating your strategic options should also be part of that?
That's always the case, and it's always being considered in any given time. Whatever is right for the shareholders is being looked at. It's not strategy in itself or by itself. If your question is, are we evaluating the current deal that's on the table? Will we be evaluating other options? That's our job, and we'll always be doing it for sure.
Okay. Thank you.
It appears we've got no further questions, so this concludes our question- and- answers session. I would like now to turn the conference back over to Ron Yekutiel for any closing remarks. Please go ahead.
Just wanna thank you all again for your time and, support and, hopefully a continued, healthy and successful year for everybody. Take care. Bye-bye.
This conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Have a good day.