Hello, everyone. I'm Jake Mutchler, research analyst at Noble Capital Markets. I'd like to welcome Kaltura. The ticker is KLTR. With us today is Ron Yekutiel, President and CEO, and Liron Sharon, Executive Vice President of FP&A. Following the company's presentation, there will be a brief Q&A session, which I will moderate. If you have any questions, please send it as a chat. A replay of this presentation will be available on channelchek.com following its conclusion. Now I'll pass it over to Ron Yekutiel and Liron Sharon from Kaltura.
Thank you, Jake, and everybody at Noble Capital Markets. Thank you all for joining us today. Looking forward to telling you a little bit about the company, and please follow up with us individually. Let me talk about Kaltura at a glance and jump into a few slides, and then a quick demo, and then Q&A. We're a leading enterprise video SaaS provider, have been around for 20 years. We've expanded in the recent year into providing rich agentic AI experiences. It's giving us a big boost, a lot of excitement around this. You're going to see accolades from the market and the potential of this great technology to boost us forward. Since we're an established business, we have already 1,200 customers, including 25% of the U.S. Fortune 100. We're engaging 10 million people actively every month, sometimes 20, at work, school, and home.
This is a bit about our financials. We've IPO'd in 2021. Our revenue guidance for this year is $184 million with 2% year-over-year. Now is the time to state the entire video technology industry had been stagnant over the last few years post-COVID. A lot of companies have sold out, but they didn't have the potential that Kaltura has to go beyond and add the things I'm going to show you and get back into a blue ocean, which we'll discuss. In recent years, revenue had climbed very moderately. We believe that is about to change. We haven't provided yet guidance for the future, but this is something that you'll see in your own eyes and expecting to take us to a good direction. 97% of our revenue is subscription-based. We have 74% gross margin.
We are operationally profitable with 16.5 latest guidance for adjusted EBITDA after raising it twice. Free cash flow last year, we don't provide guidance, was $13 million. It'll remain positive. It's a stable company, has certain scale of revenue, had slowed down with the entire industry, had done better than others, and is now getting into an exciting place. We have 600 employees around the world. Let me show you a bit what our traditional business was about, and then very quickly move into the exciting new stuff that's synergistic, and then show you a quick demo of the new things. First things that we've been giving for a while is a video content management system. You can see here at the bottom left examples of that.
What it is a system that enables enterprises, whether they're media companies, enterprises, education institutions, to manage all the video on their site. It's uploading, managing, distributing, publishing, engaging, analytics, being able to put it into cross device and create workflows for publishing, the syndication, everything, because media is a very unique data type and you need to manage it in a very unique way. We did not only stop in the regular website internet experiences. We moved to over-the-top TV delivery. Ever since Netflix and the likes have enabled to deliver over-the-internet television, we've enabled systems that manage subscription, that enable long form, that enable live linear. Now big television providers are using Kaltura to deliver television to the living rooms with a clicker.
We do not provide any hardware, set-top boxes, but the heart of the cloud-based SaaS system that manages users, manages content, manages the entirety of the TV and video experiences is Kaltura. On top of these back-end systems that are very robust with many, many APIs getting into the workflows, we have the front-end experiences for users. For example, we have our Video Portal. It's kind of a corporate YouTube, for lack of other words. It enables big organizations, we have many of the largest companies on Earth, putting this so they could run all their videos behind the firewall, divide it into channels and groups so people could find their videos, get down to transcription, down to the spoken word, contribute content in a myriad of different ways, and interact with video with quizzes and interactive capabilities. We've also enabled that to LMSs and CMSs with a big plugin.
For example, schools, many of the R1 schools in the U.S. and around the world are using Kaltura as the core for all their video management. Meaning that you may have live video recording coming from Zoom or Teams, sometimes even Kaltura, but then it comes to our video content management system and is pushed with our LMS integration so that you could consume that within Blackboard, Moodle, Sakai, Canvas. These are the learning systems with our video natively and our functionality natively. Lastly, in 2020, we added our virtual events. We came in with a bang and powered AWS re:Invent at the height of COVID with 600,000 registrants.
This enabled multi-group type session participation, with the ability to manage all of the pre-event preparations, and then during the event engagement, causing people to contribute more and be involved more, lean forward, be active, and then after the event, share all the recordings and create an interactive experience. All that had built a $185 million business for us, but I'm not here to discuss this. It's important to know it's a big established company. What we waited for is for the advent of AI to turn everything that you've heard here into hyper-personalized video experiences, where not everybody will consume the same experience, but given the power of AI, content will be created for every individual, and experiences would be provided for every individual.
Ultimately, this will enable a conversational experience that would drive avatar conversation with video and generative UI, meaning that if you're on the website, the whole website will be formed with information you need, whether it's video first or text in documents and otherwise. We're now enabling that full experience that is personalized, that is interactive, and that is conversational. The first thing that we added is our conversational rich media agents. We acquired a company in November of last year called eSelf, that's their logo on the top there, and we added it to a lot of things we started developing ourself. Now what's happening and being sold this year and getting it the next year is not what you've seen before, but an avatar-first experience that enables people to converse with avatars and move forward into buying, learning, training, et cetera.
The other tool that we have on the right side, following an acquisition we've made of PathFactory earlier this year, enables experience intelligence and orchestration. It understands when people come to a website, what they consume, how they consume it, what order of sequence of content needs to be provided so that people could now interact in a very engaging way with sequences of content. Both of these capabilities enable us to elevate the use cases from where we were before to much more mission-critical with a lot more value. I'll give you a few examples, and then maybe the demo is going to make it a bit more clear. First, in the customer journey, when we power our customers to power their customer journey. Marketing, we used to provide video for the website or video for events.
Now we're talking to folks about event concierges, website concierges, and ABM, account-based marketing concierges. These are avatar people facing that could support individuals, in some cases replace individuals, and enable the full flow from top-of-funnel marketing down to the bottom. To that end, sales. We're now enabling SDRs with our agents and point-of-sale kiosk agents that are able, through an email campaign or within the website or within the point of sale, to have a full conversation with the customer, show them rich content, answer their questions, and then enable them to go and purchase things. The same for customer care around enabling not just the conversation for the care, but generating the rich media content for every individual customer with an avatar-based recorded video or on-demand real-time live conversation with an agent.
Also for field service, we have folks interested to provide remote expert with an agent that understands what's happening in the camera, understands what's happening in the screen, and is able to interact. All these are examples with customer experience journeys. We also have now opportunities for employee journeys. Historically, it was about video for employees, video and events internally. Now it's about enabling full learning and development in the moment, training your staff, enabling salespeople, and enabling also to practice role-play with the avatar as if they're talking to a colleague or as if they're talking to a customer. Internal communication with personalized engagement and personal content, and then help desk to provide personal support. At schools, we've been, again, powering remote learning, but same for all. Now it's about personalized tutoring and about enriching content.
We have discussions with big companies, publishers that have a lot of books, and they're digital books, and they're not interactive. The ability to add an agent and avatar that will talk to the reader and enable to jump to the right place and show them videos and show them additional information, and in some cases also conduct role-play, is hugely valuable. Lastly, where we power people and audiences as we have done in television, everybody had interacted with our tools, but now they have a TV concierge. They have an avatar that speaks to them, enable them to discover content, to engage further. It supports accessibility, it supports monetization. So everything we've done to date is now super boosted, and it's also enabling us to go down market and offer things for smaller customers. These are examples of our customers.
A lot of big names you're going to see here are some of the biggest tech companies on the left, Amazon, Nvidia, Salesforce, Cisco, Oracle, SAP. Regulated industries, the biggest banks in the U.S. and around the world. Big healthcare providers. Professional services, three of the big four. Big manufacturing, automation. Education, half of the R1 schools almost. Media and telecom, 40 million set-top boxes connected to us, and we have quite a few that are north of $1 million a year. This is a recent accolade coming from Gartner saying the following, "Kaltura is the company to beat for video platform services AI," talking about our rapid AI advancements and about the tools that we have and how they're built for governance.
This comes on the heels of additional similar comments by IDC, by Forrester, by Frost & Sullivan, by ISG, and many others in recent months alone. Just couple more slides then a quick demo. We are actually moving from an industry perspective, apologies, from these three on the left, which are the enterprise video and rich media content creation and management systems and our virtual event and our Cloud TV software, all together about a $13 billion market where we were leading. You could see bottom left, Kaltura on the top right of that quadrant there as an example from Frost & Sullivan, to the conversation automation and agentic engagement solution. It's synergistic. If you take events, you need to connect that to events.
If you take any form of engagement on the website or with learners or with employees, we've been doing that, it connects to that, but it adds far more. Also you could see that we had acquired PathFactory, that's on the leaders quadrant alongside folks like Qualified that were recently acquired between $1 billion, $1.5 billion by Salesforce, and 6sense that's worth billions. So we believe, again, we've come to a bigger opportunity. We're already seeing the beginnings of this in this year. In the last quarter, we reported 14 AI-related deals, still a $1 million TCV because most are small early pilots. It's already doubling the number of AI opportunities we've had before. We've also reported north of 500 opportunities and 60 active scope POCs across all the different areas. Some of them new logos, some existing.
Again, we have many around both media and telecom, education, enterprise. We are forecasting a pickup in bookings at the second half of the year and then continued into next year. When I think about growth drivers, it is the platform expansion, which we have had a lot this year. It is about that much more applicability, the opportunity to upsell across also in some of the stuff that we have acquired in new logos.
Now you are going to see as you look at the tools, there is a lot of channel opportunity. For example, as we go to learning opportunities for schools, we have ministries of education that are talking to us that could open up many channels for education, channel for enterprise, channels for media. We have also seen some improvement in the core business that we have had that is also helpful as the year go forth.
Let me jump into a short demo and then a summary slide. Here is a short demo. This is our earnings call avatar. When we launch earnings, we do not just do it physically with my call. We put our deck online, and we attach to it my avatar. It is fully conversational. Do not take my word for it. Go to Kaltura Investor Relations, click on the website and play with my avatar yourself. You are now going to see it through Zoom. There is a little bit of a delay. If you do it yourself, there is going to be less delay. Let us see how it works. I am going to start the session.
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Yes, Ron.
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Yes.
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Ron, could you skip to show me your products, please?
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That's exciting. Show me your customers, please.
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That's great. Ron, why should I invest in Kaltura? You have not grown much in recent years, and you claim you're going to grow now. What's your growth drivers? What's going to cause you to grow?
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Ron, could you switch to Spanish, please?
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Okay, you get the gist of it. Here's another example of our agentic opportunity. Everything in Kaltura, by the way, is already agent first. This is our internal information, where we have all employees access all of our content with an agent on the right that you could speak to, and it shows you content. You could also ask, for example, I'm going to ask about information. Tell me about Kaltura Events Platform, which is our event platform, in flashcards, and ask for content. What it does, which is interesting, it does not only come and look for the information and have a conversation to discuss with you, but it also generates flashcards or enabling, one second, to see flashcards about Events Platform to show all the information about the products that you want, jumping into the seconds and minutes and relevant content.
You could see here the flashcard that's being generated. So usually what happens is people have millions of hours of videos, and they don't know where to skip to the stuff that's relevant for them. This has memory. It knows me. It knows what I'm asking about. So it tells me, "Here, this is what's Events Platform," and you clip, and it now shows me a few seconds from a specific video. You can see 23 seconds. This one is 56 seconds. It goes on, and here are the sources that are complete. So every individual gets the bits and the pieces that they should see given what it is that they need. We have that in a lot more granularity. I'm going to show you just a couple more, and then we're going to open up to Q&A.
Here's an example of teaching and learning. A lot more stuff ahead this year, next year to talk to you about, but just the feel for what you could do in the world of learning.
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Yes, Kevin.
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No. This is too easy, Kevin. Can you give me a harder one?
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And it goes on and on. You could see that the engaging part is about generating the user interface around. This one is about screen comprehension. Let's do that.
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Andre, I need your help. Can you check my screen for a second?
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Ron, you're on mute.
Thank you for that. Hopefully, you heard the demo piece. What I was going to say, and thank you, Liron, was that the full understanding of screen and the full understanding of camera enables to have interactions that are two-way, turning video not into a one way, but a complete two-way. There's more demos. I'm going to skip them. I could show you in media. There's a lot of POCs that are going to come around and hopefully things that we could share with the market. Let me now move into the final slides and make sure that I'm sharing my screen still. Share Screen, and here and here. This is the summary investment thesis as we move on from these demos.
20 years of leadership in the video market, established business, $185 million, great customers, great positioning, but really it's about now the pivot and the continued growth into a very synergistic and unique, exciting market. We have accolades for having the best tech out there and a very differentiated offering, not just because we have this, but because it connects to the databases of video that we have sustainable moats with. We're sitting on 180 million videos and 60 petabytes of content, and the engagement of many of the largest organizations in the world. Just from an event perspective, we run re:Invent, we run Dreamforce, we run GTC, just to show you in the tech world. We run all the videos in many of the schools and many organizations worldwide. To add this is easier with this diverse blue chip customers that we have.
A lot of growth engines ahead. I would suggest that it's a unique public asset. Valuation is really low because the video industry had been low and people are still waiting to see where this takes off. Then ultimately, a company that's been very careful about balancing growth and profitability to make sure that the downside is capped. Let me stop there. Thank you again for your time and open for a Q&A.
All right. Thanks, Ron. It looks like we have a couple from the audience here. The first one is, how much additional operating leverage is embedded in the model? If revenue growth improves, how much of that incremental revenue should investors expect to fall to adjusted EBITDA and free cash flow?
I think over a period, we expect to bring the company to in the 20s on the percent, whether it's 25, 20 +. It's really a question of the interim period, and it's the question of growth versus profitability and the rapidity by which we're going to invest in one versus the other. Given what we're going to see over the next few months, maybe a couple of quarters, there may be an opportunity to focus further on growth. To remind you, we're low single digit. Everybody wants to see double digit and then some, and can we bring the company back to 20%+ ? We've been at 30%+ , and the growth overcomes profitability three to one. I will say that if we make that switch and we move further towards growth versus profitability, it would be carefully, it would be gradually.
That might happen, so I'm not necessarily suggesting that you should look into immediate growing profits over the next 12, 24 months necessarily, but it might be. I think the bigger focus should be on when and how we accelerate growth to be followed by increased margins. There's no doubt that ultimately it's about becoming or returning to a rule of 40. We were a rule of 30 right before COVID hit, not even just through COVID, but even before, and we plan to return to that.
Got you. The next one from the audience here is, what do you believe investors are missing about Kaltura today? More specifically, what operating or financial milestones do you think the company needs to demonstrate over the next 12- 24 months for investors to better appreciate the value of the business?
I think that the reason the valuation is where it is because of the industry, the neighborhood that we had been at. If you look at Vimeo, Brightcove, ON24, every single video company had gone down to 1x revenue or sold at 1x revenue, so it is not personal. We did better than the rest, and we are in a better position than the rest, and I think everybody knew that. It was not personal. It was the whole category. I think that the understanding that this could be a launching pad into what I have just shown you suggests that we can and will, I believe, jump and go back into more mission criticality, more value, more growth, more opportunity. The TAM is larger. It is a growing TAM. We are positioned well within that growing TAM, which is larger than it was before.
It is a show me market, not a tell me market, which we respect and appreciate. We are not trying to lure anybody in. We are busy operating the business. Obviously, we would love to see more support for the stock in any given day. We appreciate that it is incumbent upon us to demonstrate this. To your point about KPIs, if we build it, they will come, and when growth comes, the valuation will change, and when people see the flavor of the business becoming a lot more agentic and a lot more AI based, then people will appreciate that. Our goal is to do that rather quickly, but I think that there are early signs, and early signs are upon us, whether it is, A, developing and launching an amazing product that is being accepted by the biggest analysts in the world.
B, starting to have significant POCs and opportunities with very big names and great opportunities ahead, which in part we have shared, and in part, hopefully soon. Then the third would be translating that into actual bookings, and then the fourth would be translating the bookings into revenue growth. We are in large enterprise sales cycles, and these large enterprise sales cycles take time. In a regular year, transitions of this nature could take a year and a half or whatever, and we have started this year. So we are going to see early signs this year, but there is going to be a lot more hopefully next year, and it takes a bit of time. So early investors might jump on the boat and say, "Look, I love it and I think it is way undervalued," and others might want to wait.
I think the fact that we are at is because of where we have come from and not where we are headed.
Got you. Could you talk about how the integration of PathFactory into the broader learning and revenue engagement solutions platforms is progressing, and how you are preparing the sales organization to bring those solutions to market?
Sure. We acquired PathFactory April 1st this year. We are a few months after that, and we are already doing an amazing job. They are fully integrated into the respective teams. Culture is amazingly aligned. Retention is great. Joint work is fantastic. The first integration had already been completed and deployed, meaning that natively within the PathFactory product, you could run videos of Kaltura within PathFactory, fully integrated and soup to nuts, which enables folks that are running campaigns on their websites or understanding content to have an an intimate understanding of video. As we now move into the next few quarters, it is about adding that brains of PathFactory, which was a reason of the acquisition, into our agents. To give you a few examples, there are two main solutions that we have now started developing. One for top-of-funnel marketing through bottom-of-funnel sales, and one for learning and enablement.
The first place where PathFactory fits in the current code base is on the marketing through sales. What we are launching is, again, an ABM agent, account-based marketing agent that could go post-event, before event, or not related to events, or on your website, or your website concierge that you could put at every website. By the way, we are moving to do that PLG, product-led growth, with self-serve version, so hopefully hundreds of thousands of websites could immediately put an agent that connect to all their content, turn that into a video-first experience on the website that enables people to get all the information, interact with all the information. The brains around that agent work will be PathFactory. So it would know what to provide you first, what to provide you second.
It is not just about having a generative UI experience with a conversational avatar, it is about delivering the right sequence of content, and that brains is the PathFactory brains. We are now moving quickly within the learning and enablement without the PathFactory technology because it is an area we are strong in, both with schools, but as well with enterprise learning and development. Sales enablement, customer training, partner training. Hopefully some POCs coming soon to be shared. When we have these, we have agents that are doing in-the-moment learning, and we are offering the full knowledge graph and skills graph and the connection between the content and the user. So if you have an agent there, and we have all the data that we have from our customers, we know how to map all the data with the skills and what to provide them first and second.
Part of what we're taking from PathFactory IP and capabilities is to further boost that. Like we said, our agents have the video and the infrastructure and the looks and the speak and the understanding of the screen, and to some extent, smarts around sequencing of information. It is the PathFactory IP that's enabling us to have further understanding and further orchestration of that journey of the sequencing of the content across all the different use cases that we have. We're quite excited about that. Again, I think in the market it is what it is, and everybody's relatively myopic in looking at the next day, next week, next month. As we look into a multi-month and multi-quarter in the launch of all these products, we are already a completely different company when you look at what we sell. It's on top of what we've done.
We haven't changed the direction, but it's just like night and day in so far as the breadth of what we do. I think by the end of 2027, you'll look back, you wouldn't recognize the company.
Got you. When an existing video customer adopts one of some of these interactive AI products, does this typically represent some incremental spending?
Yes.
Is it part of that broader renew or cycle? Is it replacement? Could you just touch upon that?
It typically it does, but again, let's remember, the core business, and there is a reason why companies sold out and we're at one times revenue, is problematic to some extent. Obviously not growing materially, and in some cases shrinking. We had increased churn in media and telecom that we've been working on that we believe is going to turn around. We have the core business for just events or just content management staggering. We know that we have headwinds, and we're turning that around. That being said, this that we're talking about, completely incremental. We have deals that are coming and saying, "Okay, we have the events, but we now want to have before, during, and after event engagement with an agent." It's an add-on, a very clear and nice add-on. The same goes into learning.
We're at schools, and now you want to turn that into not just the videos, but an agent that takes the videos and delivers just the video snippets and/or with a conversational agent that becomes a tutor. It is all incremental. It is not part of the existing business.
Got you. Ron, it looks like we're running out of time here quickly. Do you have any closing remarks to summarize some main points you want investors to take away from the presentation?
Well, thank you, and thank you for the opportunity. Thank you for everybody listening live and on demand. I think, again, at the valuation we are now, I would suggest that it is not being valued as a company that is expected to be a significant provider of agentic experiences for some of the biggest companies in the world. It is up to us to demonstrate that. I would hope that we do that quickly. When we do, I think that the math should work, and this should be highly undervalued at this point. But we need to demonstrate that. We're hard at work at that. We've been talking about this for the last two years of the journey we intend to do. We've put graphs about evolution within the video market and revolution to become a full digital experience platform fueled by conversational agentic tools.
We've made some acquisitions in a very controlled way. We're still managing ourselves from a bottom line perspective, and we're executing very carefully to get this done. We need a bit of patience as we go through the months and maybe a few quarters ahead as we bring this home. This is what we're doing, and we're very excited. People in the company are fueled with energy like they've never been.
Got you. I just would like to thank you, Ron Yekutiel, and thank Kaltura for joining us today. As a reminder, the ticker is KLTR, and a replay of this presentation is viewable on Channelchek.com following its conclusion. Thank you everyone for joining us.
Thank you, Jake Mutchler. Thank you, everybody. Have a beautiful day.