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KI

KALTURA INC (KLTR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered modest top-line outperformance and strong profitability: total revenue of $43.9M (+beat vs guidance high), non-GAAP diluted EPS of $0.01, GAAP diluted EPS of ($0.02), non-GAAP operating margin 7%, and record adjusted EBITDA of $4.2M .
  • Wall Street consensus was notably lower: KLTR beat Q3 revenue ($43.87M vs $43.25M*) and EPS ($0.01 vs -$0.04*) and guided Q4 revenue up sequentially with subscription revenue flat due to two rev-rec delays .
  • Strategic catalysts: signed definitive agreement to acquire eSelf/ESOF.ai ($27M total consideration) to accelerate immersive, avatar-based conversational agents; repurchased 14.4M shares at a 25% discount to 30-day VWAP ($16.6M), reducing outstanding shares and signaling capital discipline .
  • Operating updates: RPO corrected for “termination for convenience” clauses (-$18.1M adjustment), ARR $169.1M (slightly down seq), NDR 97% (churn in M&T), while margins improved (GAAP gross margin 70%, subscription gross margin 77%) .
  • Outlook: Q4 guidance implies sequential revenue growth (Total: $45.0–$45.7M; Adj. EBITDA: $4.2–$5.2M), with FY 2025 Adj. EBITDA raised for a third time to $16.6–$17.6M; management reiterates pathway to “rule of 30” by 2028 or sooner .

What Went Well and What Went Wrong

What Went Well

  • Record adjusted EBITDA ($4.2M) and ninth consecutive quarter of adjusted EBITDA profitability; strong non-GAAP gross margin (70%) and subscription gross margin (77%), reflecting cost discipline and pricing/mix improvements .
  • Q3 beat across revenue (total and subscription) vs guidance high end; cash from operations of $9.3M with quarter-end cash/marketable securities of $84.1M supporting strategic flexibility .
  • Strategic actions: definitive agreement to acquire eSelf/ESOF.ai to power immersive AI agents and new content creation tools, plus repurchase of 14.4M shares at 25% discount to 30-day VWAP, reducing share count and signaling confidence .

Management quotes:

  • “We exceeded the upper end of all our third quarter guidance ranges, delivering record adjusted EBITDA profit, and strong operating cash flow.”
  • “We believe we're entering the decade of agents… immersive real-time conversational virtual agents…”
  • “We repurchased 14.4 million shares… representing 9.2% of our outstanding shares… for a total price of $16.6 million.”

What Went Wrong

  • Net dollar retention down to 97% (vs 101% prior quarter/year), driven by elevated churn in Media & Telecom (M&T) segment; ARR down slightly sequentially to $169.1M .
  • RPO restated downward by $18.1M due to TFC clause correction; headline RPO fell to $159.3M (-4% seq/YoY), though management emphasized no change in demand outlook .
  • Two customers’ project delays (~$0.5M) pushed subscription revenue recognition out, capping Q4 subscription trajectory at Q3 levels despite broader pipeline strength .

Financial Results

Core Financials vs Prior Periods and Estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025Consensus (Q3 2025)vs Consensus
Total Revenue ($M)$44.3 $47.0 $44.5 $43.9 $43.25*+$0.65M*
Subscription Revenue ($M)$42.1 $44.9 $42.4 $42.0 ——
GAAP Diluted EPS ($)($0.02) ($0.01) ($0.05) ($0.02) (−0.04)*+$0.06*
Non-GAAP Diluted EPS ($)$0.00 $0.02 $0.01 $0.01 ——
GAAP Gross Margin (%)67% 70% 70% 70% ——
Non-GAAP Gross Margin (%)68% 70% 70% 70% ——
Subscription Gross Margin (%)75% ——77% ——
Non-GAAP Operating Margin (%)—7% 7% 7% ——
Adjusted EBITDA ($M)$2.4 $4.1 $4.1 $4.2 ——

Note: Values with asterisk are from S&P Global; Values retrieved from S&P Global.

Segment Revenue and Gross Profit

SegmentQ1 2025 Revenue ($M)Q2 2025 Revenue ($M)Q3 2025 Revenue ($M)Q1 2025 Gross Profit ($M)Q2 2025 Gross Profit ($M)Q3 2025 Gross Profit ($M)
Enterprise, Education & Technology (EE&T)$34.416 $33.242 $32.365 $26.568 $25.867 $24.542
Media & Telecom (M&T)$12.568 $11.220 $11.501 $6.168 $5.352 $6.185

KPIs

KPIQ1 2025Q2 2025Q3 2025
ARR ($M)$174.842 $170.364 $169.094
RPO ($M)$184.860 $188.124 $159.330 (incl. −$18.1M adj)
Net Dollar Retention (%)107% 101% 97%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($M)Q4 2025—$41.6–$42.3 New (flat vs Q3 due to rev-rec delays)
Total Revenue ($M)Q4 2025—$45.0–$45.7 New (sequential increase)
Adjusted EBITDA ($M)Q4 2025—$4.2–$5.2 New (record implied)
Subscription Revenue ($M)FY 2025$170.9–$172.9 $170.9–$171.6 Narrowed (midpoint lower)
Total Revenue ($M)FY 2025$180.4–$182.4 $180.3–$181.0 Narrowed (slightly lower range)
Adjusted EBITDA ($M)FY 2025$14.5–$16.0 $16.6–$17.6 Raised (third time)

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
AI/technology initiativesGrowing interest; TV Genie award; 150+ customers exploring GenAI Initial AI deals (ContentLab & Genie); pipeline >100 AI opps Planned eSelf/ESOF.ai acquisition; immersive avatar agents; Publishing Agent; Genies evolving to conversational agents Accelerating product vision, commercialization in 2H26
BookingsSeasonally steady; 1 seven-digit, 15 six-digit deals Sequential increase; 21 new six-figure; 3 initial AI deals 12 six-digit deals; 5 AI deals; pipeline supports Q4 pickup Q4 inflection expected
Retention/NDR107% (best since Q1’22) 101% 97% (M&T churn), EE&T strong Moderating; recovery expected in 2026
Segment trendsEE&T strength EE&T up YoY; M&T churn impact lingering EE&T slight YoY growth; M&T sequential improvement Mixed; M&T stabilizing
Regulatory/legal——Accessibility Agent launched ahead of Title II & EU Accessibility Act Regulatory tailwind in education/public sector
Capital allocation—Repurchases initiated 14.4M share repurchase; expected YE gross cash ~$60M, net cash ~$30M Accretive, balance-sheet flexibility
RPO accounting——RPO corrected for TFC clauses (-$18.1M) Improved controls; better transparency

Management Commentary

  • “We believe we're entering the decade of agents, where avatar-based conversational agents will become a primary interface for work, learning, and entertainment.”
  • “Following the Goldman Sachs share repurchase… and the expected closing of [ESOF]… close the year with approximately $60M in gross cash… ~$30M in net cash after deducting bank debt.”
  • “Remaining Performance Obligations… including an $18.1M downward adjustment this quarter, were $159.3M… we expect to recognize 60% as revenue over the next 12 months.”
  • “Subscription revenue [Q4] at the same level as our third quarter results after… revenue recognition delays with two existing customers.”
  • “Rule of 30… by 2028 or sooner.”

Q&A Highlights

  • ESOF.ai commercialization timeline and investment: focus on 2H 2026 for incremental revenue; ~17-person team adds ~$3.5M OpEx; minimal 2025 financial impact; leverage existing GTM/resources .
  • Revenue recognition delays: ~$500K across two customers (one EE&T, one M&T) pushed into 2026; client-side timing, not delivery issues .
  • AI adoption: growing demand for Genie/ContentLab; customers repurpose/create more video; broader adoption expected with “Genie 2.0” and immersive agents .
  • Vertical/cohort trajectory: gross retention improving in M&T into Q4; bookings pickup expected in both EE&T and M&T .

Estimates Context

  • Q3 2025 results vs Street: revenue $43.866M vs $43.248M*; EPS $0.01 vs -$0.04* → beat on both.
  • Q4 2025 Street: revenue $45.332M* broadly consistent with company total revenue guide ($45.0–$45.7M); EPS -$0.03* vs company guiding profitability via adjusted EBITDA, not EPS .
  • FY 2025 Street: revenue $180.636M* vs company $180.3–$181.0M; EPS -$0.103* while company raised FY adjusted EBITDA to $16.6–$17.6M .
PeriodRevenue Consensus Mean ($M)EPS Consensus Mean ($)Company Guide / Actual
Q3 202543.248*-0.04*$43.866M; GAAP EPS ($0.02); Non-GAAP $0.01
Q4 202545.332*-0.03*Total Revenue $45.0–$45.7; Adj. EBITDA $4.2–$5.2
FY 2025180.636*-0.103*Total Revenue $180.3–$181.0; Adj. EBITDA $16.6–$17.6

Note: Values with asterisk are from S&P Global; Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: KLTR’s revenue/EPS beats and sequential Q4 revenue guidance, paired with a buyback and stable subscription in Q4 (despite two delays), should support sentiment; watch for bookings inflection in Q4 and confirmation in February 2026 .
  • Profitability discipline: consecutive adjusted EBITDA quarters and margin stability (non-GAAP operating margin 7%) indicate operating leverage amid reorg savings; FY adjusted EBITDA raised again .
  • AI catalyst: ESOF.ai broadens the AI product stack (immersive agents, avatar VOD creation) with cross-sell and PLG potential; commercialization expected to contribute in 2H 2026—monitor integration milestones and early design partners .
  • M&T stabilization: sequential improvement in M&T and expectation for stronger Q4 retention reduces churn overhang; track NDR recovery toward 100% in 2026 .
  • Transparency/control: RPO correction clarifies contracted revenue visibility; not indicative of demand change per management—focus on pipeline conversion and retention trends .
  • Capital allocation: repurchase at 25% discount and year-end net cash (~$30M) enable flexibility for tuck-ins/PLG investments without compromising balance sheet .
  • Trading setup: Into Q4 print, upside drivers include bookings pickup, additional AI deal flow, and another record adjusted EBITDA; risks include M&T churn relapse, rev-rec timing, and macro IT spend.