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Good morning, everyone, and welcome to the Kaltura Second Quarter 2026 Earnings Call. All material contained in the webcast is the sole property and copyright of Kaltura, with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at.

FIRE Investor Relations. Please go ahead, Erica. Thank you, Operator, and good morning. I'm joined by Ron Uchtel, Kaltura's co-founder, chairman, president, and chief executive officer, and LaRon Sharon, executive vice president of FP&A and interim principal financial officer. Leron will begin with a summary of the results for the second quarter ended June 30, 2026 and provide a business update. Leron will then review the financial results for the second quarter of 2026 in greater detail, followed by the company's outlook for the third quarter and full year 2026. 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, management's expectations and plans for the business, including execution on strategic transition and upcoming product launches, integration and benefits of our recent acquisitions, our deal pipeline, trends in customer engagement, anticipated tailwinds, and our expectations around capabilities and benefits of our products including AI technologies.

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 CalTorres' annual report on Form 10-K for the fiscal year ended December 31, 2025 and other SEC filings, including the quarterly report on Form 10-2 for the quarter ended June 30, 2026 to be filed with the SEC. Any forward-looking statements made during this conference call, including responses to your questions, are based on current expectations as of today, and Caltour 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 non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP gross margin during this call. For a reconciliation of these measures to the most directly comparable gap metric, please refer to our earnings release, which is available on our website at investors.caltura.com. Now I'd like to turn the call over to Ron.

Thank you, Erica, and thank you, everyone, for joining us today. We continued our strong execution in the second quarter, exceeding the high end of our guidance for both revenue and adjusted EBITDA. Total revenue was $46.9 million, up 5% year-over-year. prescription revenue was 45.6 million, up 8% year-over-year. Adjusted EBITDA was 5.9 million, up 44% year-over-year, and representing our highest second quarter results to date. He also delivered a record non-GAAP gross margin of 75%. New subscription bookings grew sequentially and included 13 six-digit total contract value deals. Five of these were with new logos across the financial services, healthcare, and education industries.

Beyond the strong financial results, the most important development during the quarter was the meaningful increase in the number of new deals that included our AI products. Given this transition is still just beginning, we want to provide more detail than we normally would about where we see adoption, which products customers are selecting, and the business problems they're beginning to address. During the second quarter, we signed a record 14 new deals that included one or more of our AI offerings, representing a doubling of our previous records. Nine of these 14 deals included our new Agentic Avatars product. Four had six-digit total contract values, and eight were with new logos. The deals reflect a broad range of industries and use cases. Four were with higher education institutions, ethnic companies and publishers that collectively engaged tens of thousands of students.

Customers intend to use our products to deliver richer and more personalized teaching and learning experiences. Three were with real estate companies, including two subsidiaries of an organization with a network of hundreds of thousands of agents. One deal focused on personalized agent onboarding and training, while the other two focused on online property discovery, customer engagement, and lead qualification. Two were with technology companies, including a Fortune 10 company. One customer plans to use our technology for AI-enabled employee onboarding and training. The other plans to deploy a personalized customer concierge across its website and virtual events. Two were with global consulting and business process outsourcing leaders.

Both are Fortune 500 companies with hundreds of thousands of employees. One is using our products for employee onboarding, learning and development. and the other for personalized customer marketing. Two were with financial services companies that each managed trillions of dollars in assets. One plans to use their products for personalized employee knowledge sharing and internal communications. while the other plans to use our product for interactive marketing and demand engagement. Finally, one was with media and telecommunications customer that intends to use our products for conversational advertising and point of sale experiences in large venues. All combined, these deals span six industries in a broad mix of employee, learner, customer, and audience-facing use cases. providing early evidence that adoption is not limited to one vertical buyer or workflow. From a revenue perspective, as expected, the contribution from these 14 deals remains limited.

The combined total contract value is approximately $1 million. Review these deals as initial footholds that may expand over time to additional users, usage, business units, and use cases. Consistent with the outlook we shared last quarter, we continue to expect initial revenue contributions from our new products in the second half of 2026, followed by a more meaningful ramp in 2027. I would now like to provide more details about our growing pipeline across all products, the increasing role that AI products are playing within it, and why we remain confident in the opportunity ahead. Our current pipeline for new subscription bookings in the second half indicates the potential to book more than two and a half times what we booked during the first half of the year. This expected growth is being driven by both our enterprise education and and our media and telecom business. Looking at our sales pipeline of deals that also include one or more AI products for the second half of 2026 and 2027, We currently have more than 500 opportunities at various stages of engagement.

These opportunities currently represent in total approximately $17 million of total non-weighted potential annual contract value, ACV. It is important to put that figure in context. This is a non-weighted pipeline number, which includes the full value of all deals across pipeline stages. While not all of these opportunities will convert to wins, it's worth noting that most of our AI products were launched very recently, our go-to-market motion is still developing, and many of these engagements remain in early stage of discovery and could grow, and additional opportunities are expected to emerge. We therefore view the current pipeline as an encouraging initial indicator rather than as a mature presentation of the longer-term opportunity. Let me provide more details about the composition of the current AI-related pipeline. But a third of the number of these opportunities and of the potential ACV comes from new logos.

In the industry, more than one-third of potential ACV comes from educational institutions, ed tech companies, and publishers. About 25% comes from media and telecommunications companies, Approximately 40% comes from enterprises across a range of industries led by technology, financial services, healthcare and life sciences, professional services, and consulting and government. By product, the pipeline includes over 200 opportunities involving our agentic avatars and close to 100 involving our avatar video production studio. It also includes over 60 proofs of concept that are either already active or currently being scoped. We see similarly broad patterns when we examine the pipeline by use case. About one-third of potential ACVs associated with personalized employee journeys, these include employee onboarding, learning and development, compliance, sales enablement, knowledge sharing, internal communications, practice, role-playing simulations. Another roughly one-third is associated with personalized learner journeys delivered by universities, ed tech companies, and publishers. approximately one-sixth relate to customer and partner journeys.

These include onboarding, education and activation, marketing and demand engagement, digital sales rooms, customer care and support. The remaining approximately one-sixth relates to audience journeys delivered by media and telecommunications companies, including interactive experiences for television viewers and audiences in physical venues. Together, these patterns suggest that the opportunities developing across multiple industries and repeatable use cases with agentic avatars emerging as an important entry point into the broader Kultura platform. Turning to retention. We also delivered strong performance during the second quarter. The quarter represented our best growth retention results since the fourth quarter of 2022. We may experience some near-term pressure from certain legacy contracts, including an anticipated roll-off of certain pathfactory customers. However, over time, we expect the transition towards powering agentic digital experiences to support sustainable growth retention and gradually improve net dollar retention.

As discussed previously, NDR will lag the improvement in growth retention. Let me now turn to product development. Using the three-layer framework we outlined previously, I will highlight the progress we made during the quarter across content creation, content management and intelligence, and interactive conversational experiences. On the content creation front, we enhanced our avatar production workflows with B-roll and URL to video automation, expanded their multilingual capabilities, introduced richer enterprise templates and automated content pipelines, and continued investing in API first capabilities. These enhancements are designed to allow customers and partners to embed AI-powered content generation directly into their own applications and workflows and to transform presentations, documents, websites, knowledge bases, and existing media into engaging avatar-led video experiences significantly faster than through traditional presentations. production methods. We also continued investing in enterprise governance, enabling large organizations to maintain brand consistency, approval processes, permissions, security and compliance, while scaling AI-generated content. On content management and intelligence, we made significant progress integrating the Kultura and Pathfactory platforms.

Content and workflows can now be synchronized across the two platforms, bringing together video, documents, webinars, learning content, events, knowledge bases, and customer engagement data. creates a unified first-party signal layer that can help organizations understand which content performs best, which assets contribute to business outcomes, what users are seeking, and what should be recommended next. It's Content Intelligence Foundation is becoming a core building block for the AI capabilities and solutions we develop. On interactive experiences, we continued embedding conversational AI across our product portfolio. This enables users to move beyond manually searching large content libraries and instead interact with intelligent agents that can understand intent, answer questions, recommend and present relevant information, coach users, and guide them towards successful outcomes. A platform also continued to receive significant industry recognition during the quarter. The drill was named a leader in both the Q2 26 Forrester Wave for virtual events management platforms and in the 26 Aragon Research Globe for enterprise videos. We were also recognized by ISG Research as an exemplar literary provider among emerging conversational AI providers, and received the Best Event AI Technology Award of the EventX Award.

Gartner also recognized Cultura in both its video platform services and meeting solutions market guides, and we were included in the 26th WealthTech 100th list, honoring the world's most innovative tech companies for wealth management. Our annual Enterprise Connect and Education Connect events also attracted record attendance and featured business and technology leaders from organizations including Morgan Stanley, Cisco, AWS, IBM, and Palo Alto Networks. Looking ahead to the second half of the year, we have an ambitious development roadmap. On the avatar front, we plan to expand beyond facial representation to incorporate richer gestures and emotional expression. We also intend to improve our personalization and context capabilities and develop real time generative user interface experiences. Instead of presenting users with static, identical, and primarily text-based experiences, these capabilities are intended to enable rich, personalized, and intent-based content journeys that are continuously generated and curated by multi-model conversational agents. We now have the core building blocks of our agentic digital experience platform in place. major focus for the second half of the year is packaging these capabilities into two comprehensive solutions centered on large and strategic use cases.

Agencic revenue engagement and the agentic learning and enablement. Building on the revenue engagement suite we discussed last quarter, we package and showcase the first integrated version of our agentic revenue engagement solution at the recent Adobe Summit, the Forrester B2B Summit, and Salesforce Connection. It combines video and rich media experiences, content intelligence, and conversational AI within an intelligent buyer engagement platform. Solution is intended to help organizations understand customer buying intent, create personalized buyer journeys, recommend the next best content, automate follow-up, support digital sales rooms, and introduce conversational AI throughout the customer lifecycle. We believe that positions Kaltura at the intersection of several important enterprise software categories, including content intelligence, digital sales enablement, account-based marketing, customer engagement, and AI-powered revenue technology. Our differentiation is our ability to combine rich engagement, journey orchestration, and real-time intent-based conversational experiences and enterprise-grade infrastructure within one platform. The adjacent categories addressed by this solution collectively represent an estimated market opportunity of more than $20 billion and growing with more than 15% annually.

These categories include conversational automation, where PathFactory is already recognized as a leader by Forrester, as well as marketing automation add-ons, revenue enablement, and personalization. In our previous earnings call, we discussed training and learning use cases for employees, customers and partners, and students separately. We're now bringing these capabilities together within a single adjunctic learning and enablement solution, employee skilling and reskilling, customer and partner enablement and certification, and teaching and learning within educational institutions. Traditional learning systems primarily deliver predetermined and relatively static courses We see the future of learning becoming increasingly adaptive, conversational, and personalized. Our agentic learning and enablement solution combines AI-generated learning content, enterprise knowledge, conversational avatars, AI tutors, coaching simulations, skills development, assessments, and personalized learning journeys. of it together. Rather than delivering the same experience to every user, organizations can dynamically create experiences based on each individual's roles, skills, progress, objectives, and business context. We believe this represents a significant evolution beyond traditional learning management systems.

Learning management systems, learning experience platforms, revenue enablement, and customer education are increasingly converging around a common enablement layer. Quote, Collectively, these categories also represent an estimated market opportunity of more than $20 billion. Historically, they've often had separate budgets, buyers and technology providers. AI is reducing some of those traditional boundaries because the underlying requirements are becoming increasingly similar. A shared content foundation, an intelligence layer, personalization, conversational interaction, and rich media delivery. We believe platforms that can support multiple learning and enablement use cases who are common content and intelligence to be increasingly advantaged. To summarize, We delivered a strong second quarter, exceeding our guidance for both revenue and adjusted EBITDA, while continuing to expand non-GAAP profitability.

More importantly, we're beginning to see measurable commercial evidence of our AI transition. We increased the number of deals that included our AI offerings across a broad range of industries and use cases. Our AI-related pipeline already includes more than 500 opportunities representing around 17 million in non-weighted potential ACVs. And while not all these opportunities will materialize, we expect many opportunities to grow and many others to be added. The revenue contribution remains limited at this stage, but the growth in bookings, groups of concepts, and pipelines support our confidence in stronger second-half momentum and a more meaningful contribution in 2027. We enter the second half of the year with a stronger pipeline, a clearer solution focus, and increased confidence as reflected in our updated guidance. With that, I will turn the call over to Liron.

Thanks, Ron, and hello to everyone on the call today.

As Ron noted, in the second quarter, we continued to execute well, exceeding the high end of our guidance for subscription revenue, total revenue, and adjusted EBITDA. We also posted a record non-GAAP growth margin of 75% driven by a record non-GAAP subscription growth margin of 79%. Let me now walk through the quarter in more detail. Total revenue for the quarter ended June 30, 2026 was $46.9 million, up 5% sequentially and 5% year-over-year. subscription revenue was 45.6 million. six percent sequentially and eight percent you over you Professional services revenue was $1.3 million, down 13% sequentially and 40% year-over-year, consistent with our focus on recurring subscription revenue. On a segment basis, EENT total revenue was $36.8 million, up 11% year-over-year, and subscription revenue was 36.4 million, up 12% year over year. while professional services revenue contributed $0.4 million, down 43% year-over-year. Within M&T, total revenue was $10.1 million, down 10% year over year. and subscription revenue was 9.2 million, down 6% year over year, professional services revenue contributed 0.9 million down 38% year over year. That gross profit for the second quarter was $34.5 million, resulting in a gross margin of 74%, up 300 basis points from Q2 2025.

GAP subscription gross margin was 78%, up 100 basis points from Q2 2025. The year-over-year improvement in gross margin reflects the continued benefit of our makeshift toward higher margin subscription revenue. operating efficiencies, and the impact of unit economics. GAAP operating expenses for the quarter were $35.3 million. compared to 34 million in the second quarter of 2025. an increase of 4% year-over-year. This includes the impact of the e-sale and past factory acquisitions, integration costs, continuous investment in our new product portfolio, and FX add-ins of approximately $1 million. Adjusted EBITDA for the quarter was $5.9 million, an increase of $1.8 million from $4.1 million in the second quarter of 2025 and above the high end of our guidance range of $2 million to $3 million. Adjusted EBITDA margin was 12%, an increase of 300 basis points year over year. demonstrating our ability to expand non-GAAP profitability while continuing to invest in our AI roadmap, product innovation, and acquisition integration. Gas net loss for the quarter was $5.5 million, or $0.04 per diluted share, compared to a net loss of $7.8 million, or $0.05 per diluted share, in Q2 2025.

Null gap net profit for the quarter was $2.3 million or $0.01 per diluted share compared to a net profit of $2.5 million or $0.01 per diluted share in Q2 2025. Remaining performance obligations, or RPOs, were $164.3 million. up 6% sequentially and down 1% ear over ear. We expect to recognize 71% of this amount as revenue over the next 12 months. Annualized recurring revenue for the second quarter was $184.6 million. 9% sequentially and 8% ear over ear. Net dollar retention for the quarter was 96% compared to 95% in the prior quarter and 101% in the same quarter last year. As a reminder, NDR is a legacy indicator and reflects prior period bookings and retention dynamics. At the same time, this quarter we achieved our strongest growth retention performance since the fourth quarter of 2022.

Moving to the balance sheet and cash flow, we ended the quarter with $35.5 million in cash equivalents and marketable securities. Net cash used in operating activities in the quarter was $2 million compared to $2.7 million generated from operating activities in the second quarter of 2025. We expect to generate cash flow form operations in the third and fourth quarters of the year consistent with historical seasonality. Beyond the reported financial results, the second quarter represents continuous progress in our strategic evolution toward a broader, authentic digital experience platform. As Ron discussed, our AI-related new bookings and sales pipelines have maturely grown in the passing quarter. We have also made solid progress with the integration of Fast Factory into our platform and go-to-market motions while continuing to remain disciplined. in how we allocate capital and manage expenses. I will now turn to our outlook for the third quarter of 2026 and for the full fiscal year ending December 31, 2026.

For the third quarter of 2026, we expect subscription revenue to be between 43.9 million and 44.6 million, representing year-over-year growth of 5% to 6%. Total revenue to be between $45.8 million and $46.5 million, representing year-over-year growth of 4% to 6%. and adjusted EBITDA to be between 2 million and 3 million. For the full year 2026, we are thoughtfully raising all our guidance numbers and slightly narrowing the revenue guidance ranges. We now expect subscription revenue to be between $176.6 million and $178.6 million, representing year-over-year growth of 3 to 4 percent. Total revenue to be between 183 million and 185 million, representing year-over-year growth of 1% to 2%. and adjusted EBITDA to be between $15.8 million and $17.2 million. Our guidance continues to reflect our goal of maintaining balance between investing in our strategic growth areas and maintaining adjusted EBITDA profitability and cash flow generation. We expect enterprise education and technology to post a higher year over year growth rates compared with 2025. supported by the contribution from the test factory customer base and the early contribution from our new product portfolio in the second half of 2026 with a stronger impact in 2027.

We continue to forecast M&T year-over-year revenue decline this year due to the elevated churn in 2025, but still expect to post both higher M&T new bookings and retention this year, which are forecasted to regenerate the sequential quarterly M&T revenue growth in 2027. We also continue to forecast a material year-over-year reduction this year in revenue from professional services in both E&T and M&T, aligned with our strategic focus on recurring subscription revenues. On the cost side, our guidance incorporates the expected costs associated with fast factory integration, continued investment in our new product portfolio, and the expected impact of FX headwinds. To summarize, the second quarter demonstrated continued execution against both our financial and strategic priorities. We stated our guidance for revenue and adjusted dividend achieved record growth margin and delivered our strongest growth retention performance since the fourth quarter of 2022. While the revenue contribution from our newer AI offering remains early, the continuous increase in customer engagement, booking activities, Proof of concept and pipeline gives us confidence in the long-term opportunity ahead. We remain focused on discipline execution and on balancing growth and profitability as we continue to advance our strategic transition and maximize long-term shareholder value.

With that, we will open the call for questions. Operator?.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys. moment please while we pull for questions. The first question is from DJ Hines from Canaccord Genuity. Please go ahead.

Hey, good morning guys. Thanks for taking the questions. Ron, nice to see some of the new logo activity in the quarter. You know, the avatar technology in particular seems to be getting you into some new markets. Can you just talk about distribution efforts there? How are you building the pipeline? How are you breaking into these new verticals? And where do you see the most interesting opportunities in the pipeline?.

Yes, DJ, thank you for that, and good morning to everybody. Yes, exciting growth and opportunities coming within the AI space as we expected. You had mentioned new logos, indeed there is a pickup and the pipeline suggests that there's 33% right now the pipelines of new logos, and that's picking up and growing. And we knew because the historical industry we're at, the video industry, came to a point where a lot of the customers stuck to their existing vendors. And so it was really a fight in the trenches around can you move places where you share with a different vendor, a customer, and you could take their piece, which we've done well, and to have some new logos. A lot of folks did not want to move even if we had, and we did, a better solution because of switching costs and just the headaches associated with that. Now, with the advent of the agentic offerings that we're offering, along with and together with the rest of what we're doing, people are excited to go ahead and make that move and they're happy to make that move across both.

So that's exciting. And yes, we have stated, we have a building pipeline, we got a couple hundred agentic avatar opportunities, about 100 of our avatar video production studio opportunities, active in scope POCs and as mentioned, the ACV is building up, it's still preliminary, but it's going there. You've asked about distribution of verticals. First from a go-to-market perspective, to be clear how we're actually doing this, We're still divided to industries. We have folks going into EDU and M&T separately, and within enterprise, we further segmented it to go between tech and healthcare and, you know, and the rest of the other verticals that are gradually building up. So we have vertical separation. We still have geographic between Europe and the US, and by the way, we see some nice pickup across, but of course led by the US. And what's also interesting is we have some interesting channel opportunities that are building up. A lot of them are companies that are also looking to buy internally, and then are saying, you know what, we like that, and we want to use that also as a distributor, which would be interesting.

And these things would take a bit of time, and we're going to need to deploy first with them for them to see the success and then take this to market beyond. But we've said that before, this solution and these types of solutions have higher ROI, but are also So more self-serve in nature, more low touch in nature, enabling not just more customers, but easier deployment and therefore lend themselves well for distribution. Finally, as far as how our salespeople are actually looking around and selling this, there's kind of four main go-to-market motions or engines. One is the conversational agents, in which we put together Jamie and our agentic avatars and Chat Factory from Path Factory and our SDK into one conversational agent that is multi-model. And we're pushing that strongly forward. The second is AI content creation, which is Content Lab plus the Avatar Video Production Studio plus some other stuff that we've developed since around personalized videos. So we're taking all of that, which we have not done before.

Again, just like conversational agent being new and exciting, the content creation piece is new and exciting. The third are cross-sales between PathFactory and Kultura. We have a great pipeline that's building up and great opportunities to sell both Kultura to PathFactory and vice versa. And the fourth is taking it all together into full bundle wins, mainly coming into competitors and the traditional industries we're at and saying, you know, we have all these exciting things that do move the needle for you and we're happy to do this in a way that's financially appealing. So that's quite exciting for folks. So we're doing these for our clients. offering across verticals, across regions, across channels, and across the journeys that we discussed, you know, between the customer journey, the employee journey, the learner journey, the audience journey. So there's a lot of exciting stuff.

Yes, super helpful. If I could ask a follow-up on the ARR increase in the quarter. So I think it was up a little less than $16 million sequentially. Can you help us unpack how much of that was M&A driven? How much of that was organic cultural strengths? And I think you alluded also to the expectation for some potential bath factory. attrition is that assets integrated into the business. Can you just unpack that a little bit and what your expectations are there?.

Yes, happy to do that. And you asked about ARR. I think it's easier to answer by way of revenue because some of that is actually reported and stated within the PAC. So let's talk about Q2 revenue. So we had expected declines in M&T, so that's known. We also had ENT without past factories, some declines but that was expected because of one-time revenue in quarter one that was on-prem related and one-time related. So if you take that out, there was no decline. It was kind of flattish, if you may, without the pathfactory, which is kind of expected right now because it's seasonal coming out of Q1.

The net bookings are traditionally not adding stuff. So if you take off the on-prem stuff, that kind of remains where it is. PathFactory contributed $4.9 million in revenue out of our 46.9 million in total. By the way, the same for subscription because it's all subscription there. So that's the amount that was there. It's higher than we expected to some extent. Of course, we were cautious because coming into an acquisition, you gotta be careful. but also we did say that there's some attrition and a lot of that is built into what we've taken even before we're doing anything.

Because the next two, three quarters are already built in. So we expect that number, albeit that it started where it did, to still come down from a path factory perspective over the next couple of quarters and then turn around with the other things that we're doing. So again, Compacting Q2, that's how it's at, kind of flattish and as expected if you take out the on-prem for E&T. Continued decline in M&T as expected, not beyond, and the pathfactory contribution. If we think forward on the Q3 guide and beyond. We're guiding still a sequential decline, again, taking in the usual cushions that we have. But when you unpack that, what you're seeing is we're probably going to have, again, still flattish on the ENT side, plus conservatism.

So it could go up some headwinds on PathFactory that's expected, again, we over did revenue on the, Second quarter, we expect some of these things to catch up in the third quarter and get that reduced and continue decline in M&T. So kind of sharing the decline, if you may, between M&T and PathFactory, again, with hopefully cushions. Let's see. We are getting for a little bit of a PS increase into the next quarter, so that's what we're taking there. But then as we look into the rest. of the year, kind of the dean guidance, where in the half of the year, so you can see what we're seeing for the rest, you kind of assume it's then starting to pick up. We still expect that factory maybe to have some headwind for its original base offering for the next few quarters until we turn it around. But the rest of KOTURA between the growth and what we're seeing now in AI and the opportunities that are building up are going to start seeing the sequential pickup there. And you can see that slight expectation coming into Q4 as this picks up.

Again, not still big, as we said. As you see for the year, we're increasing guidance. All in all, we're doing ahead of what we expected. It's the second time in a row that we're increasing guidance. If you look at expectations for this second half of the year on the subscription basis are definitely there a bit above. Again, if you look at the total, there may be some headwinds around PS that we are careful with. So all in all, we're moving in the right direction.

No surprises. Hopefully you're going to meet the expectations that are out there. And we're really excited about AI. Let's see if we could.

post some bigger wins and update you guys. Does that give you the color you wanted? Yes, it's perfect. More than I was looking for, and so I appreciate all the detail. Thank you.

No, I appreciate that. Thank you. The next question is from Ryan Kuntz from Needham & Company. Please go ahead.

Good morning. I wanted to ask you about go-to-market, Ron. As you integrate PathFactory and you've got a new set of products and... maybe a new sales motion in some ways. Can you characterize how that pivot is happening? Are you looking, are you doing, you know, retraining of your existing sales force? Are you, you know, hiring the new skills? Like, how are you managing kind of the people and process side of rolling out your new, agentic and avatar capabilities within the product set.

Thank you so much, Ron, and looking forward to speaking at your event next week. Thank you so much for having us. So, yes, we're excited. As always, we're training. We're going again and again through my trainings. By the way, right now we're going for what we call a summer camp, which is a three-day training session started yesterday, next couple of days, focused, by the way, even on what's coming next because what I said earlier to DJ is everything we're doing right now, but we've also shared with you guys the two solutions that we're building around the agentic revenue engagement and around the learning and enablement, and we're now fully enabling everybody to go ahead and sell these full solutions. I'll get back to that. But generally speaking, the good news is, this is an evolution, not a revolution. So the customers we're going after are the same customers, the buyer, the same buyers, in some cases they're more.

Where Kaltura has a bit less, talk about CX experiences and marketing we're covered now with more PathFactory and the companies are working great together, have been onboarding, leadership came together for multiple day sessions, alignment, working 100% within the different teams, salespeople, go to marketing, developer teams, everybody is working well. So as indeed they're being trained, it is not an earthquake and it is not suddenly needing to teach them something completely different. It's an evolution state than what we have done. So that's why the pipeline is building very nicely. Our existing customers, new logos. Are we hiring more people? Yes. Are we bringing in more talent that's diverse? Yes. But our existing talent and the existing relationships we already have in place play very strongly towards what we're doing.

Both with the product mix that I mentioned earlier and the go-to-market motions just answer DJ and in the two solution sets that we're now launching which I'm happy to tell you more about.

Great. Really helpful. That's great to hear. You talked about maybe some churn coming on the path side. What's driving that? Is that kind of roadmap repricing, kind of refurbishing? focus the R&D efforts around your larger customer opportunities or what's driving some of that.

down selling on the PaaS product? Yes, so first of all, when we took PaaFactory, we were asked, what's the order magnitude of revenue? We said that it's in the teens. If you look at a 4.9 times five, it's almost 20. But the reason is we left cushion because we were asked about the run rate and we knew the run rate might come down. We also said as we acquired the company that it was a declining revenue company, not because it's not amazing technology and amazing customers, but because of the positioning of the base core stand-alone Pathfactory product. As a layer for content and user intelligence that is enabling to create customer journeys, it was kind of fighting between some other players out there doing a lot more doing better doing exciting things but being somewhat pushed out by some of the other guys did The difference is as we take them, and we said that in the acquisition, is we're not taking PathFactory just to sell PathFactory standalone, but more so and most importantly and number one, is to turn that into the quote unquote brains of our agentic motion, where you're putting together their understanding of content and users and orchestration of journeys together with our content management and experience layers and content creation layers put together. So now when we're pushing and promoting our agentic revenue platform, we're talking about everything from taking organizational context to understanding buyer intelligence to creating engaging experiences to creating revenue activities and it's put together and that's why people love how it comes together into an end to end agent. It's not just the brain, it's the brain within the full experience.

And this is the great potential. This is why we acquired the company not to take its existing exact go to market motion, existing exact product. That being said, We're also seeing even within those that are just wanting to buy PathFactory, there is a rejuvenated interest because it's now in a stronger company. We're doing this with more opportunities and more marketing with our existing customer base. So we absolutely are seeing folks that are just buying PathFactory as is, which is a great product. But the expectation as we move forward is for it to somewhat July, given past relationships that have already come to bear, even past acquisitions that they've made that are going through migrations and some folks moving. And there is a certain conservatism also that we're factoring in.

And as you've seen, we beat this quarter and we hopefully continue to beat as we've done in the past. But while we expect the core product to be and well and hopefully grow but we're cautious, the combination is where we are really going on all four cylinders. Let me add, because I spoke about the agentic revenue engagement and the big part that they play there plus the domain expertise in CX, it is the same brain around orchestration that is then the being used towards our agentic learning and enablement solution to build the knowledge graphs and to build the content logic and understanding for training enablement, which by the way, does not go just for employees. It's training enablement for customers and for partners. So it's also customer experience. And these things are conversations we're already having in the market as we speak. So to summarize for PathFactory, a turnaround on their core business because of the acquisition, conservatism and some headwinds in the short term which was baked in already, and we had assumed there was some pleasant surprise in Q2, we expect more of it. But the big bonanza is what we assume always said the combination into our agentic revenue solution and coming after that the learning and enablement solution with the brains within our agents.

really helpful Ron and thanks for that. As a reminder to ask a question please press start. We've discussed R1. There are no further questions at this time. I would like to turn the floor back over to Ron Yekutil for our closing comments.

Yes, thank you everybody. Again, as said, I think a good solid strong quarter of achieving our numbers, but really continue to keep our eye into the future as we continue to build our AI offerings and move to become a full digital experience platform. We have our pipeline showing for it. We're shared a lot more than we usually do to start giving you a feel for it. for where it's going. We said the impact's going to be in the second half of the year. We continue to expect that. We've increased numbers accordingly, but all eyes are in the future as we turn these opportunities into wins and share them with you. in the next few quarters, and looking forward to the Canaccord event again next week. Thank you all for participating, have a beautiful week.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good morning, everyone, and welcome to the Kaltura First Quarter 2026 Earnings Call. All material contained in the webcast is the sole property and copyright of Kaltura with all rights reserved.

For opening remarks and introductions, I now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead, Erica.

Thank you, operator, and good afternoon. I am joined by Ron Yekutiel, Kaltura's Co-Founder, Chairman, President and Chief Executive Officer; and Liron Sharon, Executive Vice President of FP&A and Interim Principal Financial Officer. Ron will begin with a summary of the results for the first quarter ended March 31, 2026, and provide a business update. Liron will then review the financial results for the first quarter of 2026 in greater detail, followed by the company's outlook for the second quarter and full year 2026. 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, management's expectations and plans for the business, including execution on our strategic transition and upcoming product launches, integration and expected benefits of our recent acquisitions, trends in customer engagement, anticipated headwinds and our expectations around capabilities and benefits of our products, including AI technologies. 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, 2025, and other SEC filings.

Any forward-looking statements made during 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 non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin and non-GAAP gross margin during this call. For a reconciliation of these measures 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, everyone, for joining us today. We delivered a strong start to 2026, exceeding the high end of our guidance across revenue and adjusted EBITDA and generating for the first time in our history, positive cash flow from operations in a first quarter.

Total revenue was $44.6 million, down 5% year-over-year. Subscription revenue was $43.2 million, down 4% year-over-year. Adjusted EBITDA was $5.7 million, up 37% year-over-year and our highest first quarter result to date. These results reflect continued operating discipline, improving retention trends and steady progress as we execute on our strategic transition. New subscription bookings in the first quarter followed our typical seasonal pattern with encouraging deal quality across both new logos and expansions. We closed 1 7-digit deal, 14 6-digit deals and 3 new AI-related deals. New logos included a global content delivery network, a leading health care system, 2 U.S. universities and a major APAC broadcaster.

As in prior quarters, the majority of bookings came from expansions within our existing enterprise customer base across technology, financial services, health care, education and media. Gross retention improved to its highest level in the last 5 quarters. Net dollar retention continued to reflect the lagging impact of elevated media and telecom churn in 2025, which we expect to improve over the course of this year. During the quarter, we continued to expand our AI capabilities across both content creation and user engagement. We announced the general availability of our conversational Avatar technology, along with developer tools that enable integration into enterprise workflows. We also launched a beta version and last week moved to general availability of our Avatar Video Production Studio, which enables automated creation of avatar-based video content from text and other materials. These capabilities build on our existing AI tools such as Content Lab and Genie, extending them into more interactive and conversational use cases.

Importantly, we also achieved ISO/IEC 42001 certification for Artificial Intelligence Management Systems during this quarter, reinforcing our commitment to responsible enterprise-grade AI deployment. We also completed the acquisition of PathFactory on April 1, following the signing of the definitive agreement during the first quarter. The factory adds content intelligence and journey orchestration built to enable enterprises to better understand user intent and dynamically deliver personalized digital experiences. Since closing, we have moved quickly to integrate teams and align product and go-to-market efforts. We're already jointly presenting our combined platform in the market and seeing encouraging early engagements.

With the combination of Kaltura, eSelf and PathFactory, we believe we now have the core building blocks to evolve from a video platform into an AI-powered rich Agentic digital experience platform. Kaltura provides enterprise-grade video experiences and rich media infrastructure, eSelf adds multimodel conversational avatar technology for Agentic real-time and on-demand interactions, and PathFactory adds content intelligence and journey orchestration. Together, these capabilities are designed to allow enterprises to move from static one-size-fits-all digital experiences or more personalized, interactive and outcome-driven journeys.

Now I will spend some time discussing how customers are engaging with us across the 4 journeys we power: customers, employees, learners and audiences as this is where we are seeing the most meaningful early validation of our strategy. First, customer journeys. Customer-facing use cases are the most advanced and showed the strongest early traction. We are seeing growing interest in our revenue engagement suite, which brings together video, AI-powered content creation, conversational avatars and journey orchestration into a unified solution for marketing, sales and customer engagement teams.

Discussions with both new and existing customers are shifting from deploying video tools to broader conversations around improving lead conversion, scaling personalized engagement and augmenting sales and customer success teams. We are in proof-of-concept discussions with large enterprises, including Fortune 500 organizations across technology, financial services, health care and media and telecom. These include use cases such as personalized content journeys and microsites, AI-powered conversational interfaces across websites and events, automated creation and scaling of targeted video content, 24/7 digital agents supporting customer and partner engagement and onboarding and AI-powered SDR agents.

In several of these engagements, we are progressing from initial proof of concept to broader platform discussions, reflecting growing confidence in the combined value of our offerings. Importantly, these conversations increasingly involve multiple business stakeholders, including marketing, sales and customer success leaders, expanding our buyer base beyond IT.

Second, employee journeys. Across employee-facing use cases, we're seeing strong interest in leveraging AI to improve productivity, training and knowledge access. Customers are engaging with us around 4 primary themes: extending workforce capacity through AI-assisted interactions, accelerating content creation and internal communications, turning large content libraries into interactive knowledge bases and enhancing training through more personalized and interactive experiences. We're seeing adoption of tools such as Content Lab and Genie expand within large enterprises, including global financial institutions, pharmaceutical companies and professional services firms. These deployments are creating a strong foundation for future expansion into more advanced conversational and avatar-based use cases.

For example, a large global professional services firm is expanding its use of our AI tools to scale internal communications and knowledge access across hundreds of thousands of employees, while a major financial institution has begun transforming support content into interactive, self-serve learning experiences using our Genie platform. We also see growing interest in our avatar-based offerings for content creation, knowledge discovery and role play simulations for sales training, enablement and field support.

Third, learner journeys. In education, discussions are increasingly centered around how AI can enable more personalized and interactive learning experiences. Use cases include AI-powered teaching assistants and tutors, personalized learning paths, automated content creation and adaptation and improved accessibility. We're engaged in discussions with universities around using our Avatar video production studio to generate rich instructional content. We're also in discussions with institutions regarding the use of our Agentic Avatars as academic tutors, role play simulation tools and support agents for administration and admissions. Our modular architecture and integrations with learning systems position us well in these conversations, and we're seeing continued engagement from both existing institutions and new prospects.

Fourth, audience journeys. In media and telecom, we're discussing how AI can enhance audience engagement and monetization. These discussions include more advanced content discovery and recommendations, personalized viewing experiences, new monetization models and the introduction of interactive and conversational interfaces. These discussions range from AI-powered content recommendation and avatar concierge experiences to broader applications such as digital signage and customer engagement in large venues. It is worth noting, we're also seeing growing interest from media and telecom companies to leverage our platform beyond traditional entertainment use cases, including customer journeys such as marketing and customer care and employee journeys such as sales enablement.

In summary, the increasing depth and breadth of these engagements reflects the progress we're making in our transition. As we evolve from powering video experiences to powering end-to-end rich Agentic digital experiences, our focus in 2026 is on integrating eSelf.ai and PathFactory, packaging rich Agentic solutions around clear use cases and driving early adoption. We are seeing early signs of momentum in customer engagement and pipeline activities and continue to expect revenue contribution from our new product portfolio to begin in the second half of the year with a more meaningful impact in 2027.

Before I close, I also want to highlight our upcoming Kaltura Connect on the Road 2026 events. We will be hosting events in New York, San Francisco and London this week and next, bringing together customers and partners to discuss the evolution toward more personalized AI-powered digital experiences. We are pleased to have participation from leading organizations, including AWS, Cisco, IBM, MetLife, Morgan Stanley and Palo Alto Networks. These events provide an important opportunity for customers and prospects to engage directly with our platform and road map, and we view the strong participation as further validation of the relevance of our strategy. Early feedback and participation levels are exceeding our expectations with strong engagement from both existing customers and new prospects. We're invited to register for in-person or virtual participation through our website.

To summarize, we delivered a strong Q1, exceeding expectations across revenue and adjusted EBITDA and achieving a key milestone with positive first quarter operating cash flow. We launched new products based on the eSelf acquisition and completed the PathFactory acquisition and are progressing well on integration. We've been expanding our platform capabilities and seeing encouraging early validation across all 4 journeys we support and are headed into the rest of the year with increased confidence reflected in our updated guidance.

With that, I'll turn it over to Liron. Liron?

Thanks, Ron, and hello to everyone on the call today. As Ron noted, in the first quarter, we once again exceeded the high end of our guidance across all metrics, subscription revenue, total revenue and adjusted EBITDA and generated for the first time, cash flow from operations in the first quarter of the year.

Let me now walk through the quarter in more detail. Total revenue for the quarter ended March 31, 2026, was $44.6 million, down 2% sequentially and 5% year-over-year and exceeding the high end of our guidance range of $42.6 million to $43.4 million. Subscription revenue was $43.2 million, up 1% sequentially and down 4% year-over-year and also exceeding the high end of our guidance range of $41.2 million to $42 million.

As discussed during our last earnings call, this year-over-year decline was fueled by the elevated media and telecom churn experienced in 2025, which we forecast will improve this year as well as by a large EE&T customer that shifted from conducting large virtual events to many smaller ones that are planned to be conducted later in the year. Professional services revenue was $1.4 million, down 50% sequentially and 31% year-over-year, consistent with our increased multiyear focus on recurring subscription revenue. On a segment basis, EE&T total revenue was $34.2 million, down 1% year-over-year and subscription revenue was $33.7 million, flat year-over-year, while professional services revenue contributed $0.5 million, down 42% year-over-year.

Within M&T, total revenue was $10.5 million, down 17% year-over-year, and subscription revenue was $9.5 million, down 16% year-over-year, while professional services revenue contributed $1 million, down 24% year-over-year. GAAP gross profit for the first quarter was $32.1 million, resulting in gross margin of 72%, up 200 basis points from Q1 2025. Subscription gross margin was 77%, in line with Q1 2025. The year-over-year improvement in gross margin reflects the continued benefit of our mix shift towards higher-margin subscription revenue.

GAAP operating expenses for the quarter were $33.3 million compared to $34.3 million in the first quarter of 2025, an improvement of 3% year-over-year, and that is despite incremental operating costs associated with the eSelf acquisition and FX headwinds. Adjusted EBITDA for the quarter was $5.7 million, an increase of $1.5 million from $4.1 million in the first quarter of 2025 and exceeding the high end of our guidance range of $2.3 million to $3.3 million. Adjusted EBITDA margin was 13%, an increase of 400 basis points year-over-year, which underscores our commitment to operational profitability also amid our strategic transition and investment in growth.

GAAP net loss for the quarter was $3.8 million or $0.03 per diluted share compared to a net loss of $1.1 million or $0.01 per diluted share in Q1 2025. The year-over-year change in GAAP net loss reflects primarily noncash and nonrecurring expenses, including $3.8 million for noncash stock-based compensation and $1.9 million for acquisition costs and other strategic initiatives. Non-GAAP net profit for the quarter was $2.1 million or $0.01 per diluted share compared to $2 million or $0.01 per diluted share in Q1 2025. Remaining performance obligations, or RPO, were $154.5 million, flat year-over-year. We expect to recognize 67% of this amount as revenue over the next 12 months.

Annualized recurring revenue in the first quarter was $168.8 million, flat sequentially and down 3% year-over-year. Net dollar retention for the quarter was 95% compared to 107% in the prior year period and 97% in Q4 2025. As a reminder, NDR is a lagging indicator and reflects prior period bookings and retention dynamics. As such, it has been significantly impacted by last year's heightened M&T gross churn, which we expect will materially improve this year alongside also higher M&T and EE&T bookings.

Moving to the balance sheet and cash flow. We ended the quarter with $61.8 million in cash, cash equivalents and marketable securities. Net cash generated from operating activities in the quarter was $0.7 million compared to $1 million used in operating activities in Q1 last year. This meaningful year-over-year improvement of $1.7 million also contributed to this quarter being our first Q1 with positive cash flow from operations.

I will now turn to our outlook for the second quarter of 2026 and for the full fiscal year ending December 31, 2026. For the second quarter of 2026, we expect subscription revenue to grow 2% to 4% year-over-year to between $43.3 million and $44.1 million. Total revenue to grow between 2% to 3% year-over-year to between $45.2 million and $46 million and adjusted EBITDA to be between $2 million and $3 million. For the full year 2026, we are thoughtfully raising all our guidance numbers and slightly narrowing the guidance ranges. We now expect subscription revenue to grow 1% to 3% to between $174.5 million and $176.7 million. Total revenue to grow 1% to 2% to between $182.6 million and $184.8 million, and adjusted EBITDA to be between $13.8 million and $15.2 million.

We continue to expect subscription and total revenue to pick up gradually throughout the year. We expect EE&T to post a higher year-over-year growth rate compared to 2025, fueled by contribution from the PathFactory customer base and our new product portfolio, which is expected to start contributing revenue in the second half of the year with a stronger impact in 2027. We continue to forecast M&T year-over-year revenue decline this year due to the elevated churn in 2025 but expect to achieve both higher M&T new bookings and retention this year, which are forecasted to regenerate sequential quarterly M&T revenue growth in 2027.

On the cost side, our guidance continues to take into consideration the PathFactory acquisition and expected post-merger integration costs as well as the continued expected impact of FX headwinds.

To close, Q1 marked a solid start to the year. We remain focused on disciplined execution, careful capital allocation and balancing growth with profitability to maximize long-term shareholder value.

With that, we will open the call for questions. Operator?

[Operator Instructions] Our first question comes from Ryan Koontz with Needham & Company.

Ron, I want to ask you about some questions about kind of the expanded portfolio, clearly, very forward leaning here and seems highly differentiated. But can you kind of map us how your customer engagements are going or give us some color relative to a different set of stakeholders, who you've traditionally sold to, what those engagements are like? And how are you kind of positioning the new portfolio to really take a broader swath of engagement from your customers and then obviously helping your customers improve their engagements with their end customers.

Yes. I appreciate it, Ryan, and thank you all for joining here today. So again, going backwards to the last couple of quarters and discussions we've had about our move from powering video experiences to powering agentic rich experiences that cover the entire journey of customers, of employees, of learners and of audiences. So I'll give you examples of each one of them.

But before that, we've been beefing our content creation management and experience layer with more tools. On content creation, to remind you, we have our VOD-based avatar, which enables to create automatic content with avatars. And this runs on top of our Content Lab capabilities and some more creation tools that we've developed. On the content management, we have the PathFactory intent-based content analytics, content intelligence platform that understands users and delivers them the next piece of content in the right context for the right reason at the right time. And then on the engagement layer, we have our Agentic Avatars and now also the role play simulation on top of that plus the delivery of the traditional Genie products that we had. So it's quite a lot of new things, and they all come together into this flywheel when content is created, managed and delivered in real time in conversational form.

Let me give you examples about what's happening in each one of the 4 kind of learning -- sorry, journeys examples. So we started closing initial deals. Again, they're small. We expect to have the more significant contribution into revenue in the second half of the year. At the beginning, they're more around right now customer journey, POCs around sales, marketing, customer support. They're coming from places like traditional tech, real estate, hospitality, consumer goods, M&T and all over the place.

So if you look at our pipeline right now on a broader sense, we have a few dozen opportunities and they're mostly around the Agentic Avatars together with Genie, albeit that there's already a few around the Avatar video production suite. And these are about half and half between North America and Europe, about half and half between upsells and new logos. We have more of them on the customer side, customer journey side, but not too far after the employee side and then not too far after that, the learner side and the smaller one is the audience. So by order, again, customers and employees and learners and audience. I will just note that audience is one part of what M&T customers do because M&T are also using us not just for TV, but in this case, also for their customer engagement and even employees. That doesn't mean that we have less on the M&T vertical, just the TV use case, that's the order.

From an industry perspective, we have the most coming from tech and actually M&T as well. And like I said, across multiple areas followed by education, followed by financial services and then we have pharma and real estate and gaming and BPO and manufacturing and oil and gas and food. So there's quite a few verticals that are within these pipelines for the new solutions.

I'll give you now examples in each one of these. So customer journeys. Folks are coming to us for marketing, website personalization, customer outreach, ABM market tiers that are creating the full personalized experiences through interaction with what we do. We have also personalized event follow-ups with quite a few that we already have done events and now they're looking at the one-on-one following up on these events with individuals. We have a couple that are already starting to look into using us for SDRs, the full-on basic sales on the website. We got customer training a few. They're looking to better enable their customers with information and also customer care. We have renewal enablement. And we also have folks that are working with us towards their partners, the large companies that have marketplaces for their partners and looking to have better tools for both enablement and support.

So look at this breadth around customer journey in a second, I'll talk about the rest. So far from what we've originally done by way of providing video on the website plus portals, plus events, plus webcast, these were mere tools, whereas now you fulfill the full task, you fulfill the full role, you're really becoming agentic. And the outcomes -- the outputs that are being looked at are not just of people engaged with video, but are you increasing your pipeline? Are you accelerating conversion? Are you reducing costs? And so these are real business. And to your question about buyers, we've always had kind of elements of the marketing department involved. Now we have far deeper interest by C-level on the marketing side and on the revenue side and on the customer care side.

Going to move towards employee journeys. We got folks looking at internal recruiting, communications, L&D and onboarding is significant, IT help desk, digital reception is, sales enablement, quite a few. So consider using an Avatar plus tool to train sales and to deliver them the right content they need in the right time in the right place right there when they need it, including snippet and documents together with Genie. And we also have folks that are looking at the field support. So imagine people out there trying to install stuff and they need real-time information.

Learners, we got a bunch of tutors who are looking to provide teaching and learning on a one-on-one basis. So again, look at what we've historically done. We had LMS integrations with video. We have some rooms for classes. Now it's about the full teaching and learning. So it's significantly more value. We're in schools looking at role play like nursing schools and negotiation classes and places where people need to do stuff in front of an avatar. We got people that are using content creation and math. Consider they have all these documents and all these long videos. They want to create automatic shorter videos from either a slide deck or a document or long videos. And we also have even folks looking at admissions assistance and community education.

And lastly, on the audience side, recommendations, TV concierge, virtual assistant and even physical events, big venues, point of sales, kiosks. So it's by far more robust type of interactions that we've had than in the past. The beauty about it is that this is not a pivot. This is not a dropping video and suddenly getting into all these areas. This is the new way to use rich media and many of them are connected to the other products we have. So people are seeing this, okay, great. We need within this new ABM, the website, and we need within this engagement of customers, the events. So it's added to what we've done.

So a long answer, but hopefully, it gives you color, Ryan.

[Operator Instructions] Our next question comes from DJ Hynes with Canaccord Genuity.

This is Ryan on for DJ. So you've obviously added a ton of new functionality to the platform with eSelf and now PathFactory. And I know PathFactory is obviously new. But do you anticipate any sort of sales cycle elongation or digestion period as the sales force gets up to speed with the new platform?

Yes. Thank you, Ryan, for that question. Not necessarily. But then again, let's remember, sales cycles have always been kind of classic large enterprise sales cycles. Historically, Needham telecom could have been 1.5 years and the classic enterprise sales cycles, not only us, if you have Salesforce.com or whatever, I mean, they're 14 months. So not to say that this is a typical sales cycle, but I don't think that they're further elongated. I think that they are typical long sales cycles. We've already had inbounds coming for POCs and interest at the beginning of this year through interaction in 2026 that we expect and see them converting in the second half of this year. So they're not all going to be extra long, but some of them might be.

Okay. Makes sense. And then if I could sneak one more in. So we saw that you opened the platform to AI coding agents recently. Could you maybe just clarify -- so I guess, how often are you seeing customers kind of build these AI-led digital experiences internally or off the Kaltura platform? And I guess, are you able to monetize this third-party access?

Yes. To be very clear, what we've enabled is the integration into Kaltura to be by way of a code that they could run and do. This is not us open sourcing our core technology or our core offering. So the avatars and the fullness of Kaltura platform is definitely our code and it's not being released. But what we generally find is that there's an interest out there to go ahead, take these tools and insert them in a very flexible, open, transparent way into the workflows and into the agents that third parties are building.

Now we've always taken the approach that video is in an island and also the experiences and the agents that we provide now are not in island. They need to be connected into databases. They need to be connected into third-party systems. They need to be connected into enterprise workflows. And we want to enable the lowest barrier for folks to take our tools and customize them, integrate them, insert them into workflows and have them embedded within the environment that things are happening now. And this is even more so the case, the more in-depth you are connected into the actual value generation of key KPIs of the company. And so that is enabled.

So what we're seeing is that folks definitely are thinking about their agents. We're not the first or last agent that's going to be around. What we're adding is that richness in the end user experience around the Agentic interface. And in order for that to work, it needs to be natively connected to the rest of the agentic logic. And yes, we're seeing an increased amount of definitely tech companies but beyond saying, listen, we got our own agent factory. We've got a bunch of things we do. But we definitely appreciate everything that you just talked about and how we -- need to turn our website into dynamically created generative environment or we need to turn our training or learning for customers or employees. We just need to have these tools connected to the rest of our agentic logic, our own RAG to whatever LLMs we use, to whatever applications we are developing to whatever agents we're putting in place, and that's what we've enabled.

Ladies and gentlemen, this concludes the question-and-answer session. I would now like to hand the conference over to Ron Yekutiel, the CEO, for the closing remarks.

Yes, I appreciate that, and thank you all for joining. Again, I think we're on track. We are seeing interest in the new stuff that we have brought in. As stated, we have our event around the corner that's happening in both New York, San Francisco and London with great attendance. We're inviting all of you to register to it online. We're also going to be at the Needham 21st Annual Technology Conference, inviting you to come meet us there. And lastly, you may have seen, as noted in our earnings PR, we've put in our quarterly investor deck presentation, our conversational Agentic Avatar that walks you through the deck through the presentation of an aid. You could ask it to explain to you and take you through the slides. You could ask him to address additional questions when I say him, actually is my avatar, but we could have put any avatar out there. And I'm sure you're going to find that helpful and it's something that showcases our technology. This is one of many, many, many things that we can and will do with our new tech.

So we're excited and looking forward to what's ahead. Have a beautiful day, beautiful week, and thank you for your time.

Ladies and gentlemen, the conference call of Kaltura has now concluded. Thank you for your participation. You may now disconnect your lines.

Good day, everyone, and welcome to the Kaltura Fourth Quarter and Full Year 2025 Earnings Call. All material contained in the webcast is the sole property and copyright of Kaltura with all rights reserved. For opening remarks and introductions, I'll now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead, Erica.

Thank you, operator, and good afternoon. I am joined by Ron Yekutiel, Kaltura's Co-Founder, Chairman, President and Chief Executive Officer; and Liron Sharon, Executive Vice President of FP&A and Interim Principal Financial Officer. Ron will provide a summary of the results for the fourth quarter ended December 31, 2025, along with a business and strategy update. Liron will then review financial results for the quarter and full year 2025 as well as the company's outlook for the first quarter and full year 2026. 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, management's expectations and plans for the business, including our pending acquisition of PathFactory and upcoming product launches and our expectations around capabilities and benefits of our AI technologies. 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 year ended December 31, 2024, and other SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2025, to be filed with the SEC. Any forward-looking statements made during 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 non-GAAP financial measures, adjusted EBITDA and adjusted EBITDA margin during this call. For a reconciliation of adjusted EBITDA 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 would like to turn the call over to Ron.

Thank you, Erica, and thanks, everyone, for joining us on the call this afternoon. Today, we reported total revenue of $45.5 million for the fourth quarter of 2025 and subscription revenue of $42.7 million. We posted a record adjusted EBITDA of $6.3 million, representing our 10th consecutive quarter of adjusted EBITDA profitability. This brought full year 2025 adjusted EBITDA to $18.6 million, a 150% year-over-year increase and materially above our original guidance of 100% growth. We're pleased with the continued improvement in our operating efficiency while advancing our long-term strategic positioning.

New subscription bookings in the fourth quarter were at the highest level of 2025. We closed 2 7-digit and 15 6-digit new deals across industries, including technology, financial services, health care, manufacturing, education and media and telecom. We also closed 7 AI-related deals for Content Lab and Genie, reflecting continued customer interest in our automation and personalization capabilities. Gross retention in the fourth quarter was also stronger than in any previous quarter in 2025, and we concluded the year as expected with the highest EE&T gross retention level in 5 years. Our market leadership was once again recognized by tech analysts in the passing quarter, this time by Frost & Sullivan in their 2025 global enterprise video platform market radar research, where they also cited our advanced AI capabilities and early move into agentic AI.

In other exciting news, earlier today, we announced that we entered into a definitive agreement to acquire PathFactory. This acquisition remains subject to customary closing conditions. PathFactory is a provider of AI-driven content journey orchestration and conversation automation. The company helps enterprises understand user context and intent and automatically assemble and sequence personalized digital experiences designed to improve engagement and outcomes. PathFactory serves over 100 enterprise customers, including global brands such as NVIDIA, Cisco, AVEVA, Palo Alto Networks and LG. The company was recently recognized as a leader in the Q4 2025 Forrester Wave report on conversation automation solutions for B2B. The report acknowledged PathFactory's unique approach of leveraging generative AI and content intelligence to help B2B go-to-market teams create personalized self-service B2B buying journeys. The other recognized leaders in this wave were Qualified that was recently acquired by Salesforce for over $1 billion and 6sense, whose last funding round was at a reported valuation of over $5 billion.

PathFactory adds an important layer of agentic journey level intelligence to our platform, while Kaltura has long powered rich media creation, management and experience delivery at enterprise scale and eSelf.ai, which we acquired last quarter, enriched our real-time conversational capabilities and content creation with avatars. PathFactory will bring the ability to understand what each user is trying to accomplish and orchestrate the most impactful personalized sequence of content delivery and interaction accordingly. To date, PathFactory's primary applicability has been in improving B2B top-of-funnel marketing conversion by supporting account-based marketing motions, ABM, with insights, personalized customer microsites and chat agents. We plan to continue supporting this valuable use case and to gradually expand its applicability to additional B2B and B2C customer experience use cases, including bottom-of-funnel marketing, sales enablement, customer and partner enablement, onboarding and support as well as employee and learner experiences such as internal communications, training and education.

Organizations are producing more content, engaging users across more channels and particularly in the age of agentic AI are increasingly seeking systems of engagement that move beyond static one-size-fits-all digital experiences to deliver personalized, contextual, interactive and conversational experiences at scale. Our expanded platform is well aligned with this shift. With the combination of Kaltura, eSelf and PathFactory, we believe we will have in place the required pillars to complete our long-discussed multiyear evolution from a video platform to an agentic digital experience platform that specializes in harnessing AI-powered video and rich media to drive engagement and business outcomes.

Within this expanded platform, Kaltura provides the video enrich media foundation, creation, management, governance and delivery at enterprise scale, including AI-based rich media repurposing and personalized conversation delivery through Kaltura Genie. eSelf added avatar-based content creation and real-time multimodal photorealistic conversational interaction with Genie in over 30 languages, including screen and camera comprehension. And PathFactory will boost Genie's grains by adding to it agentic journey intelligence, understanding user context and intent and orchestrating personalized engagement paths. Our combined platform, therefore, evolves beyond serving as the backbone of video experiences to becoming a comprehensive enabler of rich multimodal agentic conversational digital experiences that are hyper-personalized, contextual, outcome-oriented and deeply integrated into enterprise workflows.

Following the eSelf and contemplated PathFactory acquisitions, 2 very meaningful steps in our long-planned evolution to become a full AI-infused agentic digital experience platform, we intend to formally update our mission statement from powering any video experiences for any organization to powering rich agentic digital experiences across organizational journeys for customers, employees, learners and audiences. PathFactory is a revenue-generating business with a current annual revenue run rate in the teens of millions and a professional team across North America and India. In addition to them meaningfully strengthening our strategic evolution into an agentic digital experience platform, we believe there is an immediate opportunity of cross-selling our respective offerings to our customer bases and great value in expanding our enterprise customer footprint and employee talent base in the marketing technology and customer experience domains.

Under the terms of the acquisition agreement and subject to customary closing conditions, we expect to acquire PathFactory for approximately $22 million in cash. We believe we have sufficient cash available to execute on our goals, and we believe we will continue generating cash in 2026 and beyond. For further details, please refer to today's acquisition press release.

Moving to the product front. We announced last week the general availability of our agentic Avatars. Since acquiring eSelf, we have migrated their code base to Kaltura's enterprise-grade infrastructure and further strengthen its robustness, scalability and security. We have continued enhancing the core AI models and integrating the conversational avatars with Kaltura's Genie product, enabling both to operate across our experience products and embeddable video players. This allows interactive contextual conversations to occur anywhere using text, video snippets, flash cards and avatars. Throughout 2026, we plan to continue enhancing Avatar quality, enriching the generative content that can be presented during conversations, expanding integrations with third-party systems and strengthening our agentic brain through deeper understanding of user context and intent powered by PathFactory technology.

We also announced last week the general availability of our Avatar SDK, which enables ISVs, system integrators and in-house development groups to leverage our text-to-video and audio-to-video models and connect them to their own RAG pipelines, AgenticLogic, databases and enterprise systems. Over the course of the year, we plan to expand the SDK with additional APIs and developer tools. Today, we are pleased to announce the launch of a beta program for our Avatar video creation Studio. This solution enables customers to easily create avatar-based and Avatar narrated videos on demand at scale. These prerecorded avatars can also come to life in real time upon request, transforming into an interactive conversational avatar to respond to users' questions about the recorded video-related topics. Customers can apply for the beta program through our website, and we plan to make this offering generally available in the upcoming second quarter.

For all 3 of these new products, we're also developing self-serve versions targeting smaller organizations, departments within larger enterprises, content creators and individual developers. We believe these versions will also support an expansion of our channel sales. In parallel with the initial commercialization of these offerings, our sales team has been trained on the new go-to-market motions and are already in discussions with various prospective launch partners spanning across a wide array of industries and use cases, including agentic marketing, sales, customer care, field services, training, teaching, internal communications and recruiting. Since the commercial activity associated with these new offerings did not impact the fourth quarter of 2025, which we are reporting today, we will share more concrete information about these activities in our next earnings call. As a reminder, we expect to begin recognizing revenue from these products in the second half of the year.

In 2026, we believe AI is reshaping the market in ways that structurally favor our platform. AI strengthens each layer of what we do. First, we are deeply embedded in mission-critical enterprise workflows and business processes across marketing, training, compliance, education, communications and media delivery. These are governed, integrated and operationally critical environments with high switching costs. AI enhances these workflows by making them more intelligent and automated. It does not replace them. Second, we manage large volumes of rich media assets, metadata and behavioral engagement data for our customers that carry a high migration cost. With the addition of PathFactory, we expect to further expand our ability to generate insights and understand user context and intent. In the age of AI, longitudinal data and intent intelligence become increasingly valuable assets that enable more precise personalization and orchestration and that are harder to switch away from and replicate.

Third, AI expands how we create and monetize value. Personalized content generation, dynamic journey orchestration and conversational engagement lend themselves naturally to usage-based and outcome-oriented pricing models, not just seat-based pricing and platforms that help drive meaningful engagement can benefit from organic growth and high net dollar retention. Fourth, AI is synergistic across all layers of our platform, content creation, content management and intelligence and agentic experiences. Insights generated in one layer can power new content, new experiences and new conversations in another. This creates a flywheel effect. Existing data fuels richer experiences and real-time content generation. Those experiences generate new behavioral insights, and those insights further enhance personalization and automation. And finally, because we provide a unified digital experience platform that consolidates multiple use cases and buyers rather than a single point solution, AI amplifies our platform advantage rather than fragmenting it.

In short, we believe AI is a structural tailwind for our strategy and an amplifier of our competitive moat as a provider of rich, personalized agentic digital experiences at scale. With that foundation in place, let me outline our anticipated growth drivers for the year ahead, fueling what, how and to whom we sell. First, platform expansion. The integration of rich media, conversational AI and journey orchestration into a unified agentic digital experience platform positioned to expand our addressable market and strengthens our competitive positioning. We believe we're differentiated by the breadth and depth of our content creation, management and agentic experience offerings, by our API-driven flexibility, by our ability to consolidate multiple use cases on one platform and by our proven track record of powering complex enterprise scale deployments.

Second, broader applicability. Our expanded platform addresses a significantly wider range of use cases across customers, employees, learners and audiences. Many of these use cases are more mission-critical and can generate tangible ROI through cost and labor efficiencies and revenue uplifts. Examples include performing and supporting tasks and roles of marketeers, sellers, customer support representatives, field agents, recruiters, educators, health professionals and financial advisers. In certain cases, this also expands our reach into industries where we have historically been less active.

Third, installed base upsell. Our base of over 800 large enterprise customers represents a substantial cross-sell and upsell opportunity. Our new capabilities leverage the deep workflow integrations, enterprise trust and significant content repositories we already manage for these organizations, creating meaningful expansion potential.

Fourth, new customer acquisition. agentic conversational experiences represent a fast emerging category, generating strong market interest. Unlike the more mature video segment, where vendor consolidation limited new vendor adoption, this evolving category creates opportunities to engage new prospects. To support these opportunities, we are increasing our outbound go-to-market efforts.

Fifth, channel and down market expansion. Our new content creation and agentic offerings are well suited for self-serve PLG models targeting SMEs, SMBs, enterprise departments and developers as well as expanded channel partnerships, including co-sellers, resellers, OEMs and marketplace partners. We plan to grow these motions throughout the year.

Sixth, PathFactory cross-sell. We believe there are meaningful opportunities to introduce broader Kaltura capabilities into PathFactory's customer base of over 100 enterprises, while also enhancing the value delivered to our existing customers through journey orchestration and intent intelligence.

Seventh, competitive landscape. We believe recent consolidation activity in the video market may create additional displacement opportunities, positioning Kaltura as a stable innovation-driven alternative in both the traditional video and emerging agentic engagement categories.

Lastly, eighth, while M&T revenue in 2026 is expected to still decline year-over-year because of last year's heightened churn, we believe that M&T net bookings will improve this year compared to last, fueled by both lower gross churn and higher new bookings. We believe this will generate sequential quarterly M&T revenue growth in 2027.

In summary, 2025 was a year of operational strengthening and strategic transformation. We materially improved our adjusted EBITDA results while working on 2 strategic acquisitions that we believe significantly expand our long-term opportunity. We're entering 2026 with an evolved mission and are excited by the expanded product suite and broader market opportunity across use cases, industries and customer segments that our 2 complementary strategic acquisitions will bring to the table. We plan to deepen engagement with existing customers, expand into new accounts, extend our reach down market and leverage channel partnerships, all while strengthening our competitive positioning in our traditional video markets, including regrowing our M&T business. We see 2026 as a transition year, and we expect revenue contribution from our new portfolio to begin in the second half of the year with a stronger impact in 2027. We are tapering our adjusted EBITDA profitability and cash flow from operation growth for this year in support of acquisition costs and integration efforts and related growth investments, though both metrics are forecasted to remain in the teens and in light of higher FX headwinds that are affecting our operating costs. We continue to be committed to carefully balancing growth and profitability to maximize long-term shareholder value. To that end, we are reiterating our goal of achieving double-digit revenue growth in a Rule of 30 profile by 2028 or sooner. Lastly, we continue to progress in our CFO search and succession process, and we'll provide updates as appropriate. In the meantime, our finance organization continues to operate under the strong leadership of our Executive Vice President of Finance and Interim Principal Accounting Officer, Mrs. Claire Rochstein; and our Executive Vice President of FP&A and Interim Principal Financial Officer, Liron Sharon. I would like to thank both for their leadership. With that, I will turn it over to Liron to review our financial results in greater detail and discuss our 2026 guidance. Liron?

Thanks, Ron, and hello to everyone on the call today. In the fourth quarter, we exceeded once again the midpoint of our guidance across subscription revenue, total revenue and adjusted EBITDA and delivered through disciplined execution, a record level of both adjusted EBITDA and non-GAAP net profit. We also posted, as forecasted, a sequential quarterly growth in our new subscription bookings and the highest gross retention level of 2025.

Total revenue for the quarter ended December 31, 2025, was $45.5 million, up 4% sequentially, almost flat year-over-year and above the midpoint of our guidance range of $45 million to $45.7 million. Subscription revenue was $42.7 million, up 2% sequentially, down 2% year-over-year and above the high end of our guidance range of $41.6 million to $42.3 million. Professional services revenue was $2.9 million for the quarter, up 31% year-over-year and consistent with our previously forecasted increase. On a segment basis, EE&T total revenue increased 4% year-over-year in the fourth quarter, while M&T total revenue declined 12% year-over-year due to the elevated churn experienced earlier in the year as discussed on prior calls.

GAAP gross profit for the fourth quarter was $33 million, up 7% sequentially and 2% year-over-year. Gross margin was 72% compared to 71% in Q4 2024. Subscription gross margin was 78%, up from 77% in Q4 2024. Total operating expenses for the quarter were $32.1 million compared to $36.1 million in the fourth quarter of 2024, representing an 11% year-over-year reduction. Adjusted EBITDA for the quarter was a record $6.3 million, above the high end of our guidance range of $4.2 million to $5.2 million. This represents a year-over-year increase of $3.6 million compared to $2.7 million in the fourth quarter of 2024, effectively more than doubling our adjusted EBITDA results year-over-year.

GAAP net loss for the quarter was $0.6 million or $0.00 per diluted share, representing a $6 million year-over-year improvement. Non-GAAP net profit for the quarter was a record $5.2 million or $0.03 per diluted share, representing an improvement of $4.9 million year-over-year. Remaining performance obligations, or RPO, were $166.3 million, representing a 4% sequential increase and a 6% year-over-year decrease. We expect to recognize 64% of this amount as revenue over the next 12 months. Historical comparison RPO figures have been adjusted as discussed in our previous earnings call.

Annualized recurring revenue in the fourth quarter was $168.2 million, down 3% year-over-year. Net dollar retention was 97%, unchanged sequentially and compared to 103% in the same quarter last year. For the full year ended December 31, 2025. Total revenue was $180.9 million, up 1% year-over-year. Subscription revenue was $171.9 million, up 3% year-over-year. Professional services revenue was $8.9 million, down 19% year-over-year, consistent with the expected trends we discussed on the previous earnings calls. On a segment basis, EE&T total revenue increased 4% year-over-year, while M&T total revenue declined 7% due to elevated churn as previously discussed. Net dollar retention for 2025 was 100%, consistent with 2024 levels. While flat overall, this reflects improved net retention in EE&T, offset by lower net retention in M&T.

GAAP gross profit for 2025 was $127.7 million, up 7% year-over-year, representing a gross margin of 71%, up from 67% in 2024. Subscription gross margin improved to 77%, up from 75% in 2024. Adjusted EBITDA for 2025 was record $18.6 million, representing more than 150% year-over-year growth compared to $7.3 million in 2024. This performance, together with our improved expenses discipline and margin profile reflects our continued focus on operating efficiency. GAAP net loss for 2025 was $12.1 million or $0.08 per diluted share, an improvement of $19.2 million compared to a net loss of $31.3 million or $0.21 per diluted share in 2024. For the full year 2025, non-GAAP net profit was a record $11.5 million or $0.07 per diluted share, reflecting a $16.2 million improvement from a non-GAAP net loss of $4.7 million or $0.03 per diluted share in 2024.

Moving to the balance sheet and cash flow. We ended the fourth quarter with $62.8 million in cash and marketable securities. Net cash provided by operating activities was $3.6 million in the quarter compared to $4.3 million in Q4 2024. For the full year 2025, net cash provided by operating activities was $14.5 million compared to $12.2 million in 2024.

I will now turn to our outlook for the first quarter of 2026 and for the full fiscal year ending December 31, 2026. For the first quarter of 2026, we expect subscription revenue between $41.2 million and $42 million. Total revenue between $42.6 million and $43.4 million, adjusted EBITDA between $2.3 million and $3.3 million. We expect a similar seasonal level of negative cash flow from operations as in the first quarter of last year. Our Q1 guidance incorporates a short-term EE&T revenue headwind due to a large customer that shifted priority and budget from conducting large virtual events to many smaller ones, which are planned to be conducted with us later in the year. The guidance also incorporates a first quarter year-over-year M&T revenue decline in the mid- to high teens due to the aggregate effect of last year's higher churn. We expect an improvement in the following quarters.

For the full year 2026 revenue, we expect subscription revenue between $172.5 million and $175.5 million. total revenue between $181.2 million and $184.2 million. We are expecting subscription and total revenue to pick up gradually throughout the year. We expect EE&T to post a higher year-over-year growth rate compared to 2025, fueled by contribution from the PathFactory customer base and from our new product portfolio, which we expect would affect the second half of 2026. That said, given the early stage of our new product commercialization, we have thoughtfully assumed that the more meaningful growth acceleration from them will occur in 2027. We expect to still post an M&T year-over-year revenue decline this year due to the elevated churn in 2025, but forecast to achieve both higher M&T new bookings and retention this year, which, as Ron mentioned, is expected to regenerate sequential quarterly M&T revenue growth in 2027.

As for our bottom line figures this year, our 2026 adjusted EBITDA guidance and cash flow from operation forecast thoughtfully incorporate the expected impact of the PathFactory acquisition and related integration and investments and our continued commitment to carefully balance growth and profitability to maximize long-term shareholder value. It also incorporates increased FX headwinds affecting operating costs. Accordingly, we are providing the same annual adjusted EBITDA guidance range that we originally provided for 2025, which is between $12.7 million to $14.7 million. We also forecast that we will generate low double-digit cash flow from operations this year with most of it generated in the second half of the year, consistent with historical trends. As Ron mentioned, we remain committed to achieving a Rule of 30 combination between double-digit revenue growth and adjusted EBITDA margin by 2028 or sooner. With that, we will open the call for questions. Operator?

[Operator Instructions] Our first question is coming from Matt Cavanaugh from Needham & Company.

Congratulations on today's results and announcements. Coming out with the PathFactory acquisition, could you expand a little bit about the sales synergy and cross-selling abilities you might expect to see now with both eSelf and PathFactory under the platform along with the core Kaltura products?

Yes, 100% love to do that, and thank you, everybody, for joining. So let's talk about PathFactory and the reasons for the acquisition. So we've been communicating to the market all along the need to evolve from video into a full CX, EX, DX digital experience platform where the market is bigger, the growth is faster, the multiples are higher. And we believe that the advent of AI is enabling that. The ability to create real-time videos and to turn that into conversational avatars, conversational videos enables to close the flywheel effect, create content on the fly, manage it on the fly, engage people on the fly and move from static experiences into dynamic engaging experiences. So that was the impetus of the general move, and we've brought in eSelf to double down on the ability to create these agents, immersive agents. As we've said, they've added kind of the eyes and ears and mouth to our gen and then, of course, the face.

So why did we move on and do this additional move into PathFactory? PathFactory from a product perspective, adds a few things. They add content intelligence, understanding the content itself. Then they're enabling us to add multiple assets and not just video assets, so we could go beyond video, talk about documents and files and connect it to third-party CRMs, marketing automation platforms, DAMs, et cetera. Very importantly, they have user analysis, user intent, user understanding. We -- our system has been basically a content management system for video. And now we have a user understanding. And that's key because we need to serve the right content to the right people in the right time in the right context. And so what they're able to do is to provide orchestration for user journeys. Right now, they've been identified as one of the top providers in this space. I'll say about it a few things. They've been working mainly on top of the funnel B2B marketing. but we are going to take it to the bottom of the funnel to address SDRs like qualified is and other CX customer experiences like customer and partner onboarding, training, customer care and later take the same technology to deliver paths for learning and internal use. And so right now, they're also able not just to provide the orchestration, but pipeline and revenue attribution, and they're also connected to their own applications that they've developed for chat-based interface and stuff of that nature.

So what that enables us before I talk about how and what we're going to sell is to appreciate that we're entering deeper into a market of conversation automation solutions. in the B2B front, but later across the board. Forrester in their Q4 2025 report, had identified them as leaders alongside Qualified that was just acquired for $1.5 billion and by Salesforce, of course, in 6sense, whose last valuation from a long time ago had been at $5 billion. So they're in good neighborhoods. And this strengthens our position in that market. That is a big market. I would assume twice the size or doubling the size of our current market and also based on our analysis, growing very fast unlike the traditional video market. So it's an interesting market. And that adds up to another element before I kind of answer the specific question about sales, we've just gone deeper into the ability to add brains to our agents, not just "good looks so that they can deliver the right content at the right time while you're teaching, learning, marketing, selling, et cetera. And we've done that at the same time that we've just launched our VOD avatar that makes us deeper to content creation aligned with companies like Synthesia that are also reportedly valued at $4 billion. So I think that movement from just content management and video experiences towards content creation and towards real-time conversational technology with brains and agentic logic behind it turns us into the full digital experience platform that we've been waiting to turn.

To the question of cross-sell and upsell, maybe that now becomes clear through my statement here. So first, they themselves have about 400 customers, of which 100 large enterprises like Cisco, NVIDIA, MetLife, LG, about 10 of them only are overlapping from the big guys. means that there's a lot of folks that are not. We've had great calls with a bunch of them, and they've expressed a lot of excitement about this combination. They understand the synergy. There's to their statements, even active RFPs running for avatars. They've been talking to us about the opportunity to displace other video vendors because you'd want to have a full end-to-end connection in the agentic world between the medium that is engaging and the logic that is used towards that medium and the actual conversation technology. So it all comes very much together. So now we've been -- and again, later we can talk more about guidance, I've been careful in assuming when and if and how we kind of start making a lot of money here from the synergy, but we do believe that, a, we could take this insert it to our products and get a significant bump in value and revenue within a combined product, but also, b, that we could very well go back to their customers and upsell them and support them with the Kaltura products. So let me know if you have any more specific questions about the cross-sell, upsell opportunity.

That's great, Ron. Just touching on what you mentioned at the end there. Could you -- on your 2026 outlook, could you talk a little bit more about kind of the puts and takes that went into the assumptions there?

Yes, happy to do that. From a top line, bottom line, both.

Yes, that would be great.

Okay. So look, generally speaking, we're looking at a year in which we expect gross retention to be better because we all knew media and telecom in the past year wasn't good. By the way, EE&T was fine. But if we improve M&T, so gross retention is going to get better. Booking, we believe will pull up. Again, we're hoping for this to be as early as possible, but we are assuming it's going to be mostly at the second half of the year, in line with both the PathFactory synergies as well as with our own product releases. And while we've just started putting them out, we have some good pilots and excitement and interest, which we'll share more about. We did say last time we're saying yet again now that we expect that to start pulling up more in the second half of the year. So when you think about the revenue guidance that we've set, so we're guiding at the similar kind of level that was expected, but we hopefully coming at it very carefully, given the amount of changes that are happening so early in the year, swing one acquisition, creating another one, yet to see exactly when it will close, hopefully quickly. And so we want to make sure that we're able to achieve the numbers that we were discussing. And I think at the end of the day, to your question about the pluses and minuses, I think that we're still seeing some of the headwinds come from M&T's last year performance that are going to cause double-digit decline this year because of the delay between net bookings and M&T to how they impact revenue. We did say we expect this year for net bookings to start pulling up and for that to affect sequential growth in 2027. But for 2026, it's a headwind on the revenue side. And then from a Core EE&T, again, there is some growth, but most of it is pegged towards the new stuff, and that's going to come in the second half. And lastly, PathFactory, as mentioned, their run rate is in the teens, and we don't know when they're going to come in the middle of the year or in the second quarter or early or later in the second quarter. So we got to be careful in our assumptions. We do assume it's in the second quarter, maybe earlier within that quarter, we'll see. But given that, we've put a certain amount that we feel comfortable that should be reasonable and that what's brought it all together. So that's for the top line.

I will say from a bottom line, just to remind all of us, last time after the acquisition of eSelf, we've reduced what we had planned. So even going before, we've increased dramatically our adjusted EBITDA last year, more than 150% growth, much more than we said. We said we're going to double. We delivered on it. Originally, we said we're going to continue to pull it up, but that was before we decided to go and do these 2 acquisitions and go for the bigger market, bigger opportunity. Again, we could stick along and have a bit more profit and not put the engine in place to be able to become an exciting company again or we could do the moves that we've just done now over the last couple of acquisitions to take us there. So we've tapered down the expectations the last time we reduced it to somewhere around 20%, and we said, look, it's a function of a few things. It's both the eSelf acquisition costs and investments. It's the lower M&T results. It's the higher FX because of the Israeli shekel. And now we've come to do another readjustment. And once again, we're looking at the PathFactory integration investment and additional FX cushion that continued to go the other way on the Israeli shekel. So between all of them, we've come the exact same guidance we did last year. To remind you, we started with that guidance and ended up far higher. Maybe that will happen this year, maybe not. We'd like to stick to our guidance and see where things go. There's still a question on the revenue. There's a question on the cost, there's integration of companies. We believe we've been thoughtful and we hope to be able to overdeliver, but let's wait and see where we get to. And ultimately, to the extent that there will be any upside on the bottom line, it could be driven by the top side with a higher revenue because there's a lot of things that are pulling the revenue, as I noted earlier, but also maybe better FX. Let's wait and see. So that's my two cents about both top and bottom line.

Okay. Perfect. And just lastly for me, could you share an updated view on how you're seeing the competitive landscape and how these recent acquisitions are further differentiating Kaltura from your competitors?

By design, we are moving to a gradually moving and expanding, I wouldn't say moving because we're both in the other market and the new market into a larger, more exciting market. So let me be clear. In the world of pure video experiences, we had another research done in Q4 that had put Kaltura in the far right corner as the best product in its case. We also think that the recent consolidation that has taken place in our traditional market would enable us to be even better competitively positioned, let alone with the rest of what we just said now. When we talk to our own customers, there's a lot of synergy with the new products that we offer now that our existing video vendors -- competitors do not around the agentic experiences, but also around content creation. And therefore, we think that given both their consolidation as well as the improved amount of offerings that we have, we could do better within our classic core market in selling more of our current product and adding or not adding some of these new things. But I think the bigger point here is that we are now gradually moving to the point that we're not a video technology company. Yes, we're differentiated by the richness of the media that we provide and video is a core key piece of it, will continue to be a core key piece of it. But it becomes more a mean than an end in the sense that what we offer is agentic digital experiences in real time that are able to deliver conversational agents that are performing tasks that otherwise just humans would do. And again, I don't think they're going to replace them. I think they're going to augment them. I think they're going to boost them. I think they're going to support them. But this is something completely different. Now when we reach out to our own customers, there's a lot of excitement much more than previous because video have been relatively similar in recent years, and this is at the hype level of, oh my God, I want to use this. So this is exciting. And plus, this is a ticket for us to get to a lot more new logos. In recent years, it's been harder in our industry because people have kept to their own vendors even if there was a better solution. But this opens the door for a complete different conversation and one that is synergistic and complementary. So in short, I think that, a, we're going to be better positioned to compete with our existing "competitors" but also, b, we're expanding to now be at the same neighborhood the bigger companies that are valued higher that are in faster-growing markets are in, and I mentioned qualified, you can look at how PathFactory is put in the same report as they are right by them as a leader. And you could also look, like I said, at Synthesia. I'm not suggesting that one-to-one, we have the same product set that we're going to do the same growth, so we have the same revenue. But when you look at the products we just released and the ones that's just now in beta, and appreciate our advantages in entering that market, then you would appreciate that we have not only the ability to create avatar-based videos, but they could come to life and become conversational. That's new. They're connected to our platform so that you can connect that to any other video experience and content management. And that's the opposite direction that companies like Synthesia are working hard to do. So that's powerful. We have our existing 800 enterprise customers to upsell this to. And so there's a lot of things that are helping us to come from a place that has been relatively flattish to something that we believe and we hope, and again, we've been very thoughtful and careful, we'll continue to be, could potentially gradually increase our growth, and that's the strategy.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

So thank you all for joining today. Fresh start for a fresh year. I want to thank you all for your continued support and trust and wish upon all of us a great fiscal year and a great year altogether filled with financial success, but also some more peace, hopefully around us around the world. Looking forward to following up with each of the other ones to reach out. Have a beautiful day. Take care. Bye-bye.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Good afternoon, everyone, and welcome to the Kaltura Third Quarter 2025 Earnings Call. All material contained in the webcast is the sole property 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, Erica.

Thank you, operator. I'm joined by Ron Yekutiel, Kaltura's Co-Founder, Chairman, President and Chief Executive Officer; and John Doherty, Chief Financial Officer. Ron will begin with a summary of the results for the third quarter ended September 30, 2025, and provide a business update. John will review the financial results for the third quarter of 2025 in greater detail, followed by the company's outlook for the fourth quarter and full year of 2025. 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, but not limited to, statements regarding Kaltura's expected future financial results and management's expectations and plans for the business, including our planned acquisition announced earlier today. 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, 2024, and our other SEC filings, including quarterly report on Form 10-Q for the quarter ended September 30, 2025, filed with the SEC. Any forward-looking statements made during 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 non-GAAP financial measures, adjusted EBITDA, non-GAAP net loss and non-GAAP gross margin during this call. For a reconciliation of these measures to the most directly comparable GAAP metric, please refer to our earnings release, which is available on our website at investors.kaltura.com.

Now I will turn the call over to Ron.

Thank you, Erica, and thanks to everyone for joining us on the call this afternoon. Today, we reported total revenue of $43.9 million for the third quarter of 2025 and subscription revenue of $42 million. We posted a record adjusted EBITDA of $4.2 million, representing our ninth consecutive quarter of adjusted EBITDA profitability, driven by a strong non-GAAP gross margin of 70%, up from 68% in the same quarter last year. Cash flow from operations was $9.3 million, in line with our forecast of strong cash flow in the second half of the year. Non-GAAP net profit in the third quarter was $2 million, representing the fifth consecutive quarter of non-GAAP profitability.

Before continuing the review of our third quarter results, I would like to discuss some exciting news. After market closed today, we announced that we signed on November 5, a definitive agreement to acquire eSelf.ai, a deep tech GenAI lab developing conversational agentic AI technology and models for real-time photorealistic avatars, speech recognition and generation and screen understanding. eSelf's avatar technology is planned to power a new line of Kaltura immersive real-time conversational virtual agents, which will hear, speak, see and understand and harness video and other forms of rich media to provide highly engaging, personalized customer and employee experiences.

It is also planned to serve as the foundation of a new Kaltura content creation tool, which would enable customers to create and publish videos with recorded avatars. This dual capability positions eSelf as an important driver of both our live conversational agentic experiences and next-generation video-on-demand content creation offerings.

In our previous earnings call, we reiterated our vision to transform our AI agent from reactive prompt-based agents into proactive, automated conversational ambient agents that will anticipate needs and take action to not only drive productivity but become intelligent enough to replicate human rules and automate tasks, acting as AI twins.

We also said we plan to gradually evolve our offerings into AI specialists that are intended to be role aware, use case-specific and ultimately also industry-specific. Likewise, our investor presentations throughout the past year outlined our intent to launch immersive AI agents that would be fully automated, conversational, hyper-personalized and context aware, elevating us from powering video experiences to providing end-to-end video-based AI-infused customer and employee experiences.

We believe we're entering the decade of agents where avatar-based conversational agents will become a primary interface for work, learning and entertainment. To meet this shift, organizations will require a real-time video experience generator that assembles scenes user interface and narratives based on user intent. Instead of static pages or precut videos, real-time immersive agents will understand user context, goals and constraints and accordingly, construct personalized digital experiences that include a tailored dialogue, visual data overlays and call for action to drive the best outcome on every digital touch point across all employee and customer journeys.

The planned acquisition of eSelf, which is expected to close in the fourth quarter of this year, is an important milestone in achieving this vision and in our evolution from powering video content management and experiences to harnessing these capabilities to provide immersive virtual agents for customer and employee experiences in our transformation from a video company to a rich media-powered AI-infused CX and EX company.

After this acquisition, customers will continue to receive from Kaltura cutting-edge products to manage their video life cycle, publish and stream content online and on TV, run virtual events, et cetera. But the plan is that soon customers will also get from us 2 additional new offerings: first, a Kaltura-powered content creation tool that generates AI-based videos on demand with both photorealistic and animated avatars; and second, immersive conversational virtual agents with live avatar interfaces that utilize real-time video creation and repurposing, voice chat across over 30 languages, image creation, interactive whiteboarding and screen sharing.

This will include a wide array of prebuilt off-the-shelf agents that are optimized to fulfill CX, EX and industry-specific tasks and roles as well as development tools and professional services to create bespoke agents for customized needs. These immersive virtual agents will address tasks and fulfill roles in areas such as marketing, sales, customer care, recruiting, onboarding, teaching and training, communications, entertainment and more.

Essentially, they represent the next generation of Kaltura's recently launched AI-based Genies, turning them into fully conversational agents and adding to them a mouse, ears, eyes and a face so they could better fulfill human roles, increase customer and employee engagement and retention, streamline and accelerate processes, reduce costs and increase revenue.

We plan to integrate and offer eSelf technology alongside our current video experience products as well as offer eSelf -powered immersive virtual agents separately is new self-serve offerings, which are expected to boost our product-led growth go-to-market motion and expand our target market from large enterprise to also small and medium businesses across industries.

Examples of potential integrated offerings include enabling the creation and insertion of avatars to VOD assets within our VCMS platform and video portal product as well as adding live conversational avatars to all our products, including video portal, LMS and CMS extensions, virtual events and webinars, virtual classroom and TV streaming apps.

Examples of potential new self-serve offerings would be CX, EX and industry-specific immersive virtual agents based on the combination of Genie and the Avatar interface that would be easily embeddable in any website and online applications. These self-serve agents will include native integrations with a full suite of Kaltura products, so if warranted, they would enable our customers to harness the full powers of Kaltura across video creation, management, distribution, publishing and monetization.

eSelf was founded by Dr. Alan Bekker and Elon Shoshan and is home for an exceptionally talented team of more than 15 AI experts in the fields of computer vision and vision language models, NLP and speech. The company commenced development in 2023 and has recently started piloting its offering and receiving strong early user endorsement and industry recognition. including being recently honored by SaaS company as one of the next big things in tech in 2025.

We engaged with the eSelf team as they were switching gears from piloting to further hardening and scaling their offerings towards full commercialization, and they appreciated the opportunity to join hands with Kaltura to accelerate this process and their go-to-market motion because of our proven track record of successfully commercializing enterprise products, our highly synergistic technology and product portfolio and our strong market positioning and prominent customer base.

In recent months, we presented together the planned joint offering and its future potential and promise to various Kaltura customers and prospects across industries and were met with great interest and excitement. People love the rich multimodal conversational interface, appreciate the ability to integrate it deeply into their enterprise workflows and systems and are excited by how it connects with Kaltura's products and the vast video database that we manage and draw insights from.

We believe that closing this acquisition will enrich our technology and AI development talent base, boost the breadth, depth, appeal and mission criticality of our offerings, increase our addressable market, shorten our sales cycles with a new PLG motion and altogether support revenue growth.

This transaction will also support the repositioning of Kaltura from a video company to a media-rich AI-infused CX and EX company from providing video products as an end to harnessing them as a means for improved employee and customer engagement and success.

As for the deal structure of the eSelf acquisition, the purchase price consists of $7.5 million in cash payable upon closing, $12.5 million in cash payable over 3 years, contingent upon the attainment of specific earn-out milestones of incremental recognized revenue and 4.7 million common shares of Kaltura vesting over 3 years, subject to retention holdback provisions for eSelf founders and key employees, representing 3% of the company's outstanding stock before the deal.

The total deal value as of the date of signing, assuming all earn-out milestones and retention targets are achieved is approximately $27 million. We believe that this deal structure provides significant value accretion to Kaltura shareholders, while at the same time, recognizes the eSelf team and shareholders for their great achievements to date and their expected significant future contribution to our joint success.

For further details regarding eSelf and the transaction, please refer to the press release sent out this afternoon. You can learn more about our planned joint offering post closing and the potential exciting opportunity ahead by visiting www.kaltura.com/avatar-agents.

Next, I would like to turn to discuss another announcement from today, the repurchase of Kaltura common shares held by Goldman Sachs. Goldman Sachs invested in Kaltura in 2016. They have been a strong supporter of the company and have held all their shares since that time. Considering the extended duration that they have owned our stock and in line with their publicly traded strategy and efforts to harvest long-tenured noncore investments, we have come to an agreement to repurchase all their Kaltura shares at a 25% discount to the 30-day VWAP. The deal concluded on Friday, November 7, where upon we repurchased 14.4 million shares, representing 9.2% of our outstanding shares that day for a total price of $16.6 million.

Our Board believes that this represents a smart, timely and value-accretive move for all company shareholders and is committed to pursuing similar rewarding opportunities in the future in conjunction with our planned increased generation of cash and operational profit.

It is worth noting that following the Goldman Sachs share repurchase in Q4 and the expected closing of eSelf acquisition, the company is forecasting to close the year with approximately $60 million in gross cash, representing approximately $30 million in net cash after deducting our outstanding bank debt.

Furthermore, once the acquisition closes, the net combined impact of these 2 deals, assuming all the eSelf transaction shares will ultimately vest, represents a reduction in our outstanding share base of 9.8 million shares, translating to a 6.2% anti-dilutive accretive effect. So we expect to come out of these 2 transactions with stronger technology offerings, positioning and business opportunities, far fewer shares outstanding and more than enough cash to execute our exciting future plans.

Returning to the business update. New subscription bookings in the third quarter were comprised of 12 6-digit deals, including new customers such as a large Japanese conglomerate, a leading European professional services firm and a prominent Asian telecommunications company.

As for AI deals, in the third quarter, we closed 5 AI deals for Content Lab and Genie following last quarter's initial sales with a multinational fast food restaurant chain, a leading U.S.-based health care provider and 3 universities. We expect many more AI deals in the quarter ahead, in fact, more than previously forecasted, given the earlier stated accelerated effort in this area.

On the last earnings call, we forecasted new bookings to pick up in the second half of the year. While this has not happened yet in the third quarter, our current pipeline supports this pick up in the fourth quarter.

On the gross retention front, the gross retention rate in E&T continued to be strong in the third quarter, and we still forecast an annual E&T gross retention rate in 2025 that is better than that of the previous 4 years. M&T gross retention rate was better than that of the first and second quarters, though still lower than usual as forecasted. We continue to expect a strong M&T gross retention rate in the fourth quarter.

Moving on to the product front and beginning with our continued and growing investments in our AI offerings. In the third quarter, we expanded our family of Genie agents with additional features and functionalities. As mentioned before, these developments help prepare our Genies to become proactive, automated, conversational and ambient agents. As discussed, soon, they are expected to become fully immersive with the addition of a mouth, ears, eyes and the face.

As for Content Lab, in the third quarter, we enabled custom instructions designed to empower content creators and administrators to guide the AI with specific prompts to ensure that the generated clips emphasize the right messages, that the summaries and chapters match their communication style, that the generated metadata aligns with their internal taxonomy and that the generated quizzes fit their specific learnings objectives.

Lastly, for AI development, in the third quarter, we launched the first version of our new publishing agent, which automates the entire process of publishing content, taking over complex and repetitive tasks that previously required manual efforts. Once a content creator or administrator defines the publishing workflow and rules, the agent is empowered to take actions and make decisions autonomously to ensure content is prepared, enriched and published according to policy, including automated captioning, clipping, quiz insertion, metadata generation and content approval.

I want to tie all these AI developments together and also connect them to my earlier statements about eSelf and our exciting AI plans to evolve towards providing immersive virtual agents, our AI offerings and consequently, our entire product portfolio is becoming smarter, richer, more accurate, consistent, interactive, engaging, reliable and compliant. Our offerings are becoming more contextualized and personalized, are saving people and organizations more time and money and are assisting in achieving more mission-critical business goals.

As stated before, we're excited about this transformative transaction and the continued repositioning of Kaltura from a video company that powers video content management and experiences to a rich media-based AI-infused customer and employee experience company that specializes in harnessing the power of rich media to deliver better business results.

Moving beyond our AI innovations. In the third quarter, we delivered a broad set of enhancements across our portfolio. Our virtual events and webinars product supports events with much larger scale, fewer manual steps and lesser human resources, thanks to a more streamlined setup, including event applications and our new events MCP model, a powerful new way to connect our platform with AI assistant or third-party AI system.

In the video portal front, we fully integrated the modern Kaltura Studio, enabling our customers to run events directly from the portal with full chat and collaboration support, offering an integrated and streamlined live experience. We also upgraded our LMS and CMS extensions and virtual classroom with native embedding so instructors can deliver live and on-demand classes without leaving the LMS and students can learn the same place.

Finally, our underlying platforms for video TV content management gain improvements in hyper-personalized content discovery, the experience API, analytics and security. We are proud to continue to lead the market with the most robust, flexible and engaging video and TV platforms.

Continuing beyond our products, in the passing quarter, we hosted 4 Kaltura Connect and Education events across the U.S. where we discussed how AI is transforming the way institutions capture, preserve and personalize knowledge, empowering educators and learners with smarter, more connected experiences that drive engagement, success and student retention. Additional education events are being conducted globally throughout the fourth quarter.

During the third quarter, we also showcased at the IBC Broadcaster Conference in Amsterdam, our newly launched media publishing agent and the latest enhancements in our TV Genie offerings and ad monetization options.

Beyond education and media and telecom markets, for the broader enterprise market, we conducted several executive level dinners across the U.S. and Europe and showcased our offerings at large industry conferences like Digital X by Deutsche Telekom, CEMA, ISMA and Develhub. The focus of the conversation was our new and upcoming agentic offerings for customer and employee experiences, and we were met with great interest and excitement.

In summary, we wrapped up another quarter where we surpassed the high end of our subscription revenue, total revenue and adjusted EBITDA guidance as well as our expected cash flow from operations. Our pipeline still indicates a pick up in the level of new bookings in the fourth quarter for both E&T and M&T, coupled with an expected improvement in our M&T gross retention rate.

We continue to be fueled by customer consolidation around our platform, the maturity of our newer products and our exciting new Gen AI offerings that are expected to yield more bookings in the quarters ahead.

As for our outlook for the remainder of this year, we are guiding for the fourth quarter a sequential increase in total revenue for the first time this year. This embodies a fourth quarter subscription revenue guide that is at the same level as our third quarter results after taking into consideration revenue recognition delays with 2 existing customers. We are increasing for the third time our adjusted EBITDA guidance for the year and are forecasting to post another record high in the fourth quarter, which is reflective of the strength of our operations and our continued focus on disciplined execution. We're also forecasting another quarter of positive cash flow from operations.

We are very excited about joining hands with eSelf to accelerate the introduction of additional video-on-demand content creation tools and our transition from providing video solutions to rich media-based AI-infused customer and employee experience solutions. We believe this will increase our value, appeal and stickiness, shorten our sales cycle, increase our addressable market and support revenue growth, and we see a path to achieving all of this while continuing to grow our adjusted EBITDA profits and cash flow. To that end, we remain committed to achieving double-digit revenue growth and a Rule of 30 combination between revenue growth and adjusted EBITDA margin by 2028 or sooner.

Lastly, we will continue to look for opportunities to allocate our capital efficiently to increase shareholder value

Now before turning it over to John, our CFO, to discuss our financial results in more detail, I would like to follow-up on our announcement in early October about John's upcoming departure on December 5, to thank him again for his great contribution to Kaltura over the last couple of years and to wish him well in his next endeavor. As noted, we have initiated a search for a new CFO, and John will continue to support and consult the company and its seasoned finance team throughout the search process and new CFO onboarding.

I will now pass it over to John. John?

Thanks, Ron. I really appreciate the kind words, and thanks to all of you joining the call this afternoon. I will say a few words about my departure after I cover our third quarter 2025 results.

In the third quarter, we surpassed our top- and bottom-line guidance, improved our M&T gross retention rate sequentially and took strategic and tactical actions to allocate resources towards higher ROI opportunities while improving our overall operating efficiency. Touching on a few highlights in the quarter that demonstrate this, surpassing the high end of both subscription and total revenue guidance ranges, a record level of adjusted EBITDA also surpassing the high end of our guidance range and representing the ninth consecutive positive quarter of adjusted EBITDA profitability, highlighting our continued focus on operating expense management, strong cash flow from operations, improved M&T gross retention rate and a continued strong EE&T gross retention, which is still forecasted to yield an annual EE&T gross retention rate in 2025 that is better than that of the previous 4 years and working throughout the quarter to subsequently announce the signing of the eSelf definitive agreement and the repurchase of our shares from Goldman Sachs.

With that, let me move on to our results. Total revenue for the quarter ended September 30, 2025, was $43.9 million, down 1% year-over-year as expected and above the high end of our guidance range of $42.8 million to $43.6 million.

Subscription revenue was $42 million, flat year-over-year. This was also above the high end of our guidance range of $40.8 million to $41.6 million.

Professional services revenue contributed $1.9 million for the quarter, down 14% year-over-year and consistent with the expected trends we discussed on our previous earnings calls.

Before I speak to our remaining performance obligations, the RPO metric, I want to let you know that we made an adjustment to this metric this quarter, which has also been applied to our historical numbers. Ron spoke to our use of AI as it pertains to our product innovations and the introduction of Genie, Content Lab and publishing AI agents. In addition to harnessing AI technology to boost our own offerings, we are adopting new AI-based systems internally to improve our operations and controls.

To that end, as part of a new AI-based scan of all our contracts to ensure nothing was missed in our records, we discovered that not all contracts with the termination for convenience or TFC clause have been duly reflected in our systems and RPO calculations. For context, the TFC clause means that notwithstanding the defined contract term, a customer could terminate a contract midterm at its sole discretion. The TFC clause is only included in a small percentage of our contracts and less than 1% of our contracts were terminated before the end of their term, whether through such a TFC clause or without.

We do not have reason to believe this trend will change nor do we have any indication of any customer currently planning to exercise this clause. The current and historic RPO numbers I will now speak to all include this adjustment for consistency. We have also included a slide in the Q3 2025 investor deck that provides a full comparison of our RPO calculation, both pre and post adjustment.

As a result of this correction, the remaining performance obligations, including an $18.1 million downward adjustment this quarter were $159.3 million, a decrease of 4% sequentially and year-over-year, of which we expect to recognize 60% as revenue over the next 12 months. Again, these comparisons are all based on corrected historical RPO figures as well. To close this one out, this correction to our RPO calculation does not reflect any change in our outlook for the business or our growth prospects going forward.

Continuing to our other reported KPIs. Annualized recurring revenue was $169.1 million, up slightly year-over-year. Our net dollar retention rate for the quarter was 97% compared to 101% last quarter and in the same quarter last year. This decrease was anticipated and is reflective of the increased churn in M&T in recent quarters. As Ron mentioned, we still expect our annual NDR to reach 100%, same as last year and to start improving next year along with an improved expected gross retention in M&T.

I will now touch on the segments briefly. Total revenue of our EE&T segment for the third quarter was $32.4 million, a slight increase year-over-year. Subscription revenue was $31.8 million, up 1% year-over-year, while professional services revenue contributed $0.5 million, down 37% year-over-year.

M&T segment performance improved sequentially in the third quarter with the deceleration of the churn impact as discussed in the last 2 earnings calls. Total M&T revenue for the third quarter was $11.5 million, representing a decline of 4% year-over-year, but up 3% sequentially. Subscription revenue was $10.1 million, down 4% year-over-year, but also up 3% sequentially. Professional services revenue contributed $1.4 million, down marginally year-over-year.

GAAP gross profit in the third quarter was $30.7 million, up 4% year-over-year. Gross margin was 70%, which is up from 67% in the third quarter of 2024, and subscription gross margin was 77%, which is up from 75% in the third quarter of 2024.

Total operating expenses in the quarter were $32.2 million compared to $34 million in the third quarter of 2024, a reduction of 5% year-over-year.

Adjusted EBITDA for the quarter was $4.2 million, an increase of $1.7 million or 72% from $2.4 million in the third quarter of 2024. This result is a new record for us, being moderately higher than the previous record that we set both in the first and second quarters of this year and along with our improving expense and margin profile, highlights our continued focus on improving our operating efficiency over time. I'll discuss this more in a moment.

GAAP net loss in the quarter was $2.6 million or $0.02 per diluted share. This is an improvement of $1 million year-over-year.

Non-GAAP net profit in the quarter was $2 million or $0.01 per diluted share. This is an improvement of $2 million year-over-year.

Moving to the balance sheet and cash flow. We ended the third quarter with $84.1 million in cash and marketable securities. Net cash generated by operating activities was $9.3 million in the quarter, up $6.6 million from the second quarter of 2025, however, a decrease of $1.4 million year-over-year. You may recall that in the third quarter of 2024, we did receive a $2.3 million payment from a large customer that had been delayed from the second quarter in 2024.

As Ron touched on earlier, given the 2 transactions that were signed after the third quarter close, it is worth noting that following the Goldman Sachs share repurchase and the eSelf acquisition expected to close in Q4, the company is forecasting closing the year with approximately $60 million in gross cash, representing approximately $30 million in net cash after deducting our outstanding bank debt.

As Ron mentioned earlier, while new bookings have not yet experienced the expected second half pick up, our pipeline of opportunities for both EE&T and M&T points for this to occur in the fourth quarter. As our strong adjusted EBITDA and net operating cash flow indicate, we are gaining operating leverage, and we believe we are in a strong position to support a growth in demand, which we expect would be further accelerated in the upcoming quarters as we continue our evolution to provide immersive virtual agents. In addition, we continue to effectively manage through the churn we experienced in M&T this year as well as the continued uncertain macroeconomic environment.

Let's now turn to a quick update on the reorganization that we announced in early August. While still early, we are on track to realize the benefits that we discussed on the second quarter earnings call, namely incremental savings of $2.6 million in 2025 and $8.5 million on an annualized basis. The total onetime charge related to the reorganization was $0.8 million in the quarter. As stated, these reductions are not expected to affect our marketing and sales activities, which we still plan to sustain and gradually grow.

Finally, a few financial comments related to the eSelf acquisition. The deal is expected to close around year-end, and we expect the acquisition will have minimal financial impact on 2025 numbers. This is driven by eSelf's burn rate, which represents approximately 2% of ours and their nonmaterial revenue in 2025 as they only recently started piloting their offerings.

We expect to start recognizing incremental revenue from the acquisition by the second half of 2026, following further hardening, scaling and commercialization of their offering as well as integration with our platform and products. We will provide guidance for 2026 on our next earnings call, but can already reaffirm our plan to continue increasing our adjusted EBITDA profits and cash flow.

I would now like to discuss our outlook for the fourth quarter of 2025 and for the fiscal year ending December 31, 2025. Regarding the fourth quarter, we are guiding for a sequential increase in total revenue for the first time this year, as Ron touched on earlier. We expect total revenue to be between $45 million and $45.7 million.

As Ron also noted, we expect subscription revenue to be at the same level as our third quarter results after taking into consideration revenue recognition delays with 2 existing customers. We expect subscription revenue in the fourth quarter to be between $41.6 million and $42.3 million.

We expect to hit in the fourth quarter another record high level of quarterly adjusted EBITDA that would be between $4.2 million and $5.2 million.

Accordingly, for the full year, we are expecting subscription revenue to be between $170.9 million and $171.6 million and total revenue to be between $180.3 million and $181 million. For the full year adjusted EBITDA, we are raising our guidance for the third time this year to be between $16.6 million and $17.6 million, a $1.8 million increase of the middle of the guidance range. This is close to a $10 million year-over-year increase when compared to the $7.3 million adjusted EBITDA of 2024. As Ron mentioned, we are expecting to post again positive cash flow from operations in the fourth quarter.

In summary, EE&T gross retention remains strong, and we have continued to manage through the delayed M&T churn that impacted us this year and believe that M&T gross retention will be strong in the fourth quarter. Our new bookings pipeline suggests improvement in the fourth quarter and in 2026, driven by momentum in our sales pipeline, which also includes exciting potential AI deals. We are on very solid ground given the financial operating leverage we have built over the course of the past 2 years. It has allowed the company to allocate capital strategically to support organic growth, to buy back over 21.3 million shares since June '24 and to pursue the acquisition of eSelf to advance our evolution in 2026 and beyond.

most of you know, this will be my last earning call for Kaltura. My decision to move on to another opportunity, while, of course, a professional choice, was also very personal for me and with mixed emotions. Kaltura is a special company with a very passionate and committed team, strong senior leadership, a very talented CEO, as you all know, and a top-notch finance organization. The company is very well positioned within the existing markets it serves and will be even more so with the acquisition of eSelf as well as exposure to new market opportunities.

My belief in Kaltura has never been stronger and deeper than it is today. As I've said in the past, and I want to reinforce here, I know that the company is committed to targeting both revenue growth and adjusted EBITDA profitability, and I believe that the company is on the right path to achieve these objectives and to drive consistent returns to shareholders.

Our target continues to be to achieve double-digit revenue growth and the Rule of 30 combination between revenue growth and adjusted EBITDA margin by 2028 or sooner. As I've said before, Kaltura has achieved this goal in the past, and I know that it will achieve it again.

The company will provide guidance for 2026 when it reports Q4 '25 and 2025 full year in February 2026, but as discussed, is already confirming our intent to continue growing our adjusted EBITDA and cash from operations.

With that, we'll open up the call for questions. Operator?

[Operator Instructions] And our first question will come from Ryan Koontz with Needham.

This is Jeff Hopson on for Ryan. Congrats on the acquisition. I guess I had one on the acquisition. Any thoughts on the investments that are going to go into the new product and how it's going to integrate in, I guess, in like day 1, will sales reps be able to sell the product? Or was that second half revenue contribution kind of guiding to like a 6-month period of investing in a product?

Yes. Thank you very much. So in short, I'd say I'd focus more on the second half, not to say that things can't come earlier. we'd like to set the goal kind of in a realistic comfortable way for us to get there. It's a big move for us. There's a lot installed for this, and it's not about immediate gratification. It's about strategic long-term value.

I want to share a little bit about that, maybe give you a bit more information about cost structure and how much will be needed to be invested plus what are the type of developments for your question. But first, why are we buying eSelf? And as I've noted, it's like for 20 years, enterprises have been streaming video. But with the advent of AI, video can be created on the fly in a very hyper-personalized contextualized way, and we've been talking about that. The last 1.5 years, we've been building AI-based agentic video workflows, and we launched our Genie family of products for work, school and TV. And with that, we're able to repurpose video delivered in real time, customers, employees use that flash cards, images, short videos. But what it didn't include is an actual video representation. And now what we're doing with ESOP technology is we're giving Genie a face, a mouth, ears, eyes that's going to be human, it's going to be fully conversational and it's going to also see "your screen" so you could do a sharing and maybe at a later time, take over your screen. And that's really important.

As part of this move where we're gradually changing our mission statement from powering video experiences to powering immersive virtual agents and experiences. So the immersive virtual agents is, again, that Genie and the next generation in which it's not just video, it's fully immersive, and these are agents. It's not just about the experience. It's about replacing roles, replacing people. And as such, we're moving from being a video company to a video-based CX and EX company.

We believe that real-time AI-generated video and avatars are the next user interface. And we believe that each and every meaningful digital CX and EX touch point will be rendered as real-time video. We think navigation is going to transform from static to conversational and seeing that video carries so much emotion and context and intention, it's going to provide a much more engaging and hyper-personalized experience. So we're excited about that.

A word about what we're going to do with this, and I'm happy if there's any later questions, talk more about why we chose eSelf and why they chose us. But generally speaking and what we're going to do that's very different than some of the other folks are going to do. First, we're going to be offering these agents running on our VCMS and TVCMS. We're going to gradually productize them as stand-alone and self-served agents, and they're going to run on any website and any app, and they're going to cater to sales, marketing, customer care, recruiting, training, employee communication, teaching, entertainment, banking, everything. Gradually, we're going to build them. We're going to integrate them into our products. So that's going to be connected to our portal, connected to our events, connected to our TV system, connected to our virtual classroom, connected to the LMS. And we're going to also connect them to more third-party systems. So you could expect to have it fed by CRM, DAM, CDP, LXPs, LMSs. We're going to also build a software development kit and SDK so that, that could integrate a third-party agentic logic. And ultimately, we're going to also add tools for VOD avatars as discussed.

So you had asked about the time to market. It will take a bit to scale it to make sure that it's fit for compliance and security that it could run on a larger database. That's going to take anywhere between 1 and 2 quarters. We're going to commercialize the agents. We're going to do the integration. Everything we just said, it will gradually take the next year, but certain things are going to come much, much quicker.

I want to end up just saying why I think this differs for so many other options out there. There's not a lot. By the way, they're all big and exciting. You may have seen Synthesia recently declined a $3 billion offer by Adobe. So it said, and they raised $4 billion from Alphabet JV fund. Agen is there, Talos is there. So there's companies that are quite exciting. We are optimized for conversational more so than others that are doing VOD. And we also include the agentic logic. It's not just the avatar. It's not just a pretty face. It's about having a smart engine behind it, so you could boost the business results. But that's unique.

The other thing that's unique is that it's connected, as I mentioned earlier, to our video system. So we're going to serve within these experiences, hyper-personalized rich media content. I also mentioned it's going to be connected to our SaaS products, and that's unique.

And also lastly, when you think about the fact that we're hitting the ground running, it's the same customer, same buyers, same use cases, and we have a very significant data and workflow moat because we're sitting on a mountain of rich data at years of classes, meetings, events in which we're going to feed it. And so that's extremely, extremely unique.

And I'm just going to end up by saying this is the only public company that we are aware of in this space. There is a bunch of private companies that are doing very well. But from a public company investment, it's exciting. So I know it's a lengthy answer. I just want to make sure that we all understand the context. I did promise last year to say something about spend. I mentioned revenue second half. So from a spend perspective, the current spend of about 17 people is $3.5 million added to our OpEx. That's going to be added starting at the end of the year coming from closing throughout next year. We might add some more people for R&D to double down on this effort. I don't think we're going to need to add S&M or customer service or G&A because we could have that covered with our team. So all in all, that's kind of the impact, and we said we're going to continue to grow bottom-line. And I'm just excited that we're entering a big market with a very differentiated technology.

Awesome. And maybe just one follow-up. As we kind of look into 4Q, just curious if there's any specific verticals or customer cohorts that are kind of coming in better or worse than your expectations?

That's a good question. I mean we have seen -- so what have we seen in the third quarter, we've seen the gross retention starting to get better in M&T. We said that Q4 is going to get even better. So we're happy to see this kind of land in the right place. We did say that the new bookings, the kind of the sequential increase did not happen in the third quarter, and it is -- we said second half. So it's going to -- what we see is we expect that to happen in the fourth quarter. It is happening in both M&T and E&T. So we expect that trend to build up in both of them.

[Operator Instructions] And we'll go next to DJ Hynes with Canaccord.

Congrats on all the news, very exciting stuff. Ron, maybe I'll start with you. I'm just curious, are you seeing any tangible signs in the customer base that the adoption of AI technologies is increasing either the velocity or the amount of video content created. I'm just curious if there are data points that support that the thesis is already starting to play out or if it's still a little too early here.

So definitely, there's excitement. We have seen more and more people interested in utilizing Genie and Content Lab. Again, we closed 5 deals this quarter, both education, enterprise, there's more around the corner. The list is growing. They are using that to generate more video period. The whole idea of recreation, repurposing of videos is one of the biggest issue of AI. So we're seeing that happen. Like I said, I think that the big jump is going to happen in continuous investment in the regular stuff we've done, but also with this Genie 2.0. And I think that's 2026. So I'm very excited about that.

From a multi-quarter trend, there's no doubt it's getting there. Again, we've been careful from the beginning to talk about how quickly revenue is going to hit because there are issues pertaining to compliance and just the rapidity in which people fully adopt these things that take a bit of time. But we've been out there in conferences showcasing also the new vision. We have people take cameras out and take photos of what we've been doing in videos. Their jaws dropped. The excitement level is really high.

We've had some of our customers, including the very -- the biggest customers that we have sit and talk to us about what they could do with us now. So there is very, very interesting buying signs to the new stuff that we're doing. But look, you know us, we don't overpromise. We like to overdeliver, and we also want to build this company for the mid- to long-term. It's not a tell me market. It's show me market. And it's not overnight. I also want to set that stage that it's going to take a few quarters here. It could come quicker. It could take a bit longer. But I think that as we go through this, we're going to have more and more design partners, more and more launch partners. Hopefully, we'd be able to share these as they come by. Hopefully, they're going to be big and exciting. So everybody is going to get excited by that. But we see this as very, very disruptive.

Yes. Good to hear. And then maybe we could just follow-up on the rev rec delays you called out with 2 customers. What's causing those? And when do you expect those issues to be rectified and we could start to see that revenue drop in?

Yes. That particular -- there's a couple of customers. It's to the tune of $0.5 million-ish in that. By the way, if you add that up and just kind of look at our current guide and maybe if we were as usually, yes or no going to meet our guidance, maybe go above kind of coming back to the original numbers because we've taken it just a tad down, but let's wait and see what happens in Q4. These 2 are, one of them is, is E&T, the other one is M&T, and it's really projects that were planned to have happened by the end of the year, and they spilled over into next year. And so that's going to take a little bit longer after that, whether it's fully in Q1 or a little bit after. And that's just news coming for the customers for reasons that relate to them, which was not pre-known to us. And when it did come up, we needed to adjust for it.

Okay. So it's not a Kaltura delivery issue.

No.

It's challenges on behalf on the customer end. Okay. Got it.

That's correct. Everything that has to do with them, yes.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Ron Yekutiel for closing comments.

Yes, I appreciate that. Again, a special day for us. It's once every few years, we make a leap that is inorganic in this form. If you look at our past behavior, when we've done these, they've landed significant big customers. We acquired DaVinci in 2014, brought in Vodafone that kind of brings $20 million a year. We brought in Newrow in 2020, and that brought in AWS. We brought in in the first year, close to $13 million a year. So it's not just the issue of technology and strategy and positioning, but the very significant, we believe, potential commercialization and revenue.

It's an exciting new step, which is aligned very much with what we've been talking about for a long time. It's not a new direction. It is an evolution into the right direction, which is to become a full CX and EX platform that harnesses video in order to be a better C and EX platform and that harnesses AI at Genie 2.0. So we're excited.

We love the team that's joining us, and we love the DNA mix that they bring. We commend them for what they've done so far and thank Alan, Elon and his team for choosing Kaltura as their partner and to continue the journey together. We're excited from what lies ahead. We did not mention, but we also repurchased stock, quite significant stock this quarter. So we're ending up, as I mentioned earlier, with a lot more technology and exciting opportunity with far less shares. So it's anti-dilutive accretive value for shareholders at a great price, and we're able to hopefully command the growth and profitability that we're planning to command in the quarters ahead.

And that's it. I want to thank everybody for their continued trust and support. And once again, as we wrap up, thank my friend here and colleague, John, for his great support and partnership. We're going to remain close friends, and we're going to continue to work together, and he's going to continue to consult the company in the months ahead as we bring in the new CFO.

So -- and of course, amazing, amazing finance team and leadership within the finance team that's enabling this transition to happen. We have the #1 finance team in the world. So thank you, folks. Appreciate it. Have a wonderful day. Take care.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.