Kaltura signals transition to AI-driven CX/EX with eSelf acquisition and targets double-digit revenue growth by 2028

Earnings Call Insights: Kaltura, Inc. (KLTR) Q3 2025

MANAGEMENT VIEW

* Ron Yekutiel, Co-Founder, Chairman, President & CEO, announced "total revenue of $43.9 million for the third quarter of 2025 and subscription revenue of $42 million." He highlighted 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%." The CEO also revealed a planned acquisition: "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."
* Yekutiel stated the strategic importance: "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."
* The company also announced a "repurchase of Kaltura common shares held by Goldman Sachs... we repurchased 14.4 million shares, representing 9.2% of our outstanding shares that day for a total price of $16.6 million." Yekutiel described this as "a smart, timely and value-accretive move for all company shareholders."
* On customer momentum, Yekutiel detailed "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."
* John Doherty, Chief Financial Officer, stated: "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."

OUTLOOK

* The company is "guiding for the fourth quarter a sequential increase in total revenue for the first time this year."
* Kaltura expects "total revenue to be between $45 million and $45.7 million" in Q4 and "subscription revenue in the fourth quarter to be between $41.6 million and $42.3 million."
* Adjusted EBITDA for Q4 is guided to "between $4.2 million and $5.2 million."
* For the full year, guidance is "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."
* Management reiterated, "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."

FINANCIAL RESULTS

* Total revenue for Q3 2025 was $43.9 million. Subscription revenue was $42 million, and professional services revenue contributed $1.9 million.
* Annualized recurring revenue was $169.1 million. Net dollar retention rate for the quarter was 97% compared to 101% last quarter.
* EE&T segment revenue for Q3 was $32.4 million, with subscription revenue at $31.8 million. M&T segment revenue was $11.5 million, with subscription revenue at $10.1 million.
* GAAP gross profit was $30.7 million. Gross margin was 70%, up from 67% in Q3 2024. Subscription gross margin was 77%, up from 75% in Q3 2024.
* Total operating expenses were $32.2 million compared to $34 million in Q3 2024.
* Adjusted EBITDA was $4.2 million, an increase of $1.7 million from Q3 2024.
* Non-GAAP net profit was $2 million, or $0.01 per diluted share.
* Cash and marketable securities at quarter-end were $84.1 million. Net cash generated by operating activities was $9.3 million.

Q&A

* John Jeffrey Hopson, Needham: "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?" Ron Yekutiel: "So in short, I'd say I'd focus more on the second half, not to say that things can't come earlier... 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."
* John Jeffrey Hopson, Needham: "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?" Yekutiel: "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."
* David Hynes, Canaccord: "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?" Yekutiel: "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."
* David Hynes, Canaccord: "Follow-up on the rev rec delays you called out with 2 customers. What's causing those?" Yekutiel: "It's challenges on behalf on the customer end... It's really projects that were planned to have happened by the end of the year, and they spilled over into next year."

SENTIMENT ANALYSIS

* Analysts pressed for clarity on the timeline for integrating eSelf and on customer adoption trends, with a generally positive but probing tone.
* Management maintained a confident and optimistic tone in both prepared remarks and Q&A, regularly emphasizing strategic opportunity and operational discipline. Yekutiel stated, "We believe we're entering the decade of agents where avatar-based conversational agents will become a primary interface for work, learning and entertainment."
* Compared to the previous quarter, management’s tone appeared even more forward-looking and transformative, while analysts remained focused on execution and specifics of integration.

QUARTER-OVER-QUARTER COMPARISON

* Sequential revenue declined from $44.5 million in Q2 to $43.9 million in Q3, but management signaled a return to sequential growth in Q4.
* The current quarter saw a major strategic shift with the planned acquisition of eSelf.ai, while the previous quarter focused on organic AI product enhancements and a cost-saving reorganization.
* Adjusted EBITDA increased from $4.1 million in Q2 to $4.2 million in Q3.
* Net dollar retention rate decreased from 101% in Q2 to 97% in Q3.
* Analysts in both quarters focused on the trajectory of AI product monetization, bookings momentum, and retention, but the current quarter’s Q&A had more emphasis on integration and execution risk.
* Management confidence remained high, with increased emphasis on transformation and future growth.

RISKS AND CONCERNS

* Management noted a downward adjustment to RPO after an AI-based contract scan, with an $18.1 million reduction this quarter, but stated, "this correction to our RPO calculation does not reflect any change in our outlook for the business or our growth prospects going forward."
* There were revenue recognition delays with two customers, impacting short-term revenue timing.
* Churn in the M&T segment remained a concern, though sequential improvement was noted and further improvement is expected in Q4.
* The anticipated integration period for eSelf.ai’s technology may delay some revenue realization until the second half of 2026.

FINAL TAKEAWAY

Kaltura’s third quarter marked a transformative step, highlighted by the planned acquisition of eSelf.ai to accelerate the evolution from a video company to an AI-driven CX and EX solutions provider. Management underscored strong operational execution, ongoing profitability, and capital returns, while guiding for a return to sequential revenue growth and record adjusted EBITDA in Q4. The strategic direction, with a focus on immersive virtual agents and AI-infused offerings, is expected to expand addressable markets and support double-digit revenue growth and a Rule of 30 target by 2028 or sooner.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/kltr/earnings/transcripts]

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