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Despite Upbeat Q2 Results, Weak Projections Upset Kaltura’s Investors

Story Highlights

Kaltura’s lower revenue projections for 2022 seem to have disappointed investors, leading to a 10.5% decline in its share price on Tuesday.

Even after delivering better-than-expected results in the second quarter of 2022, Kaltura, Inc. (NASDAQ: KLTR) seems to have disappointed investors with weak projections for the third quarter and 2022. Shares of this $303.9-million software company fell 10.5% to close at $2.38 on Tuesday.

It is worth noting that Kaltura reported narrower losses and a sales surprise of 0.5% in the second quarter. The company, which has expertise in providing video products and video industry solutions, went public through an initial public offering (IPO) of shares in July 2021.

Kaltura’s Q2 Results in Detail

Kaltura reported an adjusted loss of $0.08 per share in the second quarter, an improvement over the consensus loss estimate of $0.10 per share. The company had reported a loss of $0.04 per share in the year-ago quarter.

Revenues totaled $41.98 million in the second quarter, above the consensus estimate of $41.75 million. On a year-over-year basis, the top line increased 0.9%, driven by a 4.1% rise in subscription revenue, partially offset by a 22% decline in professional services revenue.

On a segmental basis, revenues inched up 0.5% year-over-year for the Enterprise, Education, and Technology segment, and those for the Media and Telecom segment advanced 1.8%.

Annualized recurring revenue grew 3.8% year-over-year in the second quarter, while remaining performance obligations increased 10.5%.

The cost of revenue in the quarter decreased 2.1% year-over-year, while adjusted gross profit advanced 3.2%. Also, the adjusted gross margin grew 200 basis points (bps) to 64% in the second quarter.

Adjusted operating expenses increased 31.2% year-over-year. Marginal increase in revenues and higher operating expenses led to an adjusted operating loss of $9.1 million in the second quarter. The adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in the quarter was ($8.5) million versus $1 million in the year-ago quarter.

At the end of the second quarter, Kaltura had cash and cash equivalents of $55.7 million, down 61.3% from 2021-end. The cash balance included the impact of $42.1 million of net cash outflow for operating activities and $1.5 million in debt repayments. Long-term loans were $32.9 million at the end of the second quarter of 2022.

CEO’s Take

The company’s Co-founder, the Chairman, and CEO, Ron Yekutiel, said, “Given the macroeconomic outlook we are implementing a cost-reduction and re-organization plan that includes, among other things, downsizing approximately 10% of our employee base. Our re-organization plan is heavily focused on realigning our operations to further increase efficiency and productivity. We believe this necessary action will accelerate our return to the profitable growth that we achieved in previous years.”

Kaltura’s Projections for Q3 and 2022

For the third quarter, Kaltura forecasts total revenues to be within the $40.8-$41.7 million range, reflecting a year-over-year decline from the year-ago tally of $43 million.

For 2022, the company anticipates total revenue of $168.4-$171.6 million, lower compared with the $171.3-$178.2 million stated earlier. The revised projection reflects year-over-year growth of 2%-4%.

Subscription revenue in the year is expected to be $152.1-$155.1 million, down from $159.5-$163.8 million provided earlier. The adjusted EBITDA is forecast to be ($32)-($27) million.

Analysts Are Cautiously Optimistic about Kaltura

On TipRanks, analysts have a Moderate Buy consensus rating based on two Buys and one Hold. KLTR’s average price forecast is $4.50, suggesting 89.08% upside potential from the current level.

Following Q2 results, Ryan Koontz of Needham reiterated a Buy rating on Kaltura with a price target of $6 (152.1% upside potential).

Is Kaltura Stock a Good Buy?

After considering management’s efforts to re-organize its operations and control costs, Kaltura stock could look attractive to long-term investors. In the near term, the company’s performance is expected to be clouded by lower revenues, higher expenses, and operating losses.

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