Israeli video platform company Kaltura has filed a prospectus for an IPO on Nasdaq the old-fashioned way, rather than via an SPAC. The valuation that Kaltura seeks and the amount to be raised have not yet been disclosed, but it can be estimated that the company will aim at a valuation upwards of $1 billion. In its last financing round, in 2016, it was valued at $500 million.
Kaltura was founded in 2006 by its chairman and CEO Ron Yekutiel, Dr. Michal Tsur, Dr. Shay David, and Eran Etam. According to IVC, it has raised $156 million.
The company employs 584 people. Its business is in the currently hot area of video management systems. Talking to "Globes" a few months ago, Yekutiel said, "Logic says video, the pandemic said video, and the world is in any case going in that direction, but it was not obvious what a tidal wave we were getting into… in April-May, all our customers started to use our systems like crazy. Sales times were cut by a quarter."
Regarding Zoom, Yekutiel said, "There was video conferencing -Skype, Webex, Blue Jeans - and the feeling is that Zoom produced a faster horse. They didn’t produce a car, and certainly not a spaceship. We tried to make the leap to the spaceship generation, and to ask ourselves where video is going now, what the next disruption is."
The prospectus reveals that in 2020 Kaltura's revenue grew by 23.7% to $120 million, and that in each quarter last year revenue grew in comparison with the previous quarter. Revenue breaks down into revenue from subscriptions and revenue from professional services. The gross margin on subscriptions is 72.6%, whereas professional services generated a gross loss, although a smaller one than in 2019. In 2020, subscriptions revenue grew by 22.8% to $104 million. Growth in professional services revenue was higher, at 29.7%, to a total of $16.4 million.
Kaltura is not profitable, and in 2020 it posted an operating loss of $8.1 million, which compares with an operating loss of $2.8 million in 2019. The wider loss was a result of a rise in operating expenditures. The bottom line in 2020 was a net loss of $38.7 million, following a net loss of $15.6 million in 2019.
Another key figures in the prospectus is 6.7% growth in EBITDA in 2020 to $4.3 million, although as a proportion of revenue EBITDA fell from 4.1% in 2019 to 3.6% last year. Until 2019, annual EBITDA was negative. Cash flow from regular activity was positive last year, amounting to $5.8 million. The company has $27.7 million cash and debt totaling $48.2 million.
The prospectus states that, as a result of the coronavirus pandemic, ,usage of the company's solutions rose in the second quarter of 2020, as people switched to working and studying from home. It points out, however, that in certain contracts, particularly with educational institutions, there is no usage limit or price rise when usage grows, so that the increased usage did not translate into a corresponding rise in revenue. In addition, in order to meet customer demand in 2020, the company accelerated its plans for transition from its data centers to public cloud infrastructure, in order to ensure stability, reliability, flexibility, and the ability to expand its activity. The company says that the combination of greater usage and the transition to the cloud contributed to a decline in gross margin in 2020 from 63% to 60%. These expenses are expected to continue to weigh on gross profitability in 2021 as well.
According to the prospectus, Yekutiel earned $13.1 million in 2020, mostly ($12.3 million) in stock-based compensation. Tsur, who serves as president and general manager, enterprise and learning, received compensation worth $3.6 million, and CFO Yaron Garmazi received compensation worth $1.8 million.
The underwriters advising Kaltura in the offering are Goldman Sachs, Banc of America Securities, Wells Fargo Securities, Deutsche Bank Securities, JMP Securities, Cannacord Genuity, KeyBanc Capital Markets, Needham & Company, and Oppenheimer & Co.
Published by Globes, Israel business news - en.globes.co.il - on March 2, 2021
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