Kaltura files to go public on the back of accelerating revenue growth, rising losses

Kaltura, a software company focused on providing video technology to other concerns, has filed to go public.

The Kaltura S-1 filing only partially surprised. TechCrunch previously covered the company as part of our ongoing $100 million ARR series focusing on private companies that have reached material scale. (TechCrunch has also covered its product life to a moderate degree.)

The company’s IPO documentation details a business that did more than merely accelerate its growth in 2020, and more specifically, during the COVID-19 era. Seeing a company that powers video tooling do well when much of the world has transitioned to remote work and education is not a bolt from the blue. What is notable, however, is that the company’s revenue growth has accelerated yearly since at least 2018 and its final quarter of 2020 placed the company at a new growth rate maximum.

Public investors, hungry for growth, may find such a progression compelling.

Kaltura also has an interesting profitability profile: As its GAAP net losses scaled in the last year, its adjusted profitability improved. Depending on your stance regarding adjusted metrics, Kaltura’s bottom line will either irk or delight you.

This afternoon, let’s rip into the company’s S-1 and yank out what we need to know. It is IPO season, with SPACs galore and other private companies taking more traditional routes to the public markets, including Coupang announcing a price range for its traditional debut today and Coinbase’s impending direct listing.

For now we’ll focus on Kaltura. Let’s get into it.

Inside Kaltura’s IPO filing

When TechCrunch last covered Kaltura’s financial results, we noted that the company founded in 2006 had raised just north of $166 million, crossed the $100 million ARR mark, and was, per its own reporting, “profitable on an EBITDA.” Kaltura also told TechCrunch that it had margins in the 60% range and was growing at around 25% year over year. That was just over a year ago.

Do those figures hold up? In the Q1 2020 period Kaltura recorded $25.9 million in revenue, software margins of around 78% and blended gross margins of 59.8%. And the company had grown 16.6% from the year-ago quarter. In Kaltura’s defense, the company’s growth accelerated to 24% in the year, so its self-reported numbers were mostly fair. Better than, I think, most numbers we get from private companies.

Kaltura grew its revenues 12% in 2018, 50% faster at 18% in 2019, and 33% faster in 2020 when it managed 24% growth. As we usually see companies’ revenue growth decelerate as they grow, Kaltura is a fun inversion of the norm. And the company grew 30% in Q4 2020, up from 23% growth in Q4 2019; its acceleration continues.

For the frugally minded, Kaltura claims early in its S-1 document that it managed the “growth without materially increasing our sales and marketing spend over the same period.” So, did its profitability improve? Not in regular accounting (GAAP) terms.

Kaltura posted a stiff $16.3 million net loss in the final quarter of 2020, far higher than its loss in Q4 2019 when it posted a net deficit of just $1.7 million on a GAAP basis. Its yearly results tell the same story. Here is a digest of its full-year 2019 and 2020 results:

  • 2019 revenue: $97.3 million.
  • 2019 net loss: $15.6 million.
  • 2020 revenue: $120.4 million.
  • 2020 net loss: $38.7 million.

If you will allow the company to drop certain costs, like noncash expenses from the “remeasurement of warrants to fair value,” and share-based compensation along with incidentals, Kaltura’s profitability is improved. Its adjusted EBITDA rose from $4 million in 2019 to $4.3 million, a falling percentage of revenue but a larger gross sum over the two-year timeframe.

For the SaaS focused, here are some more numbers for your use: Kaltura’s ARR grew from $91.1 million at the end of 2019 to $116.6 million in 2020. During the same time period, its remaining performance obligations, or RPOs, grew from $114.9 million to $141 million. And its net dollar retention rate improved from 105% to 107% from 2019 to 2020, a modest gain, but movement in the right direction.

The company’s glass-half-full profitability and accelerating revenue growth are undergirded by an improving cash flow landscape. Kaltura’s positive operating cash flow rose from $370,000 in 2019 to $5.8 million in 2020. For the full year, Kaltura’s aggregate cash position rose by just over $1.2 million in 2020 sans raising external capital; the company can self-fund, in other words.

For a company last valued at $500 million after a $50 million fundraise in 2016, per PitchBook data, its IPO timing make sense. At nearly $117 million in ARR and end-of-year growth of 30%, Kaltura could command a revenue multiple from 12x to 45x, leaning on data from public cloud companies. The resulting valuation range — some $1.4 billion to $5.3 billion — imply that Kaltura is heading for a pleasant valuation bump from its impending debut.

To be clear, TechCrunch is not trying to value the company per se, but instead is merely using public comps with similar growth rates to illustrate how far its value has likely grown.

Who will benefit from that growth? Point 406 Ventures, Nexus India Capital, Avalon Ventures, Intel Capital, Sapphire Ventures and Goldman Sachs, it appears. Who will win the most is not yet clear as the company’s S-1 filing has yet to detail share holdings; those investing groups are merely noted amongst its principal shareholders for now.

It’s unicorn melting season, with gobs of investors hoping for liquidity while public markets are hot. Expect more Kalturas.

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