Good morning, everyone, and welcome to the Kaltura First 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 and good morning. I am 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 first quarter ended March 31, 2025, and provide a business update. John will then review the financial results for the first quarter of 2025 in greater detail, followed by the company's outlook for the second quarter and full year 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, including, but not limited to statements regarding Kaltura's expected future financial results and management's expectations and plans for the business. 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 materially 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 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 during this call, we will be discussing non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin and adjusted gross margin. 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. I will now turn the call over to Ron.

Thank you, Erica, and thanks to everyone for joining us on the call this morning. Today we reported record total revenue of $47 million for the first quarter of 2025, up 5% year-over-year, which included record subscription revenue for the quarter of $44.9 million, up 9% year-over-year. It was our third consecutive quarter of increasing year-over-year revenue growth. We also posted record ARR for the fourth consecutive quarter, up 7% year-over-year and grew our RPO 12% year-over-year. As for our bottom line, in the first quarter, adjusted EBITDA reached a record level of $4.1 million, representing our seventh consecutive quarter of adjusted EBITDA profitability. We also posted record positive non-GAAP earnings per share. This was fueled in part by a strong non-GAAP gross margin of 70%, up from 65% in the same quarter last year. We consumed $1 million in cash for operations during the quarter, similar to what we had consumed in the first quarter of last year. While cash flow was a little lower than expected, it is aligned with our typical seasonality and does not change our cash flow forecast for the full year. Moving on to the business update. New subscription bookings in the first quarter were seasonally low compared to other quarters as usual and expected. Similar to the first quarter of last year, it included one 7-digit deal and 15 6-digit deals, though the portion of new subscription bookings from new customers grew year-over-year as did the average selling price for new customers. New logos in the passing quarter included Stripe, a leading financial services company, Novo Nordisk, a leading multinational pharmaceutical company, a leading global medical device company and a large U.S. private university. Most of our new subscription bookings came again from upselling to existing customers, including a global leading cloud provider, a CRM market leader, a large Asian bank, a leading health care software company and several media and telecom companies. Companies continue to consolidate their video usage around Kaltura during the quarter. And accordingly, our average ARR per customer continued to grow to another record high. On the gross retention front, we mentioned in our last earnings call that we anticipated a lower rate of retention in the first half of the year due to delayed media and telecom churns from last year and this is occurring as expected. That said, our gross retention rate in E&T was at its best level since the fourth quarter of 2022 and we continue to forecast an annual E&T rate in 2025 that is better than that of the previous four years. We were pleased that net dollar retention in the first quarter continued to climb to 107%, its highest level since the first quarter of 2022. Moving on to the product front. Let's begin with our continued and growing investment in AI to deliver hyper-personalized data-driven experiences. In the first quarter, we enhanced our new Genie agents to empower organizations running multiple Genie instances to cater to different audiences, departments and use cases. Imagine, for example, a marketing Genie agent that provides marketing teams customer insights, customer stories and marketing tips and in the same company, also a separate academy Genie agent that provides employee micro learning and testing around company training materials and policies. In addition, Genie now supports self-service experiences with simple log-in mechanisms and enables ingestion of additional video sources beyond Kaltura, like YouTube. On the M&T front, Kaltura's TV Genie recently won the Product of the Year Award for streaming at the 2025 NAB Show, underscoring the disruption that our innovative Genie product is introducing to the market. During the quarter, we also released two more agents within our Content Lab family of offerings for content creators, a highlights video generator agent, which automatically creates highlights out of every video stitching together multiple AI-generated clips into a single video, and a content enrichment agent, which automatically generates titles, descriptions and tags for the content, driving discoverability and searchability to reach a broader audience with greater relevancy. Our AI beta program for evaluating both our Genie and Content Lab offerings for customer and employee experiences has already sparked the interest of more than 150 customers to date, which constitutes roughly 20% of our customer base. These customers span across all of our target industries, including technology companies, regulated industries like banking, insurance, health care and pharma, education institutions and media and telecom companies. While it's early, 20 of these customers spanning from U.S. headquartered enterprises such as Accenture and New York Life to global universities such as Nanyang Technology University and NGN Polytechnic, which we can name, have progressed in their POCs beyond legal and onboarding to generate Gen AI test queries and video transformation. These tests show that 85% of the video content that is recommended to users by Genie has not been previously seen by them, demonstrating how Genie surfaces value from underutilized content to optimize hyper-personalized journeys. We think this represents a significant upsell opportunity for us and expect to start closing deals in the coming quarters. As for our recently released Gen AI-powered transcription engine, it has already been successfully deployed with over 200 customers, providing improved results at lower operational costs, which helps increase our gross margin. We plan to soon expand from DoD captioning in English and image to text OCR to supporting additional languages into live captioning. Lastly, we continue to expand our collaboration with third-party Gen AI vendors, for example, with Synthesia, a developer of hyper-realistic AI avatars with which we enable our customers to create avatar-based experiences based on Kaltura's video content and within Kaltura experiences. Beyond AI, on the virtual events and webinars front during the first quarter, we bolstered our mobile experience with full support for chat and collaboration polls and quizzes. We also enhanced the way we track viewership, engagement and completion of training paths to offer more granular certifications, released RSVP and tags to allow for larger multi-session events to be easier to manage and expanded our events API to allow for better integration and control. Also in the last quarter, our video portal received a new modern design with easier content discovery navigation. These and many more improvements continue to earn us top recognition by leading analyst firms, including Gartner, which recently recognized Kaltura again as a representative vendor in their market guide for both meeting solutions and video platform services. Moving on beyond products. In the passing quarter, we hosted our first annual investor event that was held in our New York office and remote attendants joined using Kaltura's event platform. It was a great opportunity to provide additional color on our profitable growth plans and goal of achieving both double-digit revenue growth and a Rule of 30, which combines year-over-year revenue growth and adjusted EBITDA margin by 2028 or before. The highlight of the day was showcasing our great products and sharing our exciting AI-infused vision and road map as well as hearing live customer testimonials. AWS shared how they use Kaltura, among other things, to enable thousands of partners monthly across six languages. Accenture shared how every month they have millions of plays on Kaltura and 3,500 new videos uploaded powering training, enablement and internal marketing. Boston University mentioned how Kaltura enables them to provide a flipped classroom experience to students in over 100 countries. Vodafone explained how Kaltura acts as the centerpiece of Vodafone TV, which reaches today over 3 million households across nine markets. And Bouygues Telecom shared how at the end of their current migration process, they will provide TV services with Kaltura to more than 4 million households. A video recording of the event and our presentation deck are available at the Investors section of our website. We also provided through the website access to Kaltura Genie instance, where you could run AI-based Kaltura queries on this recording and additional content provided. And while on the topic of Kaltura events, I want to remind you all that our Kaltura Connect on the Road 2025 events are taking place later this month in New York, San Francisco and London. We'll discuss how AI-powered personalization, intelligent archives, agentic intelligence and data-rich video are reshaping customer and employee experiences and hear from amazing speakers from leading enterprises such as Salesforce, JPMorgan Chase, Vanguard, Adobe, AWS, Visa, Bloomberg, Pinterest, Zendesk, Accenture, AstraZeneca and more. These events are followed by six connect and education events that will take place across the U.S. and in Europe as well as virtually for APAC organizations. Information for all these events is available on our website. We invite you to join. In summary, we wrapped up a record revenue and adjusted EBITDA quarter. While the year started as usual with slower new bookings compared to other quarters, our current pipeline indicates an expected improvement in the coming quarters and we continue to forecast a year-over-year regrowth in new bookings for the full year, fueled by customer consolidation around our platform, maturity of our newer products, exciting new Gen AI capabilities, growth potential within our great customer base and a gradual regrowth in our sales force. We also continue to forecast a bounce back in gross retention in the second half of the year following the expected decline in the first half of the year, as mentioned earlier and in the previous earnings call. Despite our revenue guidance outperformance in the first quarter, we're mindful of the typical slower booking start for the year and the still uncertain macro outlook and are therefore maintaining our previously provided revenue guidance for 2025. We are, however, slightly increasing our adjusted EBITDA guidance for the year and restating our goal of posting positive cash flow from operations for the year at a similar level as our forecasted adjusted EBITDA, with most, if not all, contribution expected to come in the second half of the year, consistent with historical seasonality. With that, I'll turn it over to John, our CFO, to discuss our financial results in much more detail.

Thanks, Ron, and hello to everyone on the call today. Kaltura continued its strong and focused execution in the first quarter with further monetization of our existing customer base and addition of new customers, continued improvement in operating efficiency and reallocation of resources towards higher ROI opportunities and markets. Touching on a few highlights in the quarter that demonstrate this. For the tenth consecutive quarter, total revenue grew year-over-year, driven primarily by strength in our subscription revenue, which has grown year-over-year in this and all past quarters. It was also our third consecutive quarter of increasing year-over-year growth rates. Both total ARR and average ARR per customer continued to grow and are at the highest level to date. Net dollar retention reached its highest level since the first quarter of 2022. A strong gross retention rate in EE&T, which was at its highest level since the fourth quarter of 2022. A record level of adjusted EBITDA, representing the seventh consecutive positive quarter of adjusted EBITDA profitability, highlighting our continued focus on operating expense management and significant net loss improvement on a GAAP basis and record positive adjusted net income on a non-GAAP basis. With that, let me move on to our results. Our results once again exceeded our guidance for both revenue and adjusted EBITDA for the quarter. Total revenue for the quarter ended March 31, 2025, was $47 million, up 5% year-over-year and above the high end of our guidance range of $45.7 million to $46.5 million. Subscription revenue was $44.9 million, up 9% year-over-year. This was also above the high end of our guidance range of $43.4 million to $44.2 million. Professional services revenue contributed $2.1 million for the quarter, down 42% year-over-year, consistent with the expected trends we discussed on our previous three earnings calls. The remaining performance obligations were $184.9 million, down 9% sequentially, but still an increase of 12% year-over-year, of which we expect to recognize 59% as revenue over the next 12 months. The sequential decrease in RPO is a result of the typical seasonal decline in new bookings and renewals in the first quarter and we expect this to rebound as we move through the year, consistent with past years, as Ron mentioned earlier. Annualized recurring revenue was $174.8 million, up 1% sequentially and 7% year-over-year. This is the highest ARR we've achieved to date and the fourth consecutive sequential increase, driven primarily by our increase in subscription revenue. Our net dollar retention rate for the quarter was 107% compared to 103% last quarter and 98% in the same quarter last year. It was at its highest level since the first quarter of 2022, consistent with our expectations. Within our EE&T segment, total revenue for the first quarter was $34.4 million, up 6% year-over-year. Subscription revenue was $33.6 million, up 10% year-over-year, while professional service revenue contributed $0.8 million, down 55% year-over-year. Within our M&T segment, total revenue for the first quarter was $12.6 million, representing 2% year-over-year growth. Subscription revenue was $11.3 million, up 7% year-over-year, while professional services revenue contributed $1.3 million, down 31% year-over-year. GAAP gross profit in the first quarter was $32.7 million, up 1% sequentially and 14% year-over-year. Gross margin was 70%, which is up from 64% in the first quarter of 2024 and subscription gross margin was 77%, which is up from 72% in the first quarter of 2024. Total operating expenses in the quarter were $34.3 million compared to $35.9 million in the first quarter of 2024, a reduction of 4% year-over-year. Adjusted EBITDA for the quarter was $4.1 million, an increase of $3.6 million from $0.6 million in the first quarter of 2024. This result, along with our improving expense and margin profile, highlights our continued focus on improving our operating efficiency over time. GAAP net loss in the quarter was $1.1 million or $0.01 per diluted share. This is an improvement of $10 million year-over-year. Moving to the balance sheet and cash flow. We ended the first quarter with $80.9 million in cash and marketable securities. Net cash used in operating activities was $1 million in the quarter, similar to the amount used in the first quarter of 2024. As Ron mentioned, while cash flow was a little lower than expected, it is aligned with our typical seasonality and does not change our cash flow outlook for the year. I would now like to turn to our outlook for the second quarter of 2025 and for the fiscal year ending December 31, 2025. While we have continued to execute well as our strong first quarter outperformance demonstrates, we are in an uncertain macroeconomic environment as we collectively await clarity on the various ongoing tariff negotiations. We are keeping an eye on the impact to the general business environment as well as any related currency movements. Overall, we believe that any related impacts from tariffs are manageable for Kaltura. As Ron mentioned, we continue to be thoughtful in maintaining our overall revenue guidance for the full year with a slight increase to our adjusted EBITDA guidance for the year. Regarding our second quarter revenue guidance, consistent with what we said on our last earnings call and our historical quarterly trends, we expect second quarter revenue to decline sequentially. This is due to the typical lower level of bookings we experienced in the first quarter and disproportionate recognition of on-prem revenue in the quarter as well. As we mentioned on the fourth quarter 2024 call, this year we expected to see a more pronounced decline due to higher Q1 on-prem revenue and the increased M&T churn in the first half of the year. In the second quarter, we expect subscription revenue to range from a decrease of 1% to an increase of 1% year-over-year and to be between $40.8 million and $41.6 million and total revenue to range from a decrease of 1% to flat year-over-year and to be between $43.4 million and $44.2 million. We expect an adjusted EBITDA between $1.5 million to $2.5 million. For the full year, we are maintaining our guidance and expect subscription revenue to range from an increase of 2% to 3% over 2024 full year and to be between $170.4 million and $173.4 million and total revenue to range from an increase of 1% to 2% year-over-year to between $179.9 million and $182.9 million. We are slightly raising our expected adjusted EBITDA for the full year between $13.5 million and $15.5 million. This would result in a doubling of our adjusted EBITDA margin from 2024. We are also expecting to continue to post positive and improving cash flow from operations at a similar level as our adjusted EBITDA for the full year in 2025, with most, if not all, contribution coming in the second half of the year, consistent with historical seasonality. In summary, the first quarter was a solid start for us in 2025 and has us well positioned going forward. As we mentioned previously, we need to manage through some of the delayed churn in M&T in the first half of 2025. We expect to achieve a strong result in EE&T, and we have. And in the second half of the year, we expect our consolidated retention rate to return to last year's strong level, driven by both EE&T and M&T. I mentioned last quarter that our overall outlook on the business is brighter and the results this quarter have not changed this view. While we are closely and prudently monitoring the macroeconomic environment, we believe that we will continue to benefit from emerging tailwinds that we are seeing of spend consolidation to a single vendor, digital and AI transformations, and the hybrid workplace that is continuing to drive demand for video-based offerings. This is certainly highlighted by our record average ARR this quarter. As we said in the past and I want to reinforce here, we will continue to target both revenue growth and sustained and improving adjusted EBITDA profitability, consistent with our guidance. With an adjusted EBITDA margin of 9% and total revenue growth of 5% in the quarter, we achieved a Rule of 14 for the quarter as compared to only 5% the year before. Our results demonstrate that we've continued on the right path to achieving these objectives and to drive consistent returns to our shareholders. We are confident that we remain in a good position to achieve modestly accelerated revenue, adjusted EBITDA profitability and cash flow from operations growth profile beyond 2025. Our target continues to be to achieve double-digit revenue growth and a Rule of 30 combination between revenue growth and adjusted EBITDA by 2028 or sooner. Kaltura has achieved this goal in the past and we firmly believe that we are on the right path to achieve it again.

Yes. Thank you for the great question, Gabriela. Let me start by saying that we don't see any negative impact at this point. We're thoughtful, we're careful. We all live in the same world. But we have not heard anything material from any material customer about exposure to the situation. I would repeat your point that we are catering to larger organizations by design. We are not an SMB company. We're also definitely not a B2C company. And those that we work with are thinking for the mid- to long-term and are not planning monthly and are not planning quarterly. So it's been stable over the last weeks and months. That being said, it's hard to know whether, for example, if certain deals slip from this quarter to the next quarter is because people are taking a little bit of time to figure things out even if they don't tell us as it were, as we always know, the first quarter is a slower quarter. It has been similar to last year. So we don't have any alarm bells, but could it have been maybe a bit better if the world would have been stabler and people would have felt comfortable to close deals earlier rather than wait a bit? It could have been. But at this point, we've not had any direct impact. Also important to note, we're a SaaS company, we're a cloud company. We don't have any equipment or CapEx or things that need to be shipped from one place to the other. So we don't expect tariffs to have a big impact on Kaltura in any way, shape or form. But again, I think the operative word here is being thoughtful and it is the first quarter of the year. We never change guidance after the first quarter and this year wouldn't be the odd year in that. But let me pass it over to John. John, go ahead.

Yes, Ron mentioned this. We don't have an exposed supply chain, which means that as a SaaS company focused on the enterprise market, we believe we can navigate through this situation. It's important for us to keep an eye on it, but we haven't received any signals from our customers. Additionally, our product suite enables customers to operate more efficiently depending on how they use our products, which is a strategy we've leveraged in the past and will continue to do in our sales efforts. Also, as I noted, we are monitoring currency fluctuations. Our expenses in Israel are well-hedged, and we're tracking the dollar against the euro and pound, with the dollar weakening and the euro and pound strengthening somewhat in the latter half of the first quarter. From this standpoint, we're attentive, but it isn't negatively affecting us.

I'd say even the contrary. I mean a stronger European currency is good for us because a certain percentage of our revenue is from Europe. If that currency gets stronger on a dollar basis, we're even better. So that's a good thing from a cost perspective, it's really mostly the U.S. and then Israel, which is its own story. But I want to double down on a good comment that John had stated insofar as being kind of counter-recessionary in a way insofar as supporting reduced OpEx. One comment that was an off comment that we did hear at least from one place and I don't know if it's indicative, I don't know if there's going to be more of it, was a question of virtual events versus physical events. We all know that there had been after the height of COVID, where everything had gone virtual, returned to physical and hybrid. We have heard at least a couple of occasions where people had spoken about, yes, we want to strengthen the virtual side to reduce or accommodate for lower travel spend. And so we feel that we, as a company, are very well positioned to benefit from any situation where companies are going to want to spend less and be efficient in training, marketing, selling, collaborating remotely. Answer is absolutely yes.

Yes. That makes sense. Thanks for all the detail there. And as a follow-up, you've talked about growing the sales team gradually this year. Maybe tell us a little bit about where you're most excited to put new resources to work. It's a pretty unique position where you've done all the heavy lifting and optimization in the last three years and now you're thinking about growth. So I would love to hear where you plan to allocate those resources.

Yes. Thank you for that. So we had reduced our sales headcount by about 25% from the height during COVID. And we've done that to accommodate our return to profitability plan as well as for the declining demand in order to kind of match our sales efficiency, customer acquisition cost ratios, et cetera. And when things started turning around, bookings started coming back, markets started being more efficient and we had achieved our profitability goals and became adjusted EBITDA profitable and now in EPS levels, non-GAAP, et cetera and are getting in the right direction, we feel comfortable to gradually and the operative word here again is gradually, start increasing it and it's throughout the year. It's not an immense increase, but for the first time, there will be an increase. As to the question of where, there's two aspects here. When we have reduced the headcount, we had focused increasingly on the enterprise side of the business more so than M&T and education. And the reason for that was that we felt that that represented at the time the most effective return on our capital spend. It is both the largest TAM. It was also where we had the most amount of continued demand. M&T had stopped even more aggressively than some others on new initiatives. We had our own organic growth as it were. These cycles are longer. They're a bit less profitable. So we said that's not the time to double down on that. And on the education front, it was more upselling goals that market is a bit more saturated compared to enterprise. And again, it made more sense to go deeper on the enterprise front. What we're seeing now is two things. So number one is enterprise continue to, even increasingly so, interesting and excited. Right? We had expanded our use cases to cater to CMOs with adding our event-based and virtual and webinar-based products together with our virtual customers. So we have more products. The market is doing better. But we're also in a great position to reaccelerate the markets that we've taken the foot off the gas a bit more. So we're seeing a rebound in interest in media and are able to cater with great success and continued growth and great endorsement by our existing market-leading blue-chip customers. And in education, likewise, we're in such a strong position, market presence, additional products that enable us to continue to expand from teaching and learning to marketing and admissions with a slew of new products that we have launched. So where we had taken off the foot was more from these areas now that we're reaccelerating, we're reaccelerating across the board.

Ron, regarding the M&T churn that you anticipate, are these customers downsizing their deals or exiting the business? Can you provide any insight into the nature of the churn?

Yes, happy to do so. So just to remind all of us because we've been talking about this for a while in the last earnings call and this is as expected. So nothing here has changed over the last few months insofar as expectations for the year. I'm reminding us that last year, we had a very low churn, historically low churn lower than any other year in the history of the company for M&T. In general, by the way, it was a much, much better year than earlier years and a big rebound in gross retention compared to the year before for the company. So we're all doing great. But we also said that there were a few churns as of last year that had been pushed into 2025. And accordingly, we expect the gross retention this year for M&T to be lower. We still said that while this is going to drag down our gross retention as a company, it's going to be better than 2023. It's going to be a bit lower than 2024 and we expect that to be 100% temporary. So we don't expect that to continue after. Now back to this quarter and to your question about, is this decreasing or exiting a few points, but I'll start actually from the E&T and then I'll talk about M&T. E&T was a great gross retention quarter, best for multiple years and continue to do good and this is the majority of our business. So I want to first take off the table that the conversation here is not on E&T, it's 100% on M&T. Coming back to M&T and a), it is the expected few accounts that we knew that are coming off, nothing more. And then we continue to see increase in both upsells for our existing other customers as well as a material regrowth in new booking opportunities in that line of business. Now finally, getting to your specific question as to the cases that we're talking about here. In most of the cases here and it's only less than five, right? It's a few customers. It is mostly a full exit as opposed to decrease due to a strategic decision that they have taken for various different reasons. So they brought it in-house, they wanted to move to something else. It was a company that was acquired out of a bigger company that we have catered to and that separate company has a different plan given the exit from the larger company. So these are very specific situations and it is more a full exit rather than a decrease. Does that address your question, Ryan?

Yes, it does. And one more follow-up, if I could. That's really helpful. Regarding the product development, as you consider your strategy for expanding the product and aiming to increase revenue, do you believe it is more important to focus on creating more comprehensive solutions within specific industries? Or is it more about enhancing self-service features, streamlining the onboarding process, simplifying the product, and targeting smaller markets? Which direction are you prioritizing for your product investments?

Yes, I love these questions. So first, we don't need a revolution and to be honest, not even an evolution because we have the products that we need in order to accelerate and grow. And you've seen this in growth numbers this quarter. Again, the specific situation that is occurring on the media and telecom side, which is the only piece that is slowing down growth to some extent, is a piece that is a very temporary situation. There's more demand. And to my point earlier, even about M&T, significant opportunities more of the pipeline now is huge compared to what it was a few quarters ago. And so we're not required to build new things in order to generate the goals that we had stated. That being said, the main focus that we have right now and we've stated that multiple times is to ensure that we continue to move from a content management company to a hyper-personalized experience company, where we move to enabling individuals to have their own experience around learning, teaching, marketing, sales and entertainment with an AI-infused content management system. And we're in a huge advantage because we were atomizing content that we already own and manage on behalf of our customers. And so by doing so we're seeing great excitement. I've mentioned 150 customers that are going down the various stages of our POCs and 20 of them that are already generating a lot of traffic and excited. And daily, we get feedback from that. So that's an important piece that I call it horizontal because there's many agents that we're putting in place. They don't fall under deeper vertical solutions, they definitely don't fall under self-service, but that is an important part. Between the two that you had mentioned, if I were to choose a more important area for us in the short term, that would be more in the deeper solutions rather than self-serve and down market. While we do believe that this company has a great opportunity to continue to expand from large enterprise to medium-sized and departmental entries and that had been part of our plans and strategies over recent years and we've discussed them, it's been a few tough years and we needed to have made some smart decisions around where we put our capital. And that was the one area that we said we could wait. We've looked at other companies in this space and have seen them bleeding and have decided that we'd rather stay where we are king, which, by the way, is the area where everybody is trying to go to. We're already there for the last 19 years and continue to deepen our strength and move later to the self-serve. And I will state that what I said earlier insofar as AI is 100% aligned with the notion of less effort, more self-service because the AI tools are enabling to create content automatically, deliver it automatically, take the insights automatically. So to the extent that they are catering to less touch, more self-service, that's something that we're doing. But should you expect to see over the next quarter or two quarters, a massive move towards SMB? Not yet. Does that address your question, Ryan?

Great. John, could you start by explaining the reasons behind the decrease in total revenue from Q1 to Q2 and what the main factors contributing to that are?

So basically, if you look at what's happening first in Q1, as mentioned on the call, we did have a pickup in on-prem. That was about $1.6 million. I mean, relative to the guidance, about $1.4 million of that is falling off, plus we had the lower bookings in the quarter, which also will impact the number for the most part. So those are the two biggest pieces.

I will note on the on-prem stuff that it is a typical Q1 situation. It has also happened last year. So it's not something that is completely off. It's just that the nature of the annualized behavior of on-prem is one that gives a pickup more in Q1 rather than not. And as you've noted, it's actually a bit probably less than that number when you look at the specific additional stuff that's come in, it's about $1 million. But if you look at that increment of about $1 million, that's been incremented compared to the year before as opposed to the same on-prems that have been there forever. That will return the Q1, the following few years as well. So it's not a one-off. It's just returning here and there depending on the renewal cycle.

And Pat, the last piece is the M&T churn that's been talked about.

Yes, you would see it in the RPO, but the RPO combines two aspects: existing business and the extent of renewals, along with new bookings. It doesn't solely reflect new bookings; it encompasses everything. Q1 typically has a lower RPO compared to Q4, mainly because Q1 has historically been a low new bookings quarter. Consequently, renewals in Q1 are significantly lower than in other quarters, which leads to a decrease in RPO. The fact that this specific year also has a low number compounds the issue, but it's important to note that Q1 naturally sees a decline due to reduced business activity. As I've mentioned, nothing significant occurred that would lead us to believe Q1 would be a strong start to the year. While our pipeline looks promising, Q1 is generally lower, so we'll wait for performance in Q2, Q3, and Q4. Companies typically don’t adjust their guidance right at the start of the year, as it’s not a wise move and does not yield any benefits. While we would certainly welcome a significant increase in Q1 bookings, this pattern isn’t unusual for the start of the year. We haven't lost any major deals; a few may have been delayed. From a pipeline standpoint, we are well positioned for a strong bookings year, and we feel confident.

Your metrics look good and your RPO is strong, but you're indicating that bookings were soft. This is not uncommon for this time of year, though perhaps you were hoping for a better outcome. Can we identify where this softness appears, or is it primarily reflected in the guidance?

Yes, you would see it in the RPO, but the RPO reflects both existing business and the extent to which it is renewed, alongside any incremental new bookings. We do not focus solely on new bookings; we look at everything. Typically, Q1 shows lower RPO compared to Q4, primarily because Q1 has historically been a quarter with low new bookings. Consequently, renewals in Q1 are significantly less than in other quarters, leading to a decline in RPO. Additionally, if this year is also a down year, it compounds the situation. However, it is important to note that Q1 usually presents a drop due to the lower volume of business. Nothing substantial occurred to suggest that Q1 is typically a time to celebrate a strong start to the year. Instead, the pipeline remains strong, and we anticipate seeing results in Q2, Q3, and Q4. Companies generally do not revise their guidance at the start of the year, as it is not a prudent practice. Though we would welcome a significant increase in Q1 bookings, this trend is not unusual for the start of the year. We have not lost any major deals, although a few may have been delayed. From a pipeline perspective, we have solid coverage for a robust bookings year, and we feel optimistic. So we're very excited to start the year strong with some good growth and continued march towards profitability. I think one of the interesting remarks that was made by us is 'look at the Rule of 30' and where it has gone and how much it has jumped and continue to jump. And I think when you look at other companies in this industry, I think it's clear that we're continuing to outperform and do well. We want to thank you again for your interest and for joining our call. And just a reminder, we're going to be participating at the Needham Technology Media and Consumer Conference in May and we look forward to meeting you there. And so thank you for Needham folks. And lastly, we do hope to see some of you coming to our Connect Events throughout the months that we have in both New York, San Francisco and London and later the education events. So please go to our website and register. We'd love to see you there. So thanks and have a wonderful day and week. Take care.

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