10-Q 1 bcov-20240630.htm 10-Q 10-Q
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ne

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024

OR

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-35429

 

BRIGHTCOVE INC.

(Exact name of registrant as specified in its charter)

 

Delaware

20-1579162

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

281 Summer Street

Boston, MA 02210

(Address of principal executive offices)

(888) 882-1880

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

BCOV

The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 5, 2024, there were 44,921,558 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

 

 

 


BRIGHTCOVE INC.

Table of Contents

 

 

Page

PART I. FINANCIAL INFORMATION

 

4

Item 1. Financial Statements (Unaudited)

 

4

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023

 

4

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023

 

5

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2024 and 2023

 

6

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023

 

7

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023

 

8

Notes to Condensed Consolidated Financial Statements

 

9

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

29

 

 

Item 4. Controls and Procedures

 

30

 

 

PART II. OTHER INFORMATION

 

31

 

 

Item 1. Legal Proceedings

 

31

 

 

Item 1A. Risk Factors

 

31

 

 

Item 5. Other Information

 

32

 

 

Item 6. Exhibits

 

33

 

 

Signatures

 

34

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements related to adding employees; statements related to potential benefits of acquisitions; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, and the risks discussed in our other Securities and Exchange Commission, or SEC, filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. However, any further disclosures made on related subjects in our subsequent reports filed with the SEC should be consulted. Forward-looking statements in this Quarterly Report on Form 10-Q may include statements about:

our ability to achieve profitability;
our competitive position and the effect of competition in our industry;
our ability to retain and attract new customers;
our ability to penetrate existing markets and develop new markets for our offerings;
our ability to retain and hire qualified accounting and other personnel;
our ability to successfully integrate acquired businesses;
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
our ability to maintain the security and reliability of our systems;
our estimates with regard to our future performance and total potential market opportunity;
our ability to successfully remediate and prevent material weaknesses in internal controls over financial reporting;
our estimates regarding our anticipated results of operations, future revenue, bookings growth, capital requirements, and our needs for additional financing, including interest rate fluctuations; and
our goals and strategies, including those related to revenue and bookings growth.

 

3


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Brightcove Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(in thousands, except share
 and per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,170

 

 

$

18,615

 

Accounts receivable, net of allowance of $268 and $210 at June 30, 2024 and December 31, 2023, respectively

 

 

28,207

 

 

 

33,451

 

Prepaid expenses

 

 

9,525

 

 

 

6,569

 

Other current assets

 

 

10,255

 

 

 

11,764

 

Total current assets

 

 

72,157

 

 

 

70,399

 

Property and equipment, net

 

 

38,882

 

 

 

42,476

 

Operating lease right-of-use asset

 

 

17,896

 

 

 

16,233

 

Intangible assets, net

 

 

4,524

 

 

 

6,368

 

Goodwill

 

 

74,859

 

 

 

74,859

 

Other assets

 

 

4,719

 

 

 

5,772

 

Total assets

 

$

213,037

 

 

$

216,107

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,492

 

 

$

14,422

 

Accrued expenses

 

 

19,918

 

 

 

17,566

 

Operating lease liability

 

 

4,261

 

 

 

4,486

 

Deferred revenue

 

 

68,255

 

 

 

68,155

 

Total current liabilities

 

 

98,926

 

 

 

104,629

 

Operating lease liability, net of current portion

 

 

18,983

 

 

 

17,358

 

Other liabilities

 

 

192

 

 

 

207

 

Total liabilities

 

$

118,101

 

 

 

122,194

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 45,047,696 and 43,833,919 shares issued at June 30, 2024 and December 31, 2023, respectively; 44,912,696 and 43,698,919 shares outstanding at June 30, 2024 and December 31, 2023, respectively

 

 

45

 

 

 

44

 

Additional paid-in capital

 

 

334,269

 

 

 

328,918

 

Treasury stock, at cost; 135,000 shares

 

 

(871

)

 

 

(871

)

Accumulated other comprehensive loss

 

 

(1,894

)

 

 

(1,236

)

Accumulated deficit

 

 

(236,613

)

 

 

(232,942

)

Total stockholders’ equity

 

 

94,936

 

 

 

93,913

 

Total liabilities and stockholders’ equity

 

$

213,037

 

 

$

216,107

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Brightcove Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands, except share and per share data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and support revenue

 

$

47,397

 

 

$

49,013

 

 

$

95,366

 

 

$

96,115

 

Professional services and other revenue

 

 

1,850

 

 

 

1,975

 

 

 

4,362

 

 

 

3,936

 

Total revenue

 

 

49,247

 

 

 

50,988

 

 

 

99,728

 

 

 

100,051

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription and support revenue

 

 

17,277

 

 

 

16,603

 

 

 

34,084

 

 

 

34,868

 

Cost of professional services and other revenue

 

 

2,130

 

 

 

1,898

 

 

 

4,945

 

 

 

3,900

 

Total cost of revenue

 

 

19,407

 

 

 

18,501

 

 

 

39,029

 

 

 

38,768

 

Gross profit

 

 

29,840

 

 

 

32,487

 

 

 

60,699

 

 

 

61,283

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,975

 

 

 

10,345

 

 

 

17,824

 

 

 

20,211

 

Sales and marketing

 

 

17,080

 

 

 

19,034

 

 

 

33,534

 

 

 

38,499

 

General and administrative

 

 

8,822

 

 

 

9,405

 

 

 

18,366

 

 

 

19,469

 

Merger-related

 

 

 

 

 

45

 

 

 

 

 

 

190

 

Gain on sale of assets

 

 

 

 

 

 

 

 

(6,000

)

 

 

 

Total operating expenses

 

 

34,877

 

 

 

38,829

 

 

 

63,724

 

 

 

78,369

 

Loss from operations

 

 

(5,037

)

 

 

(6,342

)

 

 

(3,025

)

 

 

(17,086

)

Other income (expense), net

 

 

49

 

 

 

422

 

 

 

11

 

 

 

(121

)

Loss before income taxes

 

 

(4,988

)

 

 

(5,920

)

 

 

(3,014

)

 

 

(17,207

)

Provision for income taxes

 

 

257

 

 

 

317

 

 

 

657

 

 

 

744

 

Net loss

 

$

(5,245

)

 

$

(6,237

)

 

$

(3,671

)

 

$

(17,951

)

Net loss per share—basic and diluted

 

$

(0.12

)

 

$

(0.14

)

 

$

(0.08

)

 

$

(0.42

)

Weighted-average number of common shares used in computing net loss per share

 

 

44,731

 

 

 

43,059

 

 

 

44,357

 

 

 

42,795

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Brightcove Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Net loss

 

$

(5,245

)

 

$

(6,237

)

 

$

(3,671

)

 

$

(17,951

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(351

)

 

 

(30

)

 

 

(658

)

 

 

158

 

Comprehensive loss

 

$

(5,596

)

 

$

(6,267

)

 

$

(4,329

)

 

$

(17,793

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


Brightcove Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands, except share data)

 

Shares of common stock issued

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

44,698,991

 

 

 

42,992,371

 

 

 

43,833,919

 

 

 

42,449,677

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

 

 

348,705

 

 

 

383,635

 

 

 

1,213,777

 

 

 

926,329

 

Balance, end of period

 

 

45,047,696

 

 

 

43,376,006

 

 

 

45,047,696

 

 

 

43,376,006

 

Shares of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

(135,000

)

 

 

(135,000

)

 

 

(135,000

)

 

 

(135,000

)

Balance, end of period

 

 

(135,000

)

 

 

(135,000

)

 

 

(135,000

)

 

 

(135,000

)

Par value of common stock issued

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

45

 

 

$

43

 

 

$

44

 

 

$

42

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Balance, end of period

 

$

45

 

 

$

43

 

 

$

45

 

 

$

43

 

Value of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(871

)

 

$

(871

)

 

$

(871

)

 

$

(871

)

Balance, end of period

 

$

(871

)

 

$

(871

)

 

$

(871

)

 

$

(871

)

Additional paid-in capital

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

331,001

 

 

$

318,293

 

 

$

328,918

 

 

$

314,825

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units, net of tax

 

 

 

 

 

 

 

 

(1

)

 

 

(226

)

Stock-based compensation expense

 

 

3,268

 

 

 

3,608

 

 

 

5,591

 

 

 

7,302

 

Withholding tax on restricted stock

 

 

 

 

 

(31

)

 

 

(239

)

 

 

(31

)

Balance, end of period

 

$

334,269

 

 

$

321,870

 

 

$

334,269

 

 

$

321,870

 

Accumulated deficit

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(231,368

)

 

$

(221,770

)

 

$

(232,942

)

 

$

(210,056

)

Net loss

 

 

(5,245

)

 

 

(6,237

)

 

 

(3,671

)

 

 

(17,951

)

Balance, end of period

 

$

(236,613

)

 

$

(228,007

)

 

$

(236,613

)

 

$

(228,007

)

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(1,543

)

 

$

(1,405

)

 

$

(1,236

)

 

$

(1,593

)

Foreign currency translation adjustment

 

 

(351

)

 

 

(30

)

 

 

(658

)

 

 

158

 

Balance, end of period

 

$

(1,894

)

 

$

(1,435

)

 

$

(1,894

)

 

$

(1,435

)

Total stockholders’ equity

 

$

94,936

 

 

$

91,600

 

 

$

94,936

 

 

$

91,600

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Brightcove Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(3,671

)

 

$

(17,951

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

10,084

 

 

 

8,008

 

Stock-based compensation

 

 

5,372

 

 

 

7,030

 

Provision for reserves on accounts receivable

 

 

(16

)

 

 

222

 

Gain on sale of assets

 

 

(6,000

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

5,087

 

 

 

(4,219

)

Prepaid expenses and other current assets

 

 

(1,035

)

 

 

(1,882

)

Other assets

 

 

970

 

 

 

802

 

Accounts payable

 

 

(7,531

)

 

 

3,376

 

Accrued expenses

 

 

2,438

 

 

 

(5,474

)

Operating leases

 

 

(262

)

 

 

(174

)

Deferred revenue

 

 

612

 

 

 

8,440

 

Net cash provided by (used in) operating activities

 

 

6,048

 

 

 

(1,822

)

Investing activities

 

 

 

 

 

 

Gain on sale of assets

 

 

6,000

 

 

 

 

Purchases of property and equipment

 

 

(1,157

)

 

 

(1,328

)

Capitalized internal-use software costs

 

 

(4,029

)

 

 

(7,233

)

Net cash provided by (used in) investing activities

 

 

814

 

 

 

(8,561

)

Financing activities

 

 

 

 

 

 

Deferred acquisition payments

 

 

 

 

 

(1,700

)

Other financing activities

 

 

(239

)

 

 

(256

)

Net cash used in financing activities

 

 

(239

)

 

 

(1,956

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,068

)

 

 

(462

)

Net increase (decrease) in cash and cash equivalents

 

 

5,555

 

 

 

(12,801

)

Cash and cash equivalents at beginning of period

 

 

18,615

 

 

 

31,894

 

Cash and cash equivalents at end of period

 

$

24,170

 

 

$

19,093

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for operating lease liabilities

 

$

1,891

 

 

$

1,804

 

Cash paid for income taxes

 

$

731

 

 

$

821

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


Brightcove Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(in thousands, except share and per share data, unless otherwise noted)

 

1. Business Description and Basis of Presentation

Business Description

Brightcove Inc. (the “Company”) is a leading global provider of cloud services for video which enable its customers to publish, deliver, and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner.

The Company is headquartered in Boston, Massachusetts and was incorporated in the state of Delaware on August 24, 2004.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2023 contained in the Company’s Annual Report on Form 10-K and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations for the three and six months ended June 30, 2024 and 2023. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

 

2. Quarterly Update to Significant Accounting Policies

Allowance for Doubtful Accounts

The following details the changes in the Company’s reserve allowance for estimated credit losses for accounts receivable for the period:

 

 

 

Allowance for Credit Losses

 

 

 

(in thousands)

 

Balance as of December 31, 2023

 

$

210

 

Current provision for credit losses

 

 

138

 

Write-offs against allowance

 

 

(7

)

Recoveries

 

 

(73

)

Balance as of June 30, 2024

 

$

268

 

Estimated credit losses for unbilled trade accounts receivable were not material.

 

 

Recently Issued and Adopted Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, which improves the transparency and decision usefulness of income tax disclosures, specifically to enhance investors' ability to: (1) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. This guidance will be effective for the Company on January 1, 2025. The Company does not expect the application of this guidance to have a material impact on its consolidated financial statements.

9


 

 

3. Revenue from Contracts with Customers

The Company primarily derives revenue from the sale of its online video platform, which enables its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from three primary sources: (1) the subscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which include initiation, set-up and customization services.

The following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers.

 

(in thousands)

 

Accounts Receivable, net

 

 

Contract Assets (current)

 

 

Deferred Revenue (current)

 

 

Deferred Revenue (non-current)

 

 

Total Deferred Revenue

 

Balance at December 31, 2023

 

$

33,451

 

 

$

1,785

 

 

$

68,155

 

 

$

185

 

 

$

68,340

 

Balance at June 30, 2024

 

 

28,207

 

 

 

1,812

 

 

 

68,255

 

 

 

143

 

 

 

68,398

 

Revenue recognized for the three and six months ended June 30, 2024 from amounts included in deferred revenue at the beginning of the period was approximately $24.8 million and $57.3 million, respectively. Revenue recognized for the three and six months ended June 30, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $17.0 million and $47.6 million, respectively. During the three and six months ended June 30, 2024, the Company did not recognize a material amount of revenue from performance obligations satisfied or partially satisfied in previous periods.

The assets recognized for costs to obtain a contract were $11.0 million as of June 30, 2024 and $13.1 million as of December 31, 2023 and are recorded in other current assets and other assets. Amortization expense recognized for the three and six months ended June 30, 2024 related to costs to obtain a contract was $2.7 million and $5.8 million, respectively, and is included in operating expenses for the respective period. Amortization expense recognized for the three and six months ended June 30, 2023 related to costs to obtain a contract was $2.5 million and $5.0 million, respectively, and is included in operating expenses for the respective period.

Transaction Price Allocated to Future Performance Obligations

As of June 30, 2024, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $182.2 million, of which approximately $123.3 million is expected to be recognized over the next 12 months. The Company expects to recognize substantially all of the remaining unsatisfied performance obligations by April 2029.

 

4. Cash and Cash Equivalents

Cash and cash equivalents as of June 30, 2024 consist of the following:

 

 

 

June 30, 2024

 

Description

 

Contracted
Maturity

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Cash

 

Demand

 

$

24,125

 

 

$

24,125

 

Money market funds

 

Demand

 

 

45

 

 

 

45

 

Total cash and cash equivalents

 

 

 

$

24,170

 

 

$

24,170

 

 

Cash and cash equivalents as of December 31, 2023 consist of the following:

 

 

 

December 31, 2023

 

Description

 

Contracted
Maturity

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Cash

 

Demand

 

$

18,571

 

 

$

18,571

 

Money market funds

 

Demand

 

 

44

 

 

 

44

 

Total cash and cash equivalents

 

 

 

$

18,615

 

 

$

18,615

 

 

10


 

5. Net Loss per Share

The Company calculates basic and diluted net loss per common share by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company has excluded other potentially dilutive shares, which includes the effects of the assumed exercise of any outstanding common stock options and the assumed vesting of restricted stock units, where the effect would be anti-dilutive.

 

The following outstanding common shares have been excluded from the computation of dilutive net loss per share as of the periods indicated:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(shares in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Options outstanding

 

 

2,094

 

 

 

2,939

 

 

 

2,094

 

 

 

2,939

 

Restricted stock units outstanding

 

 

7,615

 

 

 

6,198

 

 

 

7,615

 

 

 

6,198

 

 

6. Stock-based Compensation

In 2022, the Company adopted the 2022 Inducement Plan (“2022 Plan”). The 2022 Plan provides for the grant of “employment inducement awards” within the meaning of NASDAQ Listing Rule 5635(c)(4). In connection with the commencement of his employment, the Company granted 800,000 restricted stock units to the Company’s Chief Executive Officer under the 2022 Plan, of which 300,000 are subject solely to service-based vesting conditions (the “RSUs”) and 500,000 are subject to both market-based and service-based vesting conditions (the “PSUs”). The RSUs vest in equal annual installments over three years following March 28, 2022.

For restricted stock units with market-based performance conditions, the cost of the awards is recognized as the requisite service is rendered by the employee, regardless of when, if ever, the market-based performance conditions are satisfied. The Monte-Carlo simulation model is used to estimate fair value of market-based performance restricted stock units. The Monte-Carlo simulation model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. Key assumptions for the Monte-Carlo simulation model include the risk-free rate, expected volatility, expected dividends and the correlation coefficient.

On March 20, 2023, the Company granted 1,563,688 premium-priced options to some of its employees under its 2021 Stock Incentive Plan. The options have a strike price of $7.00 and vest in equal installments over three years following March 10, 2023. The binomial lattice model is used to estimate the fair value of the premium-priced options. The binomial lattice model calculates multiple potential outcomes for option exercises and establishes a fair value based on the most likely outcome. Key assumptions for the binomial lattice model include share price, volatility, the early exercise multiple, risk-free rate, expected dividends, and number of time steps.

The weighted-average assumptions utilized to determine the weighted-average fair value of options are presented in the following table:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average fair value of options granted during the period

 

$

 

 

$

1.75

 

 

$

 

 

$

1.75

 

Risk-free interest rate

 

 

 

 

3.4 - 4.8%

 

 

 

 

 

3.4 - 4.8%

 

Expected volatility

 

 

 

 

47.9 - 55.5%

 

 

 

 

 

47.9 - 55.5%

 

Expected dividend yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2024, there was $22.6 million of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.27 years. The following table summarizes stock-based

11


compensation expense as included in the consolidated statement of operations for the three and six months ended June 30, 2024 and 2023:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription and support revenue

 

$

122

 

 

$

129

 

 

$

228

 

 

$

267

 

Cost of professional services and other revenue

 

 

71

 

 

 

92

 

 

 

111

 

 

 

192

 

Research and development

 

 

476

 

 

 

551

 

 

 

791

 

 

 

1,239

 

Sales and marketing

 

 

1,183

 

 

 

931

 

 

 

1,537

 

 

 

2,100

 

General and administrative

 

 

1,307

 

 

 

1,784

 

 

 

2,705

 

 

 

3,232

 

 

 

$

3,159

 

 

$

3,487

 

 

$

5,372

 

 

$

7,030

 

 

The following is a summary of the stock option activity during the six months ended June 30, 2024.

 

 

 

Number of
Shares

 

 

Weighted-Average
Exercise Price

 

 

Weighted-Average
Remaining
Contractual
Term
(In Years)

 

 

Aggregate
Intrinsic
Value (1)

 

Outstanding at December 31, 2023

 

 

2,247,951

 

 

$

7.73

 

 

7.11

 

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Canceled

 

 

(153,746

)

 

 

9.78

 

 

 

 

 

 

 

Outstanding at June 30, 2024

 

 

2,094,205

 

 

$

7.58

 

 

 

6.93

 

 

 

 

Exercisable at June 30, 2024

 

 

1,143,051

 

 

$

7.98

 

 

 

5.47

 

 

$

 

 

(1)
The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on June 30, 2024 of $2.37 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

The following table summarizes the restricted stock unit activity for our service-based awards (“S-RSU”) and our performance-based awards (“P-RSU”) during the six months ended June 30, 2024:

 

 

 

S-RSU Shares

 

 

Weighted
Average
Grant
Date
Fair Value

 

 

P-RSU Shares

 

 

Weighted
Average
Grant
Date
Fair Value

 

 

Total RSU Shares

 

 

Weighted
Average
Grant
Date
Fair Value

 

Unvested at December 31, 2023

 

 

5,102,268

 

 

$

6.04

 

 

 

517,170

 

 

$

4.54

 

 

 

5,619,438

 

 

$

5.90

 

Granted

 

 

4,238,499

 

 

 

1.89

 

 

 

 

 

 

 

 

 

4,238,499

 

 

 

1.89

 

Vested and issued

 

 

(1,213,777

)

 

 

6.54

 

 

 

 

 

 

 

 

 

(1,213,777

)

 

 

6.54

 

Canceled

 

 

(1,012,110

)

 

 

5.39

 

 

 

(17,186

)

 

 

18.33

 

 

 

(1,029,296

)

 

 

5.60

 

Unvested at June 30, 2024

 

 

7,114,880

 

 

$

3.57

 

 

 

499,984

 

 

$

4.06

 

 

 

7,614,864

 

 

$

3.60

 

 

 

7. Income Taxes

The income tax expense relates principally to the Company’s foreign operations.

The Company is required to compute income tax expense in each jurisdiction in which it operates. This process requires the Company to project its current tax liability and estimate its deferred tax assets and liabilities, including net operating loss (“NOL”) and tax credit carry-forwards. In assessing the ability to realize the net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

The Company has provided a valuation allowance against its remaining U.S. net deferred tax assets as of June 30, 2024 and December 31, 2023, based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences.

 

12


8. Commitments and Contingencies

Legal Matters

The Company, from time to time, is party to litigation arising in the ordinary course of business. Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company based on the status of proceedings at this time.

Guarantees and Indemnification Obligations

The Company typically enters into indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses and costs incurred by the indemnified party, generally the Company’s customers, in connection with patent, copyright, trade secret, or other intellectual property or personal right infringement claims by third parties with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual after execution of the agreement. Based on when customers first subscribe for the Company’s service, the maximum potential amount of future payments the Company could be required to make under certain of these indemnification agreements is unlimited, however, more recently the Company has typically limited the maximum potential value of such potential future payments in relation to the value of the contract. Based on historical experience and information known as of June 30, 2024, the Company has not incurred any costs for the above guarantees and indemnities. The Company has received requests for indemnification from customers in connection with patent infringement suits brought against the customer by a third party. To date, the Company has not agreed that the requested indemnification is required by the Company’s contract with any such customer.

In certain circumstances, the Company warrants that its products and services will perform in all material respects in accordance with its standard published specification documentation in effect at the time of delivery of the licensed products and services to the customer for the warranty period of the product or service. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial.

9. Debt

On November 1, 2023, the Company entered into a loan modification agreement to an existing amended and restated loan and security agreement with a lender (collectively, the “Loan Agreement”). The Loan Agreement provides for up to a $30.0 million asset-backed line of credit (the “Line of Credit”). Borrowings under the Line of Credit are secured by substantially all of the Company’s assets, excluding its intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate as follows: (i) for prime rate advances, the prime rate plus 225 basis points and (ii) for Secured Overnight Financing Rate (“SOFR”) advances, the greater of (A) the SOFR rate plus 225 basis points and (B) 4%. Under the Loan Agreement, the Company must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If there is outstanding principal during any month, the Company must also maintain a minimum net income threshold based on non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the lenders under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. The Line of Credit agreement will expire on November 1, 2026. The Company was in compliance with all applicable covenants under the Line of Credit as of June 30, 2024 and there were no borrowings outstanding as of June 30, 2024

 

10. Segment Information

Geographic Data

Total revenue from unaffiliated customers by geographic area, based on the location of the customer, was as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

30,246

 

 

$

30,694

 

 

$

61,210

 

 

$

59,795

 

Europe

 

 

8,165

 

 

 

7,915

 

 

 

16,081

 

 

 

16,102

 

Japan

 

 

4,069

 

 

 

4,928

 

 

 

8,901

 

 

 

10,124

 

Asia Pacific

 

 

6,675

 

 

 

7,366

 

 

 

13,244

 

 

 

13,860

 

Other

 

 

92

 

 

 

85

 

 

 

292

 

 

 

170

 

Total revenue

 

$

49,247

 

 

$

50,988

 

 

$

99,728

 

 

$

100,051

 

 

North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was $27.7 million and $28.6 million for the three months ended June 30, 2024 and 2023, respectively. Revenue from

13


customers located in the United States was $56.4 million and $55.5 million for the six months ended June 30, 2024 and 2023, respectively.

 

Other than the United States, no other country contributed more than 10% of the Company's total revenue for the three and six months ended June 30, 2024. Other than the United States and Japan, no other country contributed more than 10% of the Company's total revenue for the three and six months ended June 30, 2023.

 

 

11. Goodwill and intangible assets

During the three months ended June 30, 2024, indicators of potential impairment were identified, which included a continued decline in the Company's stock price and market capitalization.

 

The Company reviewed its quantitative analysis for its definite-lived intangible assets as of October 31, 2023, that used undiscounted cash flow models, and determined that the assumptions used in the undiscounted cash flow model were still applicable as of June 30, 2024 and that there was no