10-Q 1 bcov-20240331.htm 10-Q 10-Q
Q1--12-310001313275false0001313275us-gaap:SecuredDebtMember2023-11-010001313275us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001313275us-gaap:RetainedEarningsMember2022-12-310001313275us-gaap:ProductAndServiceOtherMember2024-01-012024-03-3100013132752024-01-012024-03-310001313275country:US2023-01-012023-03-310001313275us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001313275us-gaap:AdditionalPaidInCapitalMember2023-03-310001313275us-gaap:ProductAndServiceOtherMember2023-01-012023-03-310001313275us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001313275us-gaap:RetainedEarningsMember2024-01-012024-03-310001313275us-gaap:AdditionalPaidInCapitalMember2023-12-310001313275bcov:ServiceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2024-03-310001313275us-gaap:RetainedEarningsMember2024-03-3100013132752024-05-020001313275us-gaap:CashMember2023-12-3100013132752023-03-310001313275bcov:TwoThousandTwentyTwoInducementPlanMemberus-gaap:RestrictedStockUnitsRSUMember2022-03-282022-03-2800013132752023-12-310001313275us-gaap:RetainedEarningsMember2023-01-012023-03-310001313275us-gaap:RetainedEarningsMember2023-12-310001313275us-gaap:EmployeeStockOptionMember2024-03-310001313275country:JP2023-01-012023-03-310001313275us-gaap:CommonStockMember2024-03-310001313275bcov:ServiceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2023-12-310001313275us-gaap:SubscriptionAndCirculationMember2024-01-012024-03-310001313275bcov:PerformanceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2023-12-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001313275us-gaap:MoneyMarketFundsMember2024-03-310001313275us-gaap:SecuredDebtMember2024-01-012024-03-310001313275us-gaap:PrimeRateMemberus-gaap:SecuredDebtMember2023-11-012023-11-010001313275us-gaap:SubscriptionAndCirculationMember2023-01-012023-03-310001313275us-gaap:TreasuryStockCommonMember2024-03-310001313275us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001313275us-gaap:CommonStockMember2022-12-310001313275us-gaap:TreasuryStockCommonMember2022-12-310001313275bcov:SubscriptionAndSupportRevenueMemberbcov:NextTwelveMonthsMember2024-03-310001313275us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001313275us-gaap:ProductAndServiceOtherMember2023-01-012023-03-310001313275us-gaap:TreasuryStockCommonMember2023-12-310001313275us-gaap:SecuredDebtMember2024-03-310001313275us-gaap:AccountingStandardsUpdate201409Member2023-12-310001313275us-gaap:CommonStockMember2023-03-310001313275srt:NorthAmericaMember2023-01-012023-03-310001313275us-gaap:AdditionalPaidInCapitalMember2024-03-310001313275us-gaap:CommonStockMember2024-01-012024-03-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001313275us-gaap:SubscriptionAndCirculationMember2023-01-012023-03-310001313275us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001313275bcov:TwoThousandTwentyTwoInducementPlanMemberus-gaap:RestrictedStockUnitsRSUMemberbcov:MarketBasedAndServiceBasedPerformanceStockUnitsMembersrt:ChiefExecutiveOfficerMember2022-03-282022-03-280001313275us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001313275bcov:ServiceBasedRestrictedStockUnitsMemberbcov:TwoThousandTwentyTwoInducementPlanMemberus-gaap:RestrictedStockUnitsRSUMembersrt:ChiefExecutiveOfficerMember2022-03-282022-03-2800013132752023-01-012023-03-310001313275us-gaap:TreasuryStockCommonMember2023-03-310001313275bcov:PerformanceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2024-03-310001313275us-gaap:ProductAndServiceOtherMember2024-01-012024-03-310001313275srt:AsiaPacificMember2024-01-012024-03-310001313275us-gaap:EmployeeStockOptionMember2023-12-310001313275us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001313275us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001313275us-gaap:MoneyMarketFundsMember2023-12-310001313275us-gaap:RestrictedStockUnitsRSUMember2023-12-310001313275bcov:TwoThousandTwentyTwoInducementPlanMemberus-gaap:RestrictedStockUnitsRSUMembersrt:ChiefExecutiveOfficerMember2022-03-282022-03-280001313275us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001313275bcov:PerformanceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001313275srt:EuropeMember2023-01-012023-03-310001313275us-gaap:EmployeeStockOptionMember2023-01-012023-12-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001313275us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:MinimumMemberus-gaap:SecuredDebtMember2023-11-012023-11-010001313275bcov:OtherCountriesMember2023-01-012023-03-310001313275us-gaap:AccountingStandardsUpdate201409Member2024-03-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100013132752022-12-310001313275bcov:PremiumPricedOptionsMemberus-gaap:EmployeeStockOptionMemberbcov:TwoThousandAndTwentyOneStockIncentivePlanMember2023-03-202023-03-200001313275bcov:OtherCountriesMember2024-01-012024-03-310001313275us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001313275us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-3100013132752024-03-310001313275us-gaap:AdditionalPaidInCapitalMember2022-12-310001313275us-gaap:CommonStockMember2023-01-012023-03-310001313275srt:AsiaPacificMember2023-01-012023-03-310001313275country:US2024-01-012024-03-310001313275us-gaap:SubscriptionAndCirculationMember2024-01-012024-03-310001313275srt:EuropeMember2024-01-012024-03-310001313275us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001313275bcov:CostOfRevenueMember2024-01-012024-03-310001313275us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001313275us-gaap:RestrictedStockUnitsRSUMember2024-03-310001313275us-gaap:SecuredDebtMember2023-11-012023-11-010001313275us-gaap:CommonStockMember2023-12-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001313275us-gaap:CashMember2024-03-310001313275country:JP2024-01-012024-03-310001313275us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001313275bcov:SubscriptionAndSupportRevenueMember2024-03-310001313275srt:NorthAmericaMember2024-01-012024-03-310001313275bcov:ServiceBasedRestrictedStockUnitsMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001313275us-gaap:RetainedEarningsMember2023-03-31xbrli:purebcov:Reportingxbrli:sharesiso4217:USDxbrli:sharesiso4217:USD

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 March 31, 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 May 2, 2024, there were 44,582,481 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 March 31, 2024 and December 31, 2023

 

4

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

 

5

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023

 

6

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

 

7

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 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

 

26

 

 

Item 4. Controls and Procedures

 

27

 

 

PART II. OTHER INFORMATION

 

27

 

 

Item 1. Legal Proceedings

 

27

 

 

Item 1A. Risk Factors

 

28

 

 

Item 5. Other Information

 

28

 

 

Item 6. Exhibits

 

29

 

 

Signatures

 

30

 

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 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)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(in thousands, except share
 and per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,869

 

 

$

18,615

 

Accounts receivable, net of allowance of $211 and $210 at March 31, 2024 and December 31, 2023, respectively

 

 

35,222

 

 

 

33,451

 

Prepaid expenses

 

 

9,205

 

 

 

6,569

 

Other current assets

 

 

11,059

 

 

 

11,764

 

Total current assets

 

 

78,355

 

 

 

70,399

 

Property and equipment, net

 

 

41,007

 

 

 

42,476

 

Operating lease right-of-use asset

 

 

15,483

 

 

 

16,233

 

Intangible assets, net

 

 

5,446

 

 

 

6,368

 

Goodwill

 

 

74,859

 

 

 

74,859

 

Other assets

 

 

5,307

 

 

 

5,772

 

Total assets

 

$

220,457

 

 

$

216,107

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

11,386

 

 

$

14,422

 

Accrued expenses

 

 

18,847

 

 

 

17,566

 

Operating lease liability

 

 

4,218

 

 

 

4,486

 

Deferred revenue

 

 

71,843

 

 

 

68,155

 

Total current liabilities

 

 

106,294

 

 

 

104,629

 

Operating lease liability, net of current portion

 

 

16,745

 

 

 

17,358

 

Other liabilities

 

 

154

 

 

 

207

 

Total liabilities

 

$

123,193

 

 

 

122,194

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 44,698,991 and 43,833,919 shares issued at March 31, 2024 and December 31, 2023, respectively

 

 

45

 

 

 

44

 

Additional paid-in capital

 

 

331,001

 

 

 

328,918

 

Treasury stock, at cost; 135,000 shares

 

 

(871

)

 

 

(871

)

Accumulated other comprehensive loss

 

 

(1,543

)

 

 

(1,236

)

Accumulated deficit

 

 

(231,368

)

 

 

(232,942

)

Total stockholders’ equity

 

 

97,264

 

 

 

93,913

 

Total liabilities and stockholders’ equity

 

$

220,457

 

 

$

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 March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands, except share and per share data)

 

Revenue:

 

 

 

 

 

 

Subscription and support revenue

 

$

47,969

 

 

$

47,102

 

Professional services and other revenue

 

 

2,512

 

 

 

1,961

 

Total revenue

 

 

50,481

 

 

 

49,063

 

Cost of revenue:

 

 

 

 

 

 

Cost of subscription and support revenue

 

 

16,807

 

 

 

18,265

 

Cost of professional services and other revenue

 

 

2,815

 

 

 

2,002

 

Total cost of revenue

 

 

19,622

 

 

 

20,267

 

Gross profit

 

 

30,859

 

 

 

28,796

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

8,849

 

 

 

9,866

 

Sales and marketing

 

 

16,454

 

 

 

19,465

 

General and administrative

 

 

9,544

 

 

 

10,064

 

Merger-related

 

 

 

 

 

145

 

Gain on sale of assets

 

 

(6,000

)

 

 

 

Total operating expenses

 

 

28,847

 

 

 

39,540

 

Income (loss) from operations

 

 

2,012

 

 

 

(10,744

)

Other income (expense), net

 

 

(38

)

 

 

(543

)

Income (loss) before income taxes

 

 

1,974

 

 

 

(11,287

)

Provision for income taxes

 

 

400

 

 

 

427

 

Net income (loss)

 

$

1,574

 

 

$

(11,714

)

Net income (loss) per share—basic and diluted

 

 

 

 

 

 

         Basic

 

$

0.04

 

 

$

(0.28

)

         Diluted

 

$

0.04

 

 

$

(0.28

)

Weighted-average shares—basic and diluted

 

 

 

 

 

 

         Basic

 

 

43,983

 

 

 

42,528

 

         Diluted

 

 

44,098

 

 

 

42,528

 

 

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

 

5


Brightcove Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Net income (loss)

 

$

1,574

 

 

$

(11,714

)

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(307

)

 

 

188

 

Comprehensive income (loss)

 

$

1,267

 

 

$

(11,526

)

 

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 March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands, except share data)

 

Shares of common stock issued

 

 

 

 

 

 

Balance, beginning of period

 

 

43,833,919

 

 

 

42,449,677

 

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

 

 

865,072

 

 

 

542,694

 

Balance, end of period

 

 

44,698,991

 

 

 

42,992,371

 

Shares of treasury stock

 

 

 

 

 

 

Balance, beginning of period

 

 

(135,000

)

 

 

(135,000

)

Balance, end of period

 

 

(135,000

)

 

 

(135,000

)

Par value of common stock issued

 

 

 

 

 

 

Balance, beginning of period

 

$

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

 

Value of treasury stock

 

 

 

 

 

 

Balance, beginning of period

 

$

(871

)

 

$

(871

)

Balance, end of period

 

$

(871

)

 

$

(871

)

Additional paid-in capital

 

 

 

 

 

 

Balance, beginning of period

 

$

328,918

 

 

$

314,825

 

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

 

 

(240

)

 

 

(226

)

Stock-based compensation expense

 

 

2,323

 

 

 

3,694

 

Balance, end of period

 

$

331,001

 

 

$

318,293

 

Accumulated deficit

 

 

 

 

 

 

Balance, beginning of period

 

$

(232,942

)

 

$

(210,056

)

Net income (loss)

 

 

1,574

 

 

 

(11,714

)

Balance, end of period

 

$

(231,368

)

 

$

(221,770

)

Accumulated other comprehensive loss

 

 

 

 

 

 

Balance, beginning of period

 

$

(1,236

)

 

$

(1,593

)

Foreign currency translation adjustment

 

 

(307

)

 

 

188

 

Balance, end of period

 

$

(1,543

)

 

$

(1,405

)

Total stockholders’ equity

 

$

97,264

 

 

$

94,290

 

 

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

7


Brightcove Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Operating activities

 

 

 

 

 

 

Net income (loss)

 

$

1,574

 

 

$

(11,714

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

4,917

 

 

 

3,949

 

Stock-based compensation

 

 

2,213

 

 

 

3,543

 

Provision for reserves on accounts receivable

 

 

(81

)

 

 

67

 

Gain on sale of assets

 

 

(6,000

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,800

)

 

 

(14,713

)

Prepaid expenses and other current assets

 

 

(898

)

 

 

(986

)

Other assets

 

 

465

 

 

 

314

 

Accounts payable

 

 

(3,878

)

 

 

956

 

Accrued expenses

 

 

1,727

 

 

 

(3,999

)

Operating leases

 

 

(130

)

 

 

(81

)

Deferred revenue

 

 

3,918

 

 

 

10,032

 

Net cash provided by (used in) operating activities

 

 

2,027

 

 

 

(12,632

)

Investing activities

 

 

 

 

 

 

Proceeds from sale of assets

 

 

6,000

 

 

 

 

Purchases of property and equipment

 

 

(817

)

 

 

(952

)

Capitalized internal-use software costs

 

 

(2,182

)

 

 

(3,930

)

Net cash provided by (used in) investing activities

 

 

3,001

 

 

 

(4,882

)

Financing activities

 

 

 

 

 

 

Deferred acquisition payments

 

 

 

 

 

(1,700

)

Other financing activities

 

 

(239

)

 

 

(225

)

Net cash used in financing activities

 

 

(239

)

 

 

(1,925

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(535

)

 

 

23

 

Net increase (decrease) in cash and cash equivalents

 

 

4,254

 

 

 

(19,416

)

Cash and cash equivalents at beginning of period

 

 

18,615

 

 

 

31,894

 

Cash and cash equivalents at end of period

 

$

22,869

 

 

$

12,478

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for operating lease liabilities

 

$

938

 

 

$

874

 

Cash paid for income taxes

 

$

279

 

 

$

505

 

 

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 months ended March 31, 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

 

 

(81

)

Write-offs against allowance

 

 

82

 

Balance as of March 31, 2024

 

$

211

 

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 March 31, 2024

 

 

35,222

 

 

 

1,784

 

 

 

71,843

 

 

 

133

 

 

 

71,976

 

Revenue recognized for the three months ended March 31, 2024 from amounts included in deferred revenue at the beginning of the period was approximately $32.5 million. Revenue recognized for the three months ended March 31, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $30.5 million. During the three months ended March 31, 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 $11.8 million as of March 31, 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 months ended March 31, 2024 related to costs to obtain a contract was $3.1 million and is included in operating expenses for the respective period. Amortization expense recognized for the three months ended March 31, 2023 related to costs to obtain a contract was $2.5 million and is included in operating expenses for the respective period.

Transaction Price Allocated to Future Performance Obligations

As of March 31, 2024, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $185.4 million, of which approximately $127.3 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 March 2029.

 

4. Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 2024 consist of the following:

 

 

 

March 31, 2024

 

Description

 

Contracted
Maturity

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Cash

 

Demand

 

$

22,825

 

 

$

22,825

 

Money market funds

 

Demand

 

 

44

 

 

 

44

 

Total cash and cash equivalents

 

 

 

$

22,869

 

 

$

22,869

 

 

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 Income (Loss) per Share

The Company calculates basic and diluted net income (loss) per common share by dividing the net income (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 dilutive.

The following table sets forth the computations of basic and diluted income (loss) per share:

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Net income (loss)

 

$

1,574

 

 

$

(11,714

)

 

 

 

 

 

 

 

Weighted average shares used in computing basic earnings per share

 

 

43,983

 

 

 

42,528

 

 

 

 

 

 

 

 

Effect of weighted average dilutive stock-based awards

 

 

115

 

 

 

-

 

 

 

 

 

 

 

 

Weighted average shares used in computing diluted earnings per share

 

 

44,098

 

 

 

42,528

 

 

 

 

 

 

 

 

Net income (loss) per share—basic and diluted

 

 

 

 

 

 

         Basic

 

$

0.04

 

 

$

(0.28

)

         Diluted

 

$

0.04

 

 

$

(0.28

)

 

The following outstanding common shares have been excluded from the computation of dilutive net income (loss) per share as of the periods indicated because such securities are anti-dilutive:

 

 

 

Three Months Ended March 31,

 

(shares in thousands)

 

2024

 

 

2023

 

Options outstanding

 

 

2,234

 

 

 

2,979

 

Restricted stock units outstanding

 

 

4,533

 

 

 

6,036

 

 

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 employment of the Company's CEO, the Company granted 800,000 restricted stock units to the CEO 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.

11


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

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Weighted-average fair value of options granted during the period

 

$

 

 

$

1.75

 

Risk-free interest rate

 

 

 

 

3.4 - 4.8%

 

Expected volatility

 

 

0.0

%

 

47.9 - 55.5%

 

Expected dividend yield

 

 

 

 

 

 

 

 

As of March 31, 2024, there was $20.6 million of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.18 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the three months ended March 31, 2024 and 2023:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Stock-based compensation:

 

 

 

 

 

 

Cost of subscription and support revenue

 

$

106

 

 

$

138

 

Cost of professional services and other revenue

 

 

40

 

 

 

100

 

Research and development

 

 

315

 

 

 

688

 

Sales and marketing

 

 

354

 

 

 

1,169

 

General and administrative

 

 

1,398

 

 

 

1,448

 

 

 

$

2,213

 

 

$

3,543

 

 

The following is a summary of the stock option activity during the three months ended March 31, 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

 

 

(13,877

)

 

 

14.56

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

2,234,074

 

 

$

7.69

 

 

 

6.80

 

 

 

 

Exercisable at March 31, 2024

 

 

1,276,925

 

 

$

8.09

 

 

 

5.21

 

 

$

 

 

(1)
The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on March 31, 2024 of $1.94 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 three months ended March 31, 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

 

 

391,021

 

 

 

2.02

 

 

 

 

 

 

 

 

 

391,021

 

 

 

2.02

 

Vested and issued

 

 

(865,072

)

 

 

6.14

 

 

 

 

 

 

 

 

 

(865,072

)

 

 

6.14

 

Canceled

 

 

(595,286

)

 

 

6.06

 

 

 

(17,186

)

 

 

18.33

 

 

 

(612,472

)

 

 

6.40

 

Unvested at March 31, 2024

 

 

4,032,931

 

 

$

5.62

 

 

 

499,984

 

 

$

4.06

 

 

 

4,532,915

 

 

$

5.45

 

 

12


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 March 31, 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.

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 March 31, 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 March 31, 2024 and there were no borrowings outstanding as of March 31, 2024.

13


 

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 March 31,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

North America

 

$

30,963

 

 

$

29,101

 

Europe

 

 

7,916

 

 

 

8,187

 

Japan

 

 

4,832

 

 

 

5,196

 

Asia Pacific

 

 

6,569

 

 

 

6,494

 

Other

 

 

201

 

 

 

85

 

Total revenue

 

$

50,481

 

 

$

49,063

 

 

North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was $28.6 million and $26.9 million for the three months ended March 31, 2024 and 2023, respectively.

 

Other than the United States and Japan, no other country contributed more than 10% of the Company's total revenue for the three months ended March 31, 2024 and March 31, 2023.

 

11. Goodwill and intangible assets

During the three months ended March 31, 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 March 31, 2024 and that there was no impairment on its definite-lived intangible assets. The Company's significant assumptions in the undiscounted cash flow models include, but are not limited to, its revenue growth rates assumption.

 

As the Company has one reporting unit all of its goodwill was allocated to that unit for the purpose of testing for impairment. To determine fair value of its one reporting unit, the Company engaged a third-party valuation expert and provided the valuation expert with projected financial information prepared by management. The Company took the income approach and used a discounted cash flow model as its valuation technique to measure the fair value of its reporting unit as of March 31, 2024. The result of the goodwill impairment test performed indicated that estimated fair value exceeded the carrying value of the reporting unit. As such, the Company concluded the reporting unit was not at risk of impairment as of the interim testing date.

 

Conditions that could trigger future impairment assessment include, but are not limited to, a significant adverse change in certain agreements, significant underperformance relative to historical or projected future operating results, an economic downturn in customers’ industries, increased competition, a significant reduction in our stock price for a sustained period or a reduction of our market capitalization relative to net book value. These factors could have a negative material impact to the fair value of the Company's reporting unit and could result in a future impairment charge.

14


 

12. Restructuring and Other

During the three months ended March 31, 2023, the Company took an action to restructure certain parts of the Company with the intent of aligning skills with the Company’s strategy and facilitating cost efficiencies and savings. As a result certain headcount reductions were necessary. The Company incurred approximately $0.4 million in restructuring charges in the three months ended March 31, 2023. The restructuring charges reflected post-employment benefits, and the Company does not expect to incur any additional restructuring charges related to this action. The restructuring charges are reflected in the Condensed Consolidated Statements of Operations as follows: $0.2 million - General and Administrative; $0.1 million – Research and Development; and $0.1 million – Sales and Marketing. The Company paid the entire amount by March 31, 2023.

During the three months ended March 31, 2024, the Company took an action to restructure certain parts of the Company with the intent of aligning skills with the Company’s strategy and facilitating cost efficiencies and savings. As a result certain headcount reductions were necessary. The Company has incurred approximately $1.6 million in restructuring charges in the three months ended March 31, 2024. The restructuring charges reflect post-employment benefits, and the Company does not expect to incur any additional restructuring charges related to this action. As of March 31, 2024, the restructuring charges are reflected in the Condensed Consolidated Statements of Operations as follows: $0.2 million - Cost of Revenue; $0.3 million - General and Administrative; $0.4 million – Research and Development; and $0.7 million – Sales and Marketing. The Company expects to pay the entire amount by June 30, 2024.

During the three months ended March 31, 2024, the Company incurred costs of approximately $0.2 million relating to mobility taxes owed.

 

13. Gain on Sale of Assets

During the three months ended March 31, 2024, the Company sold a certain number of its patents to a third party for $6.0 million. The Company retains the perpetual right to use these patents for its current customers. The Company also retained the perpetual right to use these patents in its offerings to prospective customers, with certain time-limited exceptions. The Company has no obligation to maintain or develop the patents. The gain on the sale of patents is reflected within Sale of Patents in the Condensed Consolidated Statements of Operations.

15


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023.

Company Overview

We are a global leader in cloud-based streaming technology and services with a vision to be the world's most trusted streaming technology company. Brightcove’s software platform and suite of solutions include a breadth and depth of offerings that meet the needs of media and enterprise customers in a variety of industries across the globe with their use of streaming video, and serve as a guide in optimizing and maturing their streaming strategies. Leading companies across industries rely on our products, solutions, services, and industry expertise to grow their streaming businesses, monetize their content via streaming use-cases, expand and engage their audiences (both external and internal), and reduce the cost and complexity associated with storing, publishing, delivering, distributing, measuring, and monetizing content across streaming channels and devices.

With deep industry expertise and an understanding of how streaming video helps generate positive business outcomes, our proven platform combines functionality designed to meet the needs and goals of our customers with the additional flexibility for customers to customize solutions to meet their own unique requirements.

Our philosophy for the next few years will continue to be to invest in our product strategy and development, sales, and go-to-market activities to support our long-term revenue growth. We believe these investments will help us address some of the challenges facing our business such as demand for our products by existing and potential customers, rapid technological change in our industry, increased competition and resulting price sensitivity. These investments include support for the expansion of our infrastructure within our hosting facilities, the hiring of additional technical and sales personnel, the innovation of new features for existing products and the development of new products. We believe this strategy will help us retain our existing customers, increase our average annual subscription revenue per premium customer and lead to the acquisition of new customers. Additionally, we believe customer growth will enable us to achieve economies of scale which will reduce our cost of goods sold, research and development and general and administrative expenses as a percentage of total revenue.

As of March 31, 2024 and 2023 we had 648 and 736 employees, respectively.

We generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenue increased from $49.1 million in the three months ended March 31, 2023 to $50.5 million in the three months ended March 31, 2024, due to an increase in subscription and support revenue.

Included in the consolidated net income for the three months ended March 31, 2024 was stock-based compensation expense, amortization of acquired intangible assets, and restructuring and other expenses of $2.2 million, $0.9 million, and $1.8 million, respectively. Included in the consolidated net income for the three months ended March 31, 2023 was merger-related expense, stock-based compensation expense, amortization of acquired intangible assets, and restructuring expense of $0.1 million, $3.5 million, $1.0 million, and $0.4 million, respectively.

For the three months ended March 31, 2024 and 2023, our revenue derived from customers located outside North America was 39% and 41%, respectively. We expect the percentage of total net revenue derived from outside North America to remain relatively unchanged or decrease in future periods due to fluctuations in exchange rates and a decrease in usage-based fees.

Key Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

16


The following table includes our key metrics for the periods presented:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Customers (at period end)

 

 

 

 

 

 

Premium

 

 

1,992

 

 

 

2,180

 

Volume

 

 

510

 

 

 

559

 

Total customers (at period end)

 

 

2,502

 

 

 

2,739

 

Net revenue retention rate

 

 

92.3

%

 

 

93.7

%

Recurring dollar retention rate

 

 

84.6

%

 

 

88.4

%

Average annual subscription revenue per premium customer,
   excluding Starter edition customers (in thousands)

 

$

98.0

 

 

$

89.4

 

Average annual subscription revenue per premium customer
   for Starter edition customers only (in thousands)

 

$

4.3

 

 

$

3.9

 

Total backlog, excluding professional services engagements (in millions)

 

$

185.4

 

 

$

181.3

 

Total backlog to be recognized over next 12 months, excluding
   professional services engagements (in millions)

 

$

127.3

 

 

$

129.3

 

 

Number of Customers. We define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue at the end of the quarter. We believe the number of customers is a key indicator of our market penetration, the productivity of our sales organization and the value that our products bring to our customers. We classify our customers by including them in either premium or volume offerings. Our volume offerings include our Video Cloud Express customers and our Zencoder customers on month-to-month contracts and pay-as-you-go contracts. All other offerings are considered premium.

Our go-to-market focus and growth strategy is to expand our premium customer base, as we believe our premium customers represent a greater opportunity for our solutions. Premium customers decreased in the three months ended March 31, 2024 compared to the prior period due to some customers deciding to switch to in-house solutions or other third-party solutions. Volume customers decreased in recent periods primarily due to our discontinuation of the promotional Video Cloud Express offering. As a result, we have experienced attrition of this base level offering without a corresponding addition of customers. We expect customers using our volume offerings to continue to decrease in 2024 and beyond as we continue to focus on the market for our premium solutions.

Net Revenue Retention Rate. We assess our ability to retain and expand customers using a metric we refer to as our net revenue retention rate. We calculate the net revenue retention rate by dividing: (a) the current annualized recurring revenue for premium customers that existed twelve months prior by (b) the annualized recurring revenue for all premium customers that existed twelve months prior. We define annualized recurring revenue for premium customers as the aggregate annualized contract value from our premium customer base, measured as of the end of a given period. We typically calculate our net revenue retention rate on a quarterly basis. For annual periods, we report net revenue retention rate as the average of the net revenue retention rate for all fiscal quarters included in the period. By dividing the retained recurring revenue by the base recurring revenue, we measure our success in retaining and growing installed revenue from the specific cohort of customers we served at the beginning of the period.
Recurring Dollar Retention Rate. We assess our ability to retain customers using a metric we refer to as our recurring dollar retention rate. We calculate the recurring dollar retention rate by dividing the retained recurring value of subscription revenue for a period by the previous recurring value of subscription revenue for the same period. We define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renew in a given period, including any increase or decrease in contract value. We define previous recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in that same period. We typically calculate our recurring dollar retention rate on a monthly basis. Recurring dollar retention rate provides visibility into our ongoing revenue. It focuses on contracts up for renewal in a given quarter and only captures expansion/upsells at time of renewal, and is more susceptible to swings than the net revenue retention rate.
Average Annual Subscription Revenue Per Premium Customer. We define average annual subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by the average number of premium customers for that period. We believe that this metric is important in understanding subscription revenue for our premium offerings in addition to the relative size of premium customer arrangements. As our Starter edition has a price point of $199 or $499 per month, we disclose the average annual subscription revenue per premium customer separately for Starter edition customers and all other premium customers.

17


Backlog. We define backlog as the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied, excluding professional service engagements. We believe that this metric is important in understanding future business performance.

Geopolitical Events

Worldwide economic uncertainties and negative trends, including financial and credit market fluctuations, uncertainty in the banking sector, rising interest rates, political unrest and social strife, such as continued Russian military action against Ukraine, and the current armed conflict in Israel and the Gaza Strip, a potential U.S. federal government shutdown, and other impacts from the macroeconomic environment have, and could continue to, affect our business, financial condition and results of operations. While we have continued to invest in business growth, our business is dependent on many factors and these macroeconomic conditions have caused and may in the future affect the rate of spending on software products and the demand for video to support virtual events.

Components of Consolidated Statements of Operations

Revenue

Subscription and Support Revenue — We generate subscription and support revenue from the sale of our products.

Our products are generally offered to customers on a subscription-based SaaS model, with varying levels of functionality, support, and usage entitlements that depend on the use case of our customers. Customer arrangements are typically one-year contracts, which include a subscription to our software, access to basic support and a pre-determined amount of usage entitlements. The pricing is based on the value of our software, the level of support, and the amount of usage entitlements. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. We also offer enhanced support packages for an additional fee.

Our Video Cloud Express edition, which targets SMBs, and our Zencoder customers on month-to-month contracts or pay-as-you-go contracts, are considered volume customers. All other customers are considered premium customers.

Professional Services and Other Revenue — Professional services and other revenue consists of services such as implementation, software customizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the remainder due when the related services have been completed, or on a time and materials basis.

Cost of Revenue

Cost of subscription, support and professional services revenue primarily consists of costs related to supporting and hosting our product offerings and delivering our professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of our data centers, our customer support team and our professional services staff. In addition to these expenses, we incur third-party service provider costs such as data center and content delivery network, or CDN, expenses, allocated overhead, depreciation expense and amortization of capitalized internal-use software development costs and acquired intangible assets. We allocate overhead costs such as rent, utilities and supplies to all departments based on relative headcount. As such, general overhead expenses are reflected in cost of revenue in addition to each operating expense category. The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscription and support services due to the labor costs of providing professional services.

Cost of revenue decreased in absolute dollars from the first three months of 2023 to the first three months of 2024. In future periods we expect our cost of revenue will increase in absolute dollars as our revenue increases. Cost of revenue as a percentage of revenue could fluctuate from period to period depending on the number of our professional services engagements and any associated costs relating to the delivery of subscription services and the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue, in any particular quarterly or annual period.

Operating Expenses

We classify our operating expenses as follows:

18


Research and Development. Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, incentive compensation and stock-based compensation, in addition to the costs associated with contractors and allocated overhead. We have focused our research and development efforts on expanding the functionality and scalability of our products and enhancing their ease of use, as well as creating new product offerings. We expect, over the long term, that research and development expenses will increase in absolute dollars as we intend to continue to periodically release new features and functionality, expand our product offerings, continue the localization of our products in various languages, upgrade and extend our service offerings, and develop new technologies. Over the long term, we believe that research and development expenses as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing products, features and functionality, as well as changes in the technology that our products must support, such as new operating systems or new Internet-connected devices.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing staff, including salaries, benefits, incentive compensation, commissions, stock-based compensation and travel costs, amortization of acquired intangible assets, in addition to costs associated with marketing and promotional events, corporate communications, advertising, other brand building and product marketing expenses and allocated overhead. We intend to continue to invest in sales and marketing and expand the sale of our product offerings within our existing customer base, build brand awareness and sponsor additional marketing events. Accordingly, over the long term, we expect sales and marketing expense to continue to be our most significant operating expense in future periods. Over the long term, we believe that sales and marketing expense as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing customers and from small, medium-sized and enterprise customers, as well as changes in the productivity of our sales and marketing programs.

General and Administrative. General and administrative expenses consist primarily of personnel and related expenses for executive, legal, finance, information technology and human resources functions, including salaries, benefits, incentive compensation and stock-based compensation. General and administrative expenses also include the costs associated with professional fees, insurance premiums, other corporate expenses and allocated overhead. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.

Merger-related. Merger-related costs consist of expenses related to mergers and acquisitions, integration costs and general corporate development activities.

Gain on Sale of Assets. During the three months ended March 31, 2024, we sold a certain number of our patents to a third party for $6.0 million. We retain the perpetual right to use these patents for our current customers. We also retained the perpetual right to use these patents in our offerings to prospective customers, with certain time-limited exceptions. We have no obligation to maintain or develop the patents.

Other Expense, net

Other expense, net consists primarily of interest income earned on our cash, cash equivalents, and foreign exchange gains and losses.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We have provided a valuation allowance against our existing U.S. net deferred tax assets at December 31, 2023. We maintain net deferred tax liabilities for temporary differences related to our Japanese subsidiary.

Stock-Based Compensation Expense

Our cost of revenue, research and development, sales and marketing, and general and administrative expenses include stock-based compensation expense. Stock-based compensation expense represents the grant date fair value of outstanding stock options and restricted stock awards, which is recognized as expense over the respective stock option and restricted stock award service periods. For the three months ended March 31, 2024 and 2023, we recorded $2.2 million and $3.5 million, respectively, of stock-based compensation expense. We expect stock-based compensation expense to decrease in absolute dollars in future periods.

19


Foreign Currency Translation

With regard to our international operations, we frequently enter into transactions in currencies other than the U.S. dollar. As a result, our revenue, expenses and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro, British pound, Australian dollar, and Japanese yen. In periods when the U.S. dollar declines in value as compared to the foreign currencies in which we conduct business, our foreign currency-based revenue and expenses generally increase in value when translated into U.S. dollars. Should the U.S. dollar continue to increase in value, our future percentage of total net revenue derived from outside North America may remain relatively unchanged or decrease.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We consider the assumptions and estimates associated with revenue recognition, income taxes, business combinations, intangible assets and goodwill to be our critical accounting policies and estimates. We discuss any assumptions and estimates that could have a material effect on the results of operations in the applicable section of this discussion and analysis of the financial condition and results of operations. Please see Note 11 for a discussion of our evaluation of impairment of goodwill as of March 31, 2024.

For a detailed explanation of the judgments made in these areas, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the Securities and Exchange Commission on February 22, 2024.

Results of Operations

The following tables set forth our results of operations for the periods presented. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily

20


indicative of future results. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands, except share and per share data)

 

Revenue:

 

 

 

 

 

 

Subscription and support revenue

 

$

47,969

 

 

$

47,102

 

Professional services and other revenue

 

 

2,512

 

 

 

1,961

 

Total revenue

 

 

50,481

 

 

 

49,063

 

Cost of revenue:

 

 

 

 

 

 

Cost of subscription and support revenue

 

 

16,807

 

 

 

18,265

 

Cost of professional services and other revenue

 

 

2,815

 

 

 

2,002

 

Total cost of revenue

 

 

19,622

 

 

 

20,267

 

Gross profit

 

 

30,859

 

 

 

28,796

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

8,849

 

 

 

9,866

 

Sales and marketing

 

 

16,454

 

 

 

19,465

 

General and administrative

 

 

9,544

 

 

 

10,064

 

Merger-related

 

 

 

 

 

145

 

Gain on sale of assets

 

 

(6,000

)

 

 

 

Total operating expenses

 

 

28,847

 

 

 

39,540

 

Income (loss) from operations

 

 

2,012

 

 

 

(10,744

)

Other income (expense), net

 

 

(38

)

 

 

(543

)

Income (loss) before income taxes

 

 

1,974

 

 

 

(11,287

)

Provision for income taxes

 

 

400

 

 

 

427

 

Net income (loss)

 

$

1,574

 

 

$

(11,714

)

Net income (loss) per share—basic and diluted

 

 

 

 

 

 

         Basic

 

$

0.04

 

 

$

(0.28

)

         Diluted

 

$

0.04

 

 

$

(0.28

)

Weighted-average shares—basic and diluted

 

 

 

 

 

 

         Basic

 

 

43,983

 

 

 

42,528

 

         Diluted

 

 

44,098

 

 

 

42,528

 

 

Overview of Results of Operations for the Three Months Ended March 31, 2024 and 2023

Total revenue increased by 3%, or $1.4 million, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in subscription and support revenue of 2% or $0.9 million and an increase in professional services and other revenue of 28%, or $0.6 million. The increase in subscription and support revenue was primarily due to an increase in revenue from our premium offerings. Our revenue from premium offerings increased by $1.5 million, or 3%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.

The U.S. dollar has strengthened against the Japanese Yen and weakened against the British Pound when compared against exchange rates during the prior year period of comparison. In constant currency, our total revenue for the three months ended March 31, 2024 would have been approximately $51.0 million. The majority of the effect of revenue in constant currency was in revenues denominated in Japanese Yen of $0.6 million and British Pound of $0.1 million. Constant currency is calculated as translating current period revenue denominated in foreign currencies at the exchange rates of the prior period of comparison.

Our gross profit increased by $2.1 million, or 7%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to an increase in subscription and support revenue, as well as a decrease in our cost of revenue. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

Income from operations was $2.0 million in the three months ended March 31, 2024 compared to a loss from operations of $10.7 million in the three months ended March 31, 2023. This is primarily due to a decrease in operating expenses of $10.7 million (including a gain on sale of assets of $6.0 million) and an increase in gross profit of $2.1 million in the three months ended March 31,

21


2024 compared to the three months ended March 31, 2023. The decrease in operating expenses is primarily due to the gain on sale of assets.

Revenue

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Revenue by Product Line

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Premium

 

$

50,190

 

 

 

99

%

 

$

48,736

 

 

 

99

%

 

$

1,454

 

 

 

3

%

Volume

 

 

291

 

 

 

1

 

 

 

327

 

 

 

1

 

 

 

(36

)

 

 

(11

)

Total

 

$

50,481

 

 

 

100

%

 

$

49,063

 

 

 

100

%

 

$

1,418

 

 

 

3

%

 

During the three months ended March 31, 2024, revenue increased by $1.4 million, or 3%, compared to the three months ended March 31, 2023, primarily due to an increase in revenue from our premium offerings. The increase in premium revenue of $1.5 million, or 3%, is the result of an increase in the average revenue per premium customer. The increase in average revenue per premium customer was primarily due to premium customers buying more of our offerings. In the three months ended March 31, 2024, volume revenue did not change materially compared to the three months ended March 31, 2023, as we continue to focus on the market for our premium solutions.

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Revenue by Type

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%