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Brightcove Announces Financial Results for Fourth Quarter and Fiscal Year 2018

BOSTON--(BUSINESS WIRE)--

Brightcove Inc. (BCOV), the leading provider of cloud services for video, today announced financial results for the fourth quarter and fiscal year ended December 31, 2018.

“In the fourth quarter Brightcove continued to execute on the strategic priorities it has targeted to generate stronger, more consistent revenue growth and profitability. The Company has accomplished much in 2018 and is in a far stronger position to achieve its long-term objectives than when we entered the year,” said Jeff Ray, Brightcove’s chief executive officer.

Ray added, “Brightcove enters 2019 with a clear market focus, a robust product development pipeline and a new go-to-market strategy focused on driving faster sales velocity. Our clear leadership in a dynamic, fast-growing, multi-billion dollar marketplace provides ample opportunity for the company to be successful.”

Fourth Quarter 2018 Financial Highlights:

  • Revenue for the fourth quarter of 2018 was $40.9 million, an increase of 2% compared to $40.1 million for the fourth quarter of 2017. Subscription and support revenue was $37.8 million, an increase of 2% compared to $36.9 million for the fourth quarter of 2017.
  • Gross profit for the fourth quarter of 2018 was $24.4 million, representing a gross margin of 60% compared to a gross profit of $23.8 million for the fourth quarter of 2017. Non-GAAP gross profit for the fourth quarter of 2018 was $24.8 million, representing a non-GAAP gross margin of 61%, compared to a non-GAAP gross profit of $24.5 million for the fourth quarter of 2017. Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense and the amortization of acquired intangible assets.
  • Loss from operations was $2.5 million for the fourth quarter of 2018, compared to a loss from operations of $1.3 million for the fourth quarter of 2017. Non-GAAP operating income, which excludes stock-based compensation expense, the amortization of acquired intangible assets and merger-related expense, was $237,000 for the fourth quarter of 2018, compared to non-GAAP operating income of $1.3 million during the fourth quarter of 2017.
  • Net loss was $2.6 million, or $0.07 per diluted share, for the fourth quarter of 2018. This compares to a net loss of $1.4 million, or $0.04 per diluted share, for the fourth quarter of 2017. Non-GAAP net income, which excludes stock-based compensation expense, the amortization of acquired intangible assets and merger-related expense, was $147,000 for the fourth quarter of 2018, or $0.00 per diluted share, compared to non-GAAP net income of $1.3 million for the fourth quarter of 2017, or $0.04 per diluted share.
  • Adjusted EBITDA was $1.4 million for the fourth quarter of 2018, compared to adjusted EBITDA of $2.3 million for the fourth quarter of 2017. Adjusted EBITDA excludes stock-based compensation expense, merger-related expense, the amortization of acquired intangible assets, depreciation expense, other income/expense and the provision for income taxes.
  • Cash flow from operations was $2.8 million for the fourth quarter for 2018, compared to $5.2 million for the fourth quarter of 2017.
  • Free cash flow was $2.1 million after the company invested $682,000 in capital expenditures and capitalization of internal-use software during the fourth quarter of 2018. Free cash flow was $4.2 million for the fourth quarter of 2017.
  • Cash and cash equivalents were $29.3 million as of December 31, 2018 compared $26.9 million at September 30, 2018.

Full Year 2018 Financial Highlights:

  • Revenue for the full year 2018 was $164.8 million, an increase of 6% compared to $155.9 million for 2017. Subscription and support revenue for 2018 was $150.9 million, an increase of 5% compared to $143.2 million for 2017.
  • Gross profit was $98.2 million for 2018, representing a gross margin of 60%, compared to $91.3 million for 2017. Non-GAAP gross profit was $100.6 million for 2018, representing a non-GAAP gross margin of 61%, compared to $94.0 million for 2017. Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense and the amortization of acquired intangible assets.
  • Loss from operations was $13.1 million for 2018, compared to a loss from operations of $19.7 million for 2017. Non-GAAP loss from operations, which excludes stock-based compensation expense, the amortization of acquired intangible assets, executive severance and merger-related expense, was $2.2 million for 2018, compared to non-GAAP loss from operations of $9.0 million for 2017.
  • Net loss was $14.0 million, or $0.39 per diluted share, for 2018. This compares to a net loss of $19.5 million, or $0.57 per diluted share, for 2017. Non-GAAP net loss, which excludes stock-based compensation expense, the amortization of acquired intangible assets, executive severance and merger-related expense, was $3.1 million for 2018, or $0.09 per diluted share, compared to non-GAAP net loss of $8.8 million for 2017, or $0.26 per diluted share.
  • Adjusted EBITDA was $2.3 million for 2018, compared to an adjusted EBITDA loss of $4.5 million for 2017. Adjusted EBITDA excludes stock-based compensation expense, executive severance, merger-related expense, the amortization of acquired intangible assets, depreciation expense, other income/expense and the provision for income taxes.
  • Cash flow from operations was $2.6 million for 2018, compared to cash flow used in operations of $6.4 million for 2017.
  • Free cash flow was negative $2.0 million after the company invested $4.5 million in capital expenditures and capitalization of internal-use software during 2018. Free cash flow was negative $10.6 million for 2017.

A Reconciliation of GAAP to Non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Other Fourth Quarter and Recent Highlights:

  • Average annual subscription revenue per premium customer was $75,000 in the fourth quarter of 2018, excluding starter customers who had average annualized revenue of $4,500 per customer. This compares to $73,000 in the comparable period in 2017.
  • Recurring dollar retention rate was 104% in the fourth quarter of 2018, which was well above our historical target of the low to mid-90 percent range.
  • Ended the quarter with 3,783 customers, of which 2,226 were premium.
  • New customers and customers who expanded their relationship during the fourth quarter include: HOOQ, McCormick and Co., Reelz, Adobe, AMC Entertainment, Forbes Media, MVMNT TV, Ascension Health, Bibel TV, TaTatu, Rajasthan Patrika Private Limited, DNV GL, among others.
  • Brightcove was named, for a second consecutive time, a Leader in Gartner’s Magic Quadrant for Enterprise Video Content Management. Brightcove was positioned highest on the ability to execute axis within the entire Magic Quadrant.
  • Rick Hanson joined Brightcove as Chief Revenue Officer, a new role for the company. Hanson will oversee the global sales organization including all customer facing direct sales, channel sales, and professional services organizations. He joins the company after previous sales management roles at CA Technologies, HP, RSA and Skyport Systems.

Business Outlook

Based on information as of today, February 13, 2019, the Company is issuing the following financial guidance. Please note that this guidance does not incorporate the recently announced signing of a purchase agreement for the Ooyala OVP business, which we expect to close in the first half of 2019.

First Quarter 2019:

  • Revenue is expected to be in the range of $40.0 million to $40.5 million, including approximately $2.7 million of professional services revenue.
  • Non-GAAP loss from operations is expected to be in the range of $900,000 to $1.4 million, which excludes stock-based compensation of approximately $1.6 million and the amortization of acquired intangible assets of approximately $400,000.
  • Adjusted EBITDA is expected to be in the range of an Adjusted EBITDA loss of $200,000 to generating Adjusted EBITDA of $300,000, which excludes stock-based compensation of approximately $1.6 million, the amortization of acquired intangible assets of approximately $400,000, depreciation expense of approximately $1.2 million and other income/expense and the provision for income taxes of approximately $300,000.
  • Non-GAAP net loss per diluted share is expected to be $0.03 to $0.05, which excludes stock-based compensation of approximately $1.6 million and the amortization of acquired intangible assets of approximately $400,000, and assumes approximately 36.7 million weighted-average shares outstanding.

Full Year 2019:

  • Revenue is expected to be in the range of $168.0 million to $172.0 million, including approximately $11.1 million of professional services revenue.
  • Non-GAAP income from operations is expected to be in the range of breakeven to $3.0 million, which excludes stock-based compensation of approximately $6.9 million and the amortization of acquired intangible assets of approximately $1.6 million.
  • Adjusted EBITDA is expected to be in the range of $5.2 million to $8.2 million, which excludes stock-based compensation of approximately $6.9 million, the amortization of acquired intangible assets of approximately $1.6 million, depreciation expense of approximately $5.2 million and other income/expense and the provision for income taxes of approximately $1.1 million.
  • Non-GAAP net income/loss per diluted share is expected to be a loss of $0.03 to income of $0.05, which excludes stock-based compensation of approximately $6.9 million and the amortization of acquired intangible assets of approximately $1.6 million, and assumes approximately 38.6 million weighted-average shares outstanding.

Conference Call Information

Brightcove will host a conference call today, February 13, 2019, at 5:00 p.m. (Eastern Time) to discuss the Company's financial results and current business outlook. A live webcast of the call will be available at the “Investors” page of the Company’s website, http://investor.brightcove.com. To access the call, dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of this conference call will be available for a limited time at 844-512-2921 (domestic) or 412-317-6671 (international). The replay conference ID is 13686457. A replay of the webcast will also be available for a limited time at http://investor.brightcove.com.

About Brightcove

Brightcove Inc. (BCOV) is the leading global provider of powerful cloud solutions for managing, delivering, and monetizing video experiences on every screen. A pioneering force in the world of online video since the company’s founding in 2004, Brightcove’s award-winning technology, unparalleled services, extensive partner ecosystem, and proven global scale have helped thousands of companies in over 70 countries achieve better business results with video. To learn more, visit www.brightcove.com.

Forward-Looking Statements

This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning our financial guidance for the first fiscal quarter of 2019 and full year 2019, our position to execute on our growth strategy, and our ability to expand our leadership position and market opportunity. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: our history of losses; the timing and successful integration of the Ooyala acquisition; expectations regarding the widespread adoption of customer demand for our products; the effects of increased competition and commoditization of services we offer, including data delivery and storage; our ability to expand the sales of our products to customers located outside the U.S.; keeping up with the rapid technological change required to remain competitive in our industry; our ability to retain existing customers; our ability to manage our growth effectively and successfully recruit additional highly-qualified personnel; the price volatility of our common stock; and other risks set forth under the caption "Risk Factors" in our most recently filed Annual Report on Form 10-K, as updated by our subsequently filed Quarterly Reports on Form 10-Q and our other SEC filings. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Brightcove has provided in this release the non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), adjusted EBITDA and non-GAAP diluted net income (loss) per share. Brightcove uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Brightcove's ongoing operational performance. Brightcove believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in Brightcove’s industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above of non-GAAP gross profit, non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share exclude stock-based compensation expense, the amortization of acquired intangible assets, executive severance and merger-related expenses. The non-GAAP financial results discussed above of adjusted EBITDA is defined as consolidated net income (loss), plus stock-based compensation expense, the amortization of acquired intangible assets, executive severance, merger-related expenses, depreciation expense, other income/expense, including interest expense and interest income, and the provision for income taxes. Executive severance represents severance paid to the former interim CEO of the company as well as former key executives. Merger-related expenses include fees incurred in connection with an acquisition. Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. As previously mentioned, a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. The Company’s earnings press releases containing such non-GAAP reconciliations can be found on the Investors section of the Company’s web site at http://www.brightcove.com.

       
Brightcove Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
 
December 31, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 29,306 $ 26,132
Accounts receivable, net of allowance 23,264 25,236
Prepaid expenses and other current assets   11,936     7,036  
Total current assets 64,506 58,404
Property and equipment, net 9,703 9,143
Intangible assets, net 5,919 8,236
Goodwill 50,776 50,776
Deferred tax asset - 87
Other assets   2,452     969  
Total assets $ 133,356   $ 127,615  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,712 $ 6,142
Accrued expenses 13,746 13,621
Capital lease liability 236 228
Equipment financing - 26
Deferred revenue   39,846     39,370  
Total current liabilities 61,540 59,387
Deferred revenue, net of current portion 146 244
Deferred tax liability 28 -
Other liabilities   1,028     1,228  
Total liabilities 62,742 60,859
 
Stockholders' equity:
Common stock 37 35
Additional paid-in capital 251,122 238,700
Treasury stock, at cost (871 ) (871 )
Accumulated other comprehensive loss (952 ) (809 )
Accumulated deficit   (178,722 )   (170,299 )
Total stockholders’ equity   70,614     66,756  
Total liabilities and stockholders' equity $ 133,356   $ 127,615  
 
           
Brightcove Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
2018 2017 2018 2017
Revenue:
Subscription and support revenue $ 37,765 $ 36,893 $ 150,941 $ 143,159
Professional services and other revenue   3,099     3,208     13,892     12,754  
Total revenue 40,864 40,101 164,833 155,913
Cost of revenue: (1) (2)
Cost of subscription and support revenue 13,588 12,484 53,311 50,664
Cost of professional services and other revenue   2,889     3,834     13,313     13,954  
Total cost of revenue   16,477     16,318     66,624     64,618  
Gross profit   24,387     23,783     98,209     91,295  
Operating expenses: (1) (2)
Research and development 7,884 7,557 31,716 31,850
Sales and marketing 13,267 12,938 55,775 57,294
General and administrative 5,047 4,619 23,103 21,847
Merger-related   716     -     716     -  
Total operating expenses   26,914     25,114     111,310     110,991  
Loss from operations (2,527 ) (1,331 ) (13,101 ) (19,696 )
Other income (expense), net   101     24     (326 )   547  
Net loss before income taxes (2,426 ) (1,307 ) (13,427 ) (19,149 )
Provision for income taxes   191     65     601     370  
Net loss $ (2,617 ) $ (1,372 ) $ (14,028 ) $ (19,519 )
 
Net (loss) income per share—basic and diluted
Basic $ (0.07 ) $ (0.04 ) $ (0.39 ) $ (0.57 )
Diluted   (0.07 )   (0.04 )   (0.39 )   (0.57 )
 
Weighted-average shares—basic and diluted
Basic 36,532 34,692 35,808 34,376
Diluted 36,532 34,692 35,808 34,376
 
(1) Stock-based compensation included in above line items:
Cost of subscription and support revenue $ 108 $ 131 $ 481 $ 439
Cost of professional services and other revenue 87 62 242 251
Research and development 349 431 1,281 1,563
Sales and marketing 492 797 2,377 2,750
General and administrative 591 528 2,268 2,240
 
 
(2) Amortization of acquired intangible assets included in the above line items:
Cost of subscription and support revenue $ 254 $ 508 $ 1,651 $ 2,031
Research and development - - - 11
Sales and marketing 167 167 666 692
 
       
Brightcove Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
 
Twelve Months Ended December 31,
Operating activities 2018 2017
Net loss $ (14,028 ) $ (19,519 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 6,796 7,257
Stock-based compensation 6,649 7,243
Deferred income taxes 118 38
Provision for reserves on accounts receivable 199 203
Changes in assets and liabilities:
Accounts receivable 2,791 (3,811 )
Prepaid expenses and other current assets 294 (1,484 )
Other assets (536 ) 56
Accounts payable 1,197 1,758
Accrued expenses 326 (2,930 )
Deferred revenue   (1,256 )   4,748  
Net cash provided by (used in) operating activities   2,550     (6,441 )
 
Investing activities
Purchases of property and equipment, net of returns (1,538 ) (1,102 )
Capitalization of internal-use software costs   (2,993 )   (3,010 )
Net cash used in investing activities   (4,531 )   (4,112 )
 
Financing activities
Proceeds from exercise of stock options 5,757 520
Payments of withholding tax on RSU vesting (170 ) (268 )
Payments on equipment financing (26 ) (307 )
Payments under capital lease obligation   (311 )   (489 )
Net cash provided by (used in) financing activities   5,250     (544 )
 
Effect of exchange rate changes on cash and cash equivalents   (95 )   416  
 
Net increase (decrease) in cash and cash equivalents 3,174 (10,681 )
Cash and cash equivalents at beginning of period   26,132     36,813  
Cash and cash equivalents at end of period $ 29,306   $ 26,132  
 
           
Brightcove Inc.
Reconciliation of GAAP Gross Profit, GAAP Loss From Operations, GAAP Net Loss and GAAP Net Loss Per Share to
Non-GAAP Gross Profit, Non-GAAP Income (Loss) From Operations, Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share
(in thousands, except per share amounts)
 
 
Three Months Ended December 31,

 

Twelve Months Ended December 31,
2018 2017 2018 2017
GROSS PROFIT:
GAAP gross profit $ 24,387 $ 23,783 $ 98,209 $ 91,295
Stock-based compensation expense 195 193 723 690
Amortization of acquired intangible assets   254     508     1,651     2,031  
Non-GAAP gross profit $ 24,836   $ 24,484   $ 100,583   $ 94,016  
LOSS FROM OPERATIONS:
GAAP loss from operations $ (2,527 ) $ (1,331 ) $ (13,101 ) $ (19,696 )
Stock-based compensation expense 1,627 1,949 6,649 7,243
Amortization of acquired intangible assets 421 675 2,317 2,734
Executive severance - - 1,199 700
Merger-related   716     -     716     -  
Non-GAAP income (loss) from operations $ 237   $ 1,293   $ (2,220 ) $ (9,019 )
NET LOSS:
GAAP net loss $ (2,617 ) $ (1,372 ) $ (14,028 ) $ (19,519 )
Stock-based compensation expense 1,627 1,949 6,649 7,243
Amortization of acquired intangible assets 421 675 2,317 2,734
Executive severance - - 1,199 700
Merger-related   716     -     716     -  
Non-GAAP net income (loss) $ 147   $ 1,252   $ (3,147 ) $ (8,842 )
GAAP diluted net loss per share $ (0.07 ) $ (0.04 ) $ (0.39 ) $ (0.57 )
Non-GAAP diluted net income (loss) per share $ 0.00   $ 0.04   $ (0.09 ) $ (0.26 )
 
Shares used in computing GAAP diluted net loss per share 36,532 34,692 35,808 34,376
Shares used in computing Non-GAAP diluted net income (loss) per share 37,421 35,525 35,808 34,376
 
           
Brightcove Inc.
Calculation of Adjusted EBITDA
(in thousands)
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
2018   2017 2018   2017
Net loss $ (2,617 ) $ (1,372 ) $ (14,028 ) $ (19,519 )
Other expense, net (101 ) (24 ) 326 (547 )
Provision for income taxes 191 65 601 370
Depreciation and amortization 1,632 1,650 6,796 7,257
Stock-based compensation expense 1,627 1,949 6,649 7,243
Executive severance - - 1,199 700
Merger-related   716     -     716     -  
Adjusted EBITDA $ 1,448   $ 2,268   $ 2,259   $ (4,496 )
 
 

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