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Brightcove (BCOV) Breaks Even in Q4 Earnings, Revenues Up Y/Y

Zacks Equity Research

Brightcove BCOV reported breakeven adjusted earnings in fourth-quarter 2018 in contrast to the Zacks Consensus Estimate of loss per share of 3 cents. The figure came below the year-ago quarter’s adjusted earnings of 4 cents.

Revenues of $40.9 million increased 2% from the year-ago quarter and came in line with the Consensus Estimate. However, the figure came slightly below the guidance due to lower- than-expected services revenue.

Brightcove Inc. Price, Consensus and EPS Surprise

Brightcove Inc. Price, Consensus and EPS Surprise | Brightcove Inc. Quote

Quarter Details

Subscription and support revenues (92.4% of total revenues) increased 2.4% year over year to $37.8 million. However, Professional services and other revenues (7.6%) decreased 3.4% year over year to about $3.1 million.

On the basis of geography, North America contributed 54% of total revenues, while the rest came from the international front. Europe accounted for 17% of total revenues and Japan and Asia Pacific accounted for 29%. Brightcove stated that it continues to see new customer wins and increase in existing customer engagement in Japan and Asia Pacific.

Media business represented 54% of total revenues and enterprise business accounted for 45%.

Per premium customer average annual subscription revenues were $75,000 compared with $73,000 in the year-ago quarter. This excludes per starter customers average annualized revenues of $4,500 in the reported quarter.

In the reported quarter, recurring dollar retention rate was 104%, above the guidance of low to mid-90% range due to growth in renewals and higher up-sell renewal value. Brightcove exited the quarter with 3,783 customers, of which 2,226 were premium.

Customer Wins, Acquisition & Growth Factors

Brightcove won new customers and customer renewal agreements. Its customers include Adobe ADBE, Ascension Health, Rajasthan Patrika Private Limited, McCormick & Company MKC, Forbes Media, AMC Entertainment AMCX and HOOQ among others. Notably, HOOQ is a joint venture of Sony Pictures, Warner Bros. and Singtel to provide on-demand video service across Southeast Asia and India.

Bookings in 2018 remained flat as solid performance in the first half of the year was offset by sluggishness in the second half.

Brightcove stated that it will come up with new solutions in 2019, particularly products that generate higher ROI for the company. The move is in line with the company’s strategy to take advantage of the total addressable market (TAM), which is expected to record CAGR of 17% to 4.2 billion by 2022 from 1.6 billion in 2016, per management.

Additionally, Brightcove is focusing on media, marketing, entertainment and enterprise spaces, which are growing quickly and represent about 60% of the company’s TAM. Specifically, the company is looking to cater to demand from digital marketers and over-the-top (OTT) providers. Increased content consumption along with companies looking to provide compelling OTT content is likely to drive demand for OTT services.

Moreover, Brightcove’s decision to acquire Ooyala (for $15 million), a provider of cloud video technology, may boost the company’s competitive position. Additionally, Ooyala’s innovative video service offerings along with its global presence may help Brightcove expand its market offerings and services.

Operating Details

Non-GAAP gross profit increased 1.4% year over year to $24.8 million. However, gross margin contracted 30 basis points (bps) year over year to 60.8%.

Adjusted EBITDA declined 36.2% year over year to $1.4 million due to unfavorable timing of investments. Adjusted EBITDA margin contracted 210 bps year over year to 3.5%.

Research and development expense increased 4.3% year over year to $7.9 million. Sales and marketing expense increased 2.5% year over year to $13.3 million as Brightcove increased marketing spend to drive sales. General and administration expense increased 9.3% year over year to about $5.1 million.

Brightcove generated non-GAAP operating income of $237,000 compared with $1.3 million in the year-ago quarter.

Balance Sheet and Cash Flow

As of Dec 31, 2018, cash & cash equivalents were $29.3 million compared with $26.9 million as of Sep 30, 2018.

Cash flow from operations in the quarter was about $2.8 million compared with $5.2 million in the year-ago quarter. Free cash flow in the quarter was $2.1 million compared with $4.2 million in the year-ago quarter.

Guidance

First-Quarter 2019

Revenues are anticipated to be in the range of $40-40.5 million, of which about $2.7 million will come from professional services.

Non-GAAP operating loss is expected to be in the range of $900,000 - $1.4 million. Adjusted EBITDA is anticipated in the range of negative $ 200,000 - $300,000. Non-GAAP net loss per share is expected to be 3-5 cents.

2019

Revenues are anticipated to be in the range of $168-172 million, of which about $11.1 million will come from professional services.

Non-GAAP operating income is expected to be in the range of breakeven - $3 million. Adjusted EBITDA is anticipated in the range of $5.2- $8.2 million. Non-GAAP net loss/income per share is expected to be in the range of loss of 3 cents to income of 5 cents.

Brightcove expects marketing and sales segment to reach $900 million by 2022, growing more than 20% annually.

Brightcove currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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