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Edited Transcript of BCOV earnings conference call or presentation 1-Nov-18 9:00pm GMT

Q3 2018 Brightcove Inc Earnings Call

Cambridge Nov 2, 2018 (Thomson StreetEvents) -- Edited Transcript of Brightcove Inc earnings conference call or presentation Thursday, November 1, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hugh Jefferson Ray

Brightcove Inc. - CEO & Director

* Robert Noreck

Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer

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Conference Call Participants

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* Glenn George Mattson

Ladenburg Thalmann & Co. Inc., Research Division - VP of Equity Research

* Jeffrey Parker Lane

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Michael James Latimore

Northland Capital Markets, Research Division - MD & Senior Research Analyst

* Sameet Sinha

B. Riley FBR, Inc., Research Division - Senior Analyst of Internet and E-commerce

* Steven Bruce Frankel

Dougherty & Company LLC, Research Division - Senior VP & Director of Research

* Brian Denyeau

ICR, LLC - SVP

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Presentation

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Operator [1]

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Greetings, and welcome to Brightcove's Third Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brian Denyeau. Please go ahead.

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Brian Denyeau, ICR, LLC - SVP [2]

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Good afternoon, and welcome to Brightcove's Third Quarter 2018 Earnings Call. Today, we'll be discussing the results announced in our press release issued after market close today. With me on the call are Jeff Ray, Brightcove's Chief Executive Officer; and Rob Noreck, Brightcove's Chief Financial Officer.

During the call, we will make statements related to our business that may be considered forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning our financial guidance for the fourth fiscal quarter of 2018 and the full year of 2018, expected profitability and positive free cash flow, our position to execute our go-to-market and growth strategy, our ability to expand our leadership position, our ability to maintain and upsell existing customers and our ability to acquire new customers. Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recently filed annual report on Form 10-K and as updated by our other SEC filings.

Also during the course of today's call, we will refer to certain non-GAAP financial measures. There's a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after market close today, which can be found on our website at www.brightcove.com.

In terms of the agenda for today's call, Jeff will provide a summary review of our financial results, an update on our operations and a review of our strategy. Rob will then finish with additional details regarding our third quarter 2018 results as well as our outlook for the fourth quarter and full year 2018.

With that, let me turn the call over to Jeff.

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [3]

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Thank you, Brian, and thanks to all of you for joining us today. During the third quarter, we made significant progress on the strategic initiatives we believe will position the company to deliver faster, sustainable and profitable growth in the future. This is translating into positive trends, including improved renewal rates and a growing number of customers who are making long-term commitments to Brightcove by signing multiyear agreements, a key indicator that customers are realizing value from Brightcove's products. I'm encouraged by these trends, which indicate a healthier install base, upon which we can grow and expand. While we're pleased with the progress we have made executing on our long-term strategy, our financial performance in the third quarter was not as good as we had anticipated.

Looking at our financial results for the quarter. We delivered third quarter revenue of $41.1 million, which represented 4% year-over-year growth and was below our guidance. Adjusted EBITDA was positive $575,000, which well exceeded the favorable end of our guidance and reflects a strong commitment to cost discipline. And our recurring dollar retention rate was 94%. The slower growth in revenue was largely driven by lower-than-expected overages revenue and lower-than-expected bookings earlier in the quarter. We also fell short of our bookings target and now do not expect that we will achieve our double-digit bookings growth target for 2018.

2018 is a year of transition for Brightcove, and we are still early in the process of revamping our product and go-to-market efforts to align with our new strategy. Our goal is to build a higher velocity, predictable selling motion in multiple markets across multiple use cases that yield greater diversity in deal size. We're making good progress towards that goal. But in the third quarter, the changes to our go-to-market motion proved to be more disruptive than we had anticipated. It's important to note that our bookings performance does not reflect any change to the competitive environment or the opportunity for our products and services. We simply need to do a more effective job of executing during this transition period.

We believe making these fundamental changes across all aspects of the business are critical if we're going to achieve our long-term objectives. Simply put, the old way of doing business at Brightcove was not going to produce the results we believe this company can deliver and that our shareholders deserve. This near-term disruption is a cost we are willing to absorb to change our long-term growth and profitability trajectory, which is what we believe will generate the most value for our shareholders.

I think it is important to step back and look at the bigger picture so investors can understand what we are trying to accomplish. Over the past 6 months, we have a substantially new leadership team and have been instituting changes across every aspect of the organization. Through rigorous analysis of our end markets, product portfolio and go-to-market positioning, we have identified clear action plans to generate a faster, more effective and more predictable sales engine.

Our goal is to instill a deep commitment to operational excellence in all facets of our business: sales, marketing, product, customer success that enhances the value we deliver customers and results in predictable, incremental growth for Brightcove. We will help our customers be successful by increasing the return on investments our products deliver, which will drive increased customer loyalty and improved retention rates. I have been very encouraged by the team's embrace of these changes.

As part of these efforts, we are building up a strong legacy of customer success with customer satisfaction scores that are already higher than a typical enterprise software company. We know we can do even better if we are fully aligned to drive customer success. One of the things I have been most encouraged by since joining Brightcove are the conversations I have had with customers. I've spoken now to more than 100, and I have heard a consistent theme. First, our customers trust us to deliver their business and increase their customer satisfaction. Second, they view Brightcove as the experts in our field and look to us to push the boundaries of what's possible with video. And third, they very much want us to succeed and are embracing our strategy to drive growth in our business.

I'd like to spend a few moments discussing some of the things we're doing and why these changes give us the confidence that we will be able to achieve our objectives. The first thing we are doing is driving accountability across the company. I believe an engaged team that is empowered to make and own decisions drives the best results. To facilitate accountability, we have been on a path to reorganize the business to have one team responsible for product design, development and operations; one team focused on marketing, lead generation and branding; and one team focused on sales and customer engagement. Having clear lines of responsibility with a single executive in charge of each function will be a significant improvement in our organizational structure and ultimately our performance.

Our transformation is well underway. Under the leadership of our new Chief Product Officer, Charles Chu, we have undergone a thorough review of our end markets. We have approached this process from a market-driven perspective where our product investments will be determined by a rigorous ROI-based methodology that identifies products customers will find most valuable. Through this process, we have identified the following: we have clearly identified our total available market, which was $1.6 billion in 2016 and is growing to $4.2 billion by 2022, a 17% compounded annual growth rate. Within this market, there are 9 distinct submarkets across media, entertainment, digital marketing and enterprise, each of which is growing greater than 10% annually.

We are initially focusing our resources on 4 of these submarkets which are growing rapidly, where we believe customers have shown the strongest demand for our products and we are strongest from a competitive perspective. Let me share 2 examples of those segments. The first segment includes customers who have significant corporate IT and marketing budgets and want to grow video usage with a trusted cloud provider. There are thousands of potential customers around the world that fit this profile, and we think a set of purpose-built solutions that address specific use cases will be well received. This approach aligns nicely with our goal of building a higher-velocity selling model that will lessen our historical dependence on large deals each quarter. We have already demonstrated an ability to capture share. We intend to accelerate that growth.

Second, we are focusing on OTT experiences. Our early success with OTT Flow has demonstrated the significant opportunity for a variety of content providers to deliver compelling OTT experiences for consumers. We are enhancing and expanding the OTT features and functions available with our offering to provide customers with a more intuitive out-of-the-box OTT solution.

In the coming quarters, we will be introducing purpose-built solutions for each of these and other markets with a clear focus on making Brightcove's products easy to deploy, easy to use and quick to generate value for our customers. We know that by focusing our product development efforts in these exciting markets, we will be better positioned to drive significant growth and generate strong returns on our product investments. We will talk a lot more about our plans with key stakeholders in the coming months and intend to present the entire strategy at our PLAY user conference next spring. With the strongest engineering team in the market, we are uniquely qualified to take on these product challenges.

Our product and customer support leadership was most recently recognized in several exciting announcements. Frost & Sullivan recognized Brightcove with its 2018 Global Company of the Year Award. Our robust platform offering, brand reputation and expanding global footprint were noted as giving Brightcove a distinct edge in the highly fragmented OVP market. Our Context Aware Encoding Technology won a CSI Award at the recent International Broadcasters Conference for best digital processing technology. This patent-pending technology was recognized as the fastest, most innovative approach to solving the complex problem of video delivery and we beat out AWS' Elemental technology, among others. The Technology Services Industry Association recognized Brightcove as a Certified Staff Support Excellence Center for the fifth year in a row. This award recognizes our dedication to excellence and the unparalleled commitment we make to ensure a best-in-class experience for every customer on every inquiry. These awards are validation of our technology leadership, world-class engineering team and commitment to customer success. We are confident focusing that engineering talent on a targeted product road map will yield impressive results in the coming quarters.

Just as we have aligned our product, engineering and operations functions into one team, so have we done the same with our marketing functions. In the third quarter, we made significant changes to our go-to-market organization that will better align our marketing and sales efforts. We hired Sara Larsen as our new Chief Marketing Officer. In this role, she will be responsible for all lead and demand generation, product marketing, client marketing, branding, messaging and marketing communications and report directly to me. Sara has extensive marketing leadership experience with companies such as IBM and SAP and joins us from Dassault Systèmes, where she was most recently Vice President, Americas Marketing and Communications. She was responsible for go-to-market activities for the Americas, directing efforts for 3 sales channels and 12 industry verticals in a business that is one of the company's largest markets. We are thrilled to have a marketing leader of Sara's experience join Brightcove and believe her multichannel enterprise marketing expertise will be critical to our go-to-market efforts.

We also consolidated our demand-generation teams into a single group underneath Sara by collapsing our Media Business Unit and Digital Marketing Business Unit into a single, powerful marketing organization. This group will be solely focused on developing Brightcove's unified marketing and demand-generation strategies, and we think this structure will make it easier to align with our product and sales teams and provide a more effective lead-generation engine. Consolidating our marketing efforts will enhance our ability to speak with one voice on the value of Brightcove, which will raise our brand awareness and enhance our ability to generate actionable, high-quality sales leads. In short, we are turning global marketing into a machine for driving demand.

And finally, we are uniting the global sales organizations into one team under one sales leader. We are well into our search process for a Chief Revenue Officer who will be responsible for leading our global sales organization, including direct sales, channel sales and professional services organizations. This single sales leader, reporting directly to me, will be empowered to build and lead a world-class sales team. We have seen the positive impact on coordination and alignment from unified leadership under Charles and Sara, and we'll deliver the same impact with our new sales leader. I'm impressed with the quality of candidates we are meeting and their level of interest in joining Brightcove. They see the same opportunity we do and are excited at the opportunity to be part of something big here.

We feel very good about the changes we are instituting across the business. We're fortunate to be a leader in a trend-favored market. Video will continue to grow and transform every aspect of consumers' lives. Customers in every industry increasingly recognize they need to incorporate video into their businesses. The changes we are making are designed to increase market awareness of our product capabilities to provide a great customer experience and fast time to value. We have a long list of customers who look to Brightcove as a trusted adviser who can help them turn video into a competitive advantage for their business. It's our goal to achieve this same level of customer success across a much broader range of customers.

We've had several customer wins in the third quarter which demonstrate how customers are using Brightcove's market-leading technology to expand their video reach. H&M group selected Brightcove to deliver all video content globally, citing the features, stability and reliability of the Brightcove platform. Digital Trends, the largest independent tech media site in the world, expanded their relationship beyond video cloud to now include OTT Flow, enabling broad video reach to mobile and connected TV platforms. ODK Media, operator of social TV platform OnDemandKorea and OnDemandChina, selected Brightcove to expand their presence in key markets. And 3M expanded its relationship with Brightcove beyond digital marketing to now include all internal video streaming, ensuring a consistent video presence and broad audience reach globally.

To summarize, we accomplished a lot during the quarter. We're executing against our strategic priorities and taking the steps necessary to enable Brightcove to deliver significant and consistent growth and profitability. While we recognize the need to minimize the near-term impact to our financial results, we are resolved to making the fundamental changes to deliver profitable breakout growth. Based on what we have seen so far and the progress we have made, we believe the changes we are making to the business will deliver significant value for shareholders.

With that, let me turn the call over to Rob to discuss our results in more detail. Rob?

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [4]

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Thank you, Jeff, and good afternoon, everyone. I will begin with a detailed review of our third quarter results, and then I will finish with our outlook for the fourth quarter and the full year. Total revenue in the third quarter was $41.1 million, which is below our guidance range. As Jeff mentioned, the shortfall in revenue was largely driven by lower-than-expected overages revenue and lower-than-expected bookings early in the quarter. The shortfall in overages was driven, in part, by certain customers who are nearing or were just deciding to sign early multiyear renewals with us. This is a positive for our business overall as these customers are increasing their commitment to Brightcove. However, in the near term, revenue from these customers will return to ratable recognition versus their overages being recognized in the period incurred. Breaking revenue down further, subscription and support revenue was $37.4 million, and professional services revenue was $3.7 million.

On a geographic basis, we generated 53% of our revenue in North America during the quarter and 47% internationally. Breaking down international revenue a little more, Europe generated 18% of our revenue, and Japan and Asia-Pac generated 28% of our revenue during the quarter. We see continued momentum in Japan and Asia-Pac, both with new customer wins and expanded engagements with existing customers. From a vertical perspective, our media business represented 53% of our revenue in the quarter, and our enterprise business represented 44% of our revenue, while volume business represented the remaining 3%.

Let me now turn to the supplemental metrics we share on a quarterly basis. Our recurring dollar retention rate in the third quarter was 94%, which was in line with our target range of low to mid-90s. We are pleased with our retention performance in the quarter, which reflects the positive impact of the value we are delivering to customers. We are focused on maintaining and improving our retention rates over time. However, we currently continue to target our historical retention rate in the low to mid-90s.

Our customer count at the end of the third quarter was 3,867, of which 2,227 were classified as premium customers.

Looking at our ARPU. Within our premium customer base, our annualized revenue per premium customer was $74,000, which was up 3% year-over-year and excludes our entry-level pricing for starter customers, which averaged $4,600 in annualized revenue.

Looking at our results on a GAAP basis. Our gross profit was $24.8 million. Operating loss was $3.1 million, and loss per share was $0.10 for the quarter.

Turning to our non-GAAP results. Our non-GAAP gross profit in the third quarter was $25.4 million compared to $23.7 million in the year-ago period and represented a gross margin of 62%. The 180 basis point improvement in gross margin was largely driven by improvement in services margin, which was positive for the second quarter in a row. We believe services will remain profitable going forward.

Subscription and support revenue represented approximately 91% of our total revenue and generated a 66% gross margin in the quarter, consistent with the third quarter of 2017.

Non-GAAP loss from operations was $607,000 in the third quarter compared to a non-GAAP loss from operations of $2.2 million in the third quarter of 2017.

Adjusted EBITDA was $575,000 in the third quarter compared to a loss of $889,000 in the year-ago period and above the high end of our guidance range for the quarter. The adjusted EBITDA beat was driven, in part, by higher services gross margins as well as the timing of investments.

Non-GAAP loss per share was $0.03 based on 36.2 million weighted average shares outstanding. This compares to a loss per share of $0.06 on 34.5 million weighted average shares outstanding in the year-ago period.

Turning to the balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $26.9 million. During the third quarter, we used $488,000 in cash flow from operations, and free cash flow was negative $1.6 million after taking into account $1.1 million in capital expenditures and capitalized internal-use software.

I'd now like to finish by providing our guidance for the fourth quarter and full year 2018. For the fourth quarter, we are targeting revenue of $41 million to $41.5 million, including approximately $3.3 million of professional services revenue. From a profitability perspective, we expect a non-GAAP operating loss of $500,000 to $1 million and adjusted EBITDA of $200,000 to $700,000. Non-GAAP net loss per share is expected to be in the range of $0.03 to $0.04 based on 36.6 million weighted average shares outstanding.

Turning to our outlook for the full year 2018. We are revising our full-year revenue outlook to $165 million to $165.5 million. This includes approximately $14 million of professional services revenue. The reduction in our revenue outlook reflects the lower overages discussed earlier as well as the impact of lower-than-expected bookings. In terms of profitability, we are adjusting our outlook to a non-GAAP operating loss of $2.9 million to $3.4 million and adjusted EBITDA of $1 million to $1.5 million. In addition, we now expect non-GAAP net loss per share of $0.12 to $0.13 based on 35.8 million weighted average shares outstanding. For cash flow, we expect full year free cash outflow in the range of $2 million to breakeven.

To summarize, Brightcove's third quarter performance demonstrated significant progress against our strategic priorities. We are on track to achieve our full year profit and cash flow objectives despite the modest reduction in our revenue outlook. We are increasingly confident the changes we are implementing across the business will result in faster and more profitable growth going forward.

With that, we will now take your questions. Operator, we are ready to begin Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Tom Roderick with Stifel.

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Jeffrey Parker Lane, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [2]

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It's actually Parker Lane in for Tom. You referenced that you're going to be focusing on 4 new submarkets. I'm just curious how much of these new purpose-built solutions are about more aligning yourself with the market to capture new opportunities versus growing more inside of the existing customer base you have, considering that, that ARPU and the premium customers has held pretty steadily around $73,000, $75,000 for the last couple of quarters?

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [3]

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Yes. I think it's a combination of both, Parker. We're looking at the market, and we're doing the outside-in analysis in terms of what the market requires. So it's going to be a combination of both, the new business and expanding within our current customers.

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [4]

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Yes. This is Jeff. A good example of that is one of the markets that we see that were already getting decent traction in would really respond favorably to an easier-to-use product. They don't need the full sophistication of what our products and offerings can do, so it's a way to shorten the selling cycle. It's also a way to broaden the opportunity that we can play in.

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Jeffrey Parker Lane, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [5]

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Got it. And then as far as the disruption is concerned this quarter, it looks like your North American business might have been a little weaker than it has been in a couple of quarters. Is that the primary area that's being disrupted from a go-to-market strategy? Or is it really going to be throughout the entire business?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [6]

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Yes. The North America tended to get more disrupted than the other regions.

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Operator [7]

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Our next question comes from the line of Steven Frankel with Dougherty.

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [8]

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Let's start with this notion of disruption. How much of that is a tactical issue that with some new marching orders you can fix in a relatively short order versus, well, it really means getting these go-to-market solutions ready and that's going to take longer?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [9]

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Yes. The go-to-market solutions are not disrupting -- did not disrupt the third quarter. The go-to-market solution work was done by product management, engineering with a lot of attention from members of the leadership team and some outside validation, and then ultimately, the concurrence of the board. So that really was done exclusive of the sell and sales process. I think there's a couple of ways to answer it. Number one is just the fact that when you are driving this much change, you're going to introduce some amount of distraction. A lot of our go-to-market work did require a lot of help from people who also were involved in selling. It's just part of what you have to do to change as necessary. We know that to make great progress, we do have to drive that change. We accept that. The other element is behavioral. For example, there were deals that I think in the past might have been approved that we didn't approve. A good example is the fact that our professional services business is starting to trend towards profitability. Some of that is execution. Some of that is the nature of the kinds of engagements that we will take on from this day forward.

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [10]

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Okay. And then could you tell us exactly what overages were? And then a related question is typically if you have customers renewing early, that tends to drive that recurring revenue retention rate up above normal. So where is the leak in the bucket there? Did we lose a couple of customers as well?

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [11]

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Yes. This is Rob. Overages came in at $2 million, so it's a little bit lower than what we were anticipating, obviously. And in terms of the renewal rate, typically when it gets up over the 95% to 100% range, what we've seen is large upsells at the time of renewal. And in this case, we are adding term and not necessarily large upsells with those early renewals.

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [12]

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Okay. And you talk a lot about reacceleration, but it sounds like that's something that's still several quarters away. Is that the message here is be patient? We've got some things in the hopper. Once we deliver them, we can reaccelerate the business. But it's kind of mid-next year we should start to anticipate that?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [13]

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Yes. We're not being patient. So none of us are thrilled with the results, but we are definitely not being patient. There is a massive amount of change going on inside the business, and we've highlighted some of those things for you. And it is because we know that we need to demonstrate good profitable growth as quickly as we can, so we're moving quickly instead of going more slowly.

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Operator [14]

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Our next question comes from the line of Sameet Sinha with B. Riley FBR.

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Sameet Sinha, B. Riley FBR, Inc., Research Division - Senior Analyst of Internet and E-commerce [15]

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Yes. A couple of questions here. So, Jeff, you -- last quarter, you'd spoken about onetime incremental investments. But if I look at your numbers, third quarter and for your fourth quarter, basically flat. So where are those onetime investments? Are you finding cost-saving opportunities and that's why we just -- we're not seeing it in the numbers? Or are these investments delayed into next year? Can you talk about that? Secondly, talking about those customers who -- you are -- who's signing on longer deals but not upselling or cross-selling, that's -- I think that process has been going on for a couple of quarters now. Can you talk about how many such customers are left? Just wanted to kind of get a sense because it's better for the company but obviously caused some near-term disruption in the business. And then I have one follow-up.

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [16]

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Yes. Sameet, I'll take those. This is Rob. In terms of your first question, yes. The short answer is yes. We've been able to find cost savings across the business to fund those and those investments, and we continue to be responsible in terms of where we're spending our money. There has been some timing difference in terms of those investments pushing between Q3 to Q4, but we don't anticipate those falling into '19 at all. Those were definitely 2018 initiatives. And then your second question around how many customers left do we have -- how many customers are left to move into multiyear deals? And if you think our -- about our premium customer count of over 2,200 customers, we've got a long way to go before we run out of customers to put on multiyear deals.

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Sameet Sinha, B. Riley FBR, Inc., Research Division - Senior Analyst of Internet and E-commerce [17]

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Okay. Got it. Now let's talk about in terms of these near-term disruptions. I think you kind of -- could you say that there was -- your sales leadership and other leaderships were kind of distracted by these changes that you are pushing through? Or was there some realignment and restructuring that was needed to get the marketing and the sales organizations all headed in the same direction?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [18]

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Yes. Let me try to answer that with 2 pieces. Number one, we did a reorganization in the quarter. That reorganization impacted marketing, specifically product marketing, where we consolidated all marketing into one cohesive team underneath our new CMO, Sara Larsen. We just found that we had brilliant examples of marketing embedded in the BUs, but those great examples were not being shared and we did not have a high level of collaboration. And quite frankly, we were a mile wide and an inch deep. This is now one cohesive team that took a lot of time and attention, and so we're very, very excited about what that team can now do in driving better, higher-quality deals and demand and lead gen and doing a better job of positioning us. So that -- I don't think that necessarily impacted the selling, but it was an organizational change that we needed to make. And I'm very, very pleased with the outcome of that change. As I talk to our employees, they're very excited to be part of one very strong marketing team, and there's a high level of optimism as a result of that. The other component is the go-to-market work that we shared with you shortly after I joined the company that we were going to look at all aspects of how we engage with customers and look for ways to improve. Those initiatives were driven, in large part, by an outside consulting firm to help us, but it also required that we tap into a lot of experience of our best sales leaders. And that was slightly disruptive to the business. But again, we made those strategic decisions to address these things, confront them and put in place a better dynamic for growth.

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Sameet Sinha, B. Riley FBR, Inc., Research Division - Senior Analyst of Internet and E-commerce [19]

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Fair enough. One final question. Now in terms of the competitive environment, obviously things change, but your end markets are improving and you kind of highlighted what the end market or your potential TAM is. And these -- and you highlighted 2 of them. What has -- have things changed in the competitive environment, let's say, over the last couple of years? Or it's pretty much the same?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [20]

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I can't comment on the last couple of years. I'll defer to Rob who's got more history.

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [21]

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Yes. I think in terms of the competitive environment, you've got a lot -- in the pure OVP space, you've got a lot of the same companies in the marketplace. You've got the Kalturas and the Ooyalas of the world. But as we've kind of branched out and started servicing different segments and not just the media segment, we're certainly running across more competitors.

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Operator [22]

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(Operator Instructions) Our next question comes from the line of Glenn Mattson with Ladenburg Thalmann.

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Glenn George Mattson, Ladenburg Thalmann & Co. Inc., Research Division - VP of Equity Research [23]

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Yes. One comment, Jeff, that you made about some deals that would have gotten approved in the past were not approved under your leadership. That sounds like kind of a negative surprise that maybe wasn't anticipated before. Can you talk about the magnitude of like how many deals, how large? And then that's one thing you've uncovered after 5, 6 months on the job here. Could you talk about is there any other kind of deeply embedded structural issues at the company that you've come across now that you've had a little more time here?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [24]

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Yes. The deals were not large. But when you do something like this, it can be disruptive. You're changing a tone. You're raising a bar. You're setting a higher standard. And you can't -- when you do something like that, there are repercussions. We accept that, and we've spend a lot of time with the sales team helping them to understand why we want to book good, clean business. So I'm comfortable that we're in a better state now as we go forward. I think the teams understand that. I think they're actually encouraged by the fact that we will back them up and support the higher-quality portfolio. It also puts a lot of pressure on the business to do a better job of selling. There is room for improvement in the quality of the way we engage with customers and how we invest in our selling skills and our sales talent. That is -- that doesn't get fixed overnight. We will make those investments in time and money and help to make sure that we're putting our best foot forward.

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Glenn George Mattson, Ladenburg Thalmann & Co. Inc., Research Division - VP of Equity Research [25]

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Okay. And then I guess I'm curious about like what is the lever or the trigger that gets you back to better growth? Is it that these kind of new products that have the quick turn as far as purpose-built solutions, getting those products built and getting them to market and getting them -- and seeing conversion? Or is it just -- is it these go-to-market changes that you've made? It's like what's the trigger? And I mean, how long kind of -- what's the outlook for how long we can expect to have to wait before we see better bookings, and therefore, better growth?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [26]

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Yes. As I've -- since I walked in the door, we're looking at every part of this business. There are no sacred cows. There's nothing that's off limits and as we pursue opportunities for driving what I call breakout profitable growth I continue to be very, very encouraged by the feedback that we're getting, the signals that we're getting. The work and the segmentation has been very encouraging. We're very, very excited about the affirmation that the markets that we're targeting are higher-growth markets. They give us an opportunity for better profitability. They are sizable, and they are very close to what we already do. They don't require that we go in a profoundly different direction and take on significant risk and spend 2 years building new products, so I think all of those focus on long-term health. And the short-term, tactical real-time things that we're doing in leadership, in discipline, in structure are all going to position us for good, solid, predictable, profitable growth.

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Glenn George Mattson, Ladenburg Thalmann & Co. Inc., Research Division - VP of Equity Research [27]

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And lastly, I know there's a lot of wood to chop before we get there, but you're the market leader. Are you going to say that you've identified the market as growing at 17%. Would you expect that you would be growing at that rate or above when you've completed all these changes and finished with this plan?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [28]

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Yes. Anything less than that would not -- we would not be very proud of that, if we can't grow at and above organic market growth rates.

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Operator [29]

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Our next question comes from the line of Mike Latimore with Northland Capital Markets.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [30]

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Yes. In terms of the -- you said the bookings were a little light early in the quarter. And obviously, there were some strategic changes. Has there been much in the way of sales force turnover? Have you changed out some salespeople? Or what kind of change to sales headcount have you seen?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [31]

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There's been virtually none. The sales team that we entered the quarter with is the sales team that we exited the quarter with.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [32]

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Got it. Okay. And then the -- on the overage revenues, any general thought there? I mean, is $2 million sort of the new norm? Do you think it goes a little lower? Where might overages be?

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [33]

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Yes. It's tough to tell based on 1 quarter. It certainly doesn't make a trend, but we have hedged it back a little bit in our Q4 guidance.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [34]

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Okay. Got it. And then, Jeff, you said that -- I thought you said that the full strategic change would be done by PLAY. Is that what you said? Or what's supposed to be complete by the PLAY conference?

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [35]

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Our messaging on our strategy will be ready for full release -- a full reveal by PLAY. That doesn't mean that we aren't going to be sharing components, elements of it with key stakeholders, partners, others, key customers. And we will also take this opportunity to prove it out also. That gives us a chance to test some things between now and PLAY. By the time we stand up in front of the audience at PLAY, we need to stand up with 100% confidence that the strategy is sound, that the products are going to be delivered at very, very high quality on time. And we're just going to do that very, very carefully.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [36]

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Okay. Got it. And then these 4 other submarkets that you're focused on, the higher-growth ones, what percent of the business is in those markets today?

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Robert Noreck, Brightcove Inc. - Executive VP, CFO & Principal Accounting Officer [37]

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I don't think I know. We're going to have to take that as a to-do. We do know -- we do understand the contribution of those subsegments to the overall TAM for today, and we understand where they will be by 2022. And the good news is those represent a pretty significant portion -- there's the majority of the TAM. I know we did the work. I just don't have it in front of me right now. I apologize because we've certainly assessed the portfolio against what we're doing today. I just don't have it in front of me.

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Operator [38]

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Ladies and gentlemen, we have reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Jeff Ray for closing remarks.

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Hugh Jefferson Ray, Brightcove Inc. - CEO & Director [39]

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Thanks a lot, Devon, and thank you all for dialing in. While we could have done better, we're very, very excited about the progress that we're making on our strategic initiatives, on our organizational changes, on the addition of amazing leaders into the company and again the affirmation that I am hearing from our customers who believe in us, who are counting on us to be the leader and to help them grow and succeed. I feel good about the 3-year strategy work that we've done. It's been confirmed with enough customers, enough experts to know that we're working on the right things. And for us, we just can't move fast enough. So understand that the tone here is urgency and focus. Thank you all, and have a good afternoon. Goodbye.

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Operator [40]

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This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.