Brightcove(BCOV) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Brightcove Inc.'s unaudited condensed consolidated financial statements for Q3 and YTD September 30, 2022, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $231.2 million as of September 30, 2022, while cash and equivalents significantly decreased to $31.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $31,348 | $45,739 | | Total current assets | $82,553 | $94,230 | | Goodwill | $74,859 | $60,902 | | Total assets | $231,238 | $216,468 | | Deferred revenue (current) | $65,067 | $62,057 | | Total liabilities | $127,921 | $120,208 | | Total stockholders' equity | $103,317 | $96,260 | Condensed Consolidated Statements of Operations Q3 2022 revenue increased to $53.9 million with a wider net loss, and YTD revenue grew to $161.8 million with a net loss Q3 2022 vs Q3 2021 Performance (Three Months Ended Sep 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $53,944 | $52,163 | | Gross Profit | $33,881 | $33,510 | | Loss from operations | ($821) | ($233) | | Net Loss | ($1,680) | ($1,020) | | Net Loss per share (diluted) | ($0.04) | ($0.02) | YTD 2022 vs YTD 2021 Performance (Nine Months Ended Sep 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $161,770 | $158,452 | | Gross Profit | $104,023 | $103,407 | | (Loss) income from operations | ($2,076) | $6,479 | | Net (Loss) income | ($3,618) | $4,980 | | Net (Loss) income per share (diluted) | ($0.09) | $0.12 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $19.7 million for YTD September 2022, but investing activities used $31.5 million, leading to a $14.4 million cash decrease Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,749 | $14,748 | | Net cash used in investing activities | ($31,510) | ($6,282) | | Net cash provided by financing activities | $92 | $350 | | Net (decrease) increase in cash | ($14,391) | $7,813 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition, the Wicket Labs acquisition, stock-based compensation, and geographic revenue, with a $144.1 million backlog - The company acquired Wicket Labs, Inc. on February 1, 2022, for approximately $2.0 million in stock and $13.2 million in cash. The acquisition contributed $14.0 million to goodwill[70][72][79] - As of September 30, 2022, the company had approximately $144.1 million in unsatisfied performance obligations (backlog) for subscription and support contracts, with $113.8 million expected to be recognized as revenue over the next 12 months[44] Revenue by Geography (Nine Months Ended Sep 30, in thousands) | Region | 2022 | 2021 | | :--- | :--- | :--- | | North America | $89,344 | $89,204 | | Europe | $28,080 | $28,159 | | Japan | $17,180 | $19,263 | | Asia Pacific | $26,808 | $21,421 | | Total Revenue | $161,770 | $158,452 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 2% YTD revenue increase, a swing to a $2.1 million operating loss due to higher expenses and one-time costs, and plans for continued investment despite currency headwinds - The company's strategy is to invest in its product strategy, sales, and go-to-market activities to support long-term revenue growth, address competition, and increase average revenue per premium customer[86] Key Metrics (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total customers (at period end) | 2,900 | 3,205 | | Premium customers (at period end) | 2,271 | 2,265 | | Net revenue retention rate | 93.4% | 97.1% | | Avg. annual subscription revenue per premium customer (ex-Starter) | $96.3k | $93.9k | | Total backlog (in millions) | $144.1 | $148.6 | - The strengthening U.S. dollar had a negative impact on revenue. In constant currency, total revenue for the nine months ended Sep 30, 2022, would have been approximately $167.2 million, which is $5.4 million higher than the reported figure[134] Results of Operations Q3 2022 revenue increased to $53.9 million with a wider operating loss, and YTD revenue swung to a $2.1 million operating loss from a prior-year profit due to higher expenses Q3 2022 vs Q3 2021 Revenue by Type (in thousands) | Revenue Type | Q3 2022 | Q3 2021 | Change % | | :--- | :--- | :--- | :--- | | Subscription and support | $51,814 | $49,226 | +5% | | Professional services and other | $2,130 | $2,937 | -27% | | Total | $53,944 | $52,163 | +3% | YTD 2022 vs YTD 2021 Operating Expenses (in thousands) | Expense Category | YTD 2022 | YTD 2021 | Change % | | :--- | :--- | :--- | :--- | | Research and development | $24,540 | $24,041 | +2% | | Sales and marketing | $55,272 | $52,730 | +5% | | General and administrative | $24,391 | $21,822 | +12% | | Other expense (benefit) | $1,149 | ($1,965) | -158% | | Total Operating Expenses | $106,099 | $96,928 | +9% | - The significant swing in "Other expense (benefit)" was due to a $1.1 million expense for the former CEO's retirement in 2022, compared to a $2.0 million benefit from the CARES Act in 2021[150][151] Liquidity and Capital Resources Cash and equivalents decreased to $31.3 million as of September 30, 2022, with $19.7 million from operations offset by $31.5 million used in investing Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Provided by Operating Activities | $19,749 | $14,748 | | Used in Investing Activities | ($31,510) | ($6,282) | | Provided by Financing Activities | $92 | $350 | - The significant increase in cash used for investing activities was driven by $13.2 million paid for the Wicket Labs acquisition and $8.6 million in capital expenditures, mainly for the new headquarters[157] - The company has a $30.0 million asset-based line of credit which remained undrawn as of September 30, 2022[159] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency, interest rates, and inflation, with a 20% unfavorable currency movement potentially decreasing operating income by $3.1 million - The company's primary market risks are foreign currency exchange, interest rates, and inflation[168] - For the nine months ended Sep 30, 2022, 28% of revenues and 16% of expenses were denominated in foreign currencies. The largest exposures are to the Euro, British pound, and Japanese Yen[173][174][176] - A sensitivity analysis indicates that a 20% unfavorable movement in foreign exchange rates would have decreased revenues by $8.5 million and operating income by $3.1 million for the nine months ended Sep 30, 2022[176] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - Based on an evaluation by management, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[179] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[180] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course litigation, but management does not expect a material adverse effect on its financial position or operations - The company is party to litigation arising in the ordinary course of business but does not expect these proceedings to have a material adverse effect on its financial results[181] Risk Factors This section highlights risks from weakened global economic conditions, including inflation, rising interest rates, and geopolitical instability, which could adversely affect customer spending and renewal rates - The company highlights risks from weakened global economic conditions, including inflation, rising interest rates, and geopolitical instability such as the conflict in Ukraine[183] - Economic weakness in Europe, a key market, could harm operating results by affecting customers' ability or willingness to subscribe, delaying purchasing decisions, or impacting renewal rates[184] - Rising inflation and interest rates, particularly in the U.S., may decrease demand for products, increase operating costs (including labor), and create financial market volatility[185] Other Information The company's policy permits directors, officers, and certain employees to establish Rule 10b5-1 trading plans for pre-scheduled securities transactions - The company's policy permits its officers, directors, and certain other persons to enter into trading plans complying with Rule 10b5-1[186] Exhibits This section lists exhibits filed with the 10-Q report, including CEO and CFO certifications and XBRL data files for interactive reporting - Key exhibits filed with the report include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906[190][193] - The filing includes XBRL instance and taxonomy documents to provide interactive data[191][192] Signatures The report was signed on November 2, 2022, by the Chief Executive Officer and Chief Financial Officer - The report was signed on November 2, 2022, by Marc DeBevoise, Chief Executive Officer, and Robert Noreck, Chief Financial Officer[196]