Brightcove(BCOV) - 2022 Q4 - Annual Report

PART I Business Overview Brightcove Inc. provides cloud-based streaming services globally, primarily through a subscription-based SaaS model, serving 2,845 customers as of December 31, 2022 - Brightcove is a leading global provider of cloud-based streaming services, helping customers manage and monetize video content across various devices[13] - As of December 31, 2022, the company had 2,845 customers in over 60 countries, including 2,235 premium and 610 volume customers[14][18] - The primary revenue model is subscription-based Software as a Service (SaaS) Total revenue remained steady at $211.0 million in 2022 compared to $211.1 million in 2021[18] - The company's core products include Video Cloud, Brightcove Live, Brightcove Beacon, Brightcove Player, Zencoder, and Brightcove Audience Insights[14] - As of December 31, 2022, the company had 725 employees, with 332 located in the United States and 393 located internationally[66] Risk Factors The company faces risks including historical net losses, high dependence on Video Cloud, customer retention challenges, market competition, technological changes, global economic impacts, cybersecurity, and evolving data privacy regulations - The company has a history of significant losses, including a consolidated net loss of $9.0 million for the year ended December 31, 2022, and may not sustain profitability in the future[75] - A substantial portion of historical revenue comes from a single product, Video Cloud, making the business vulnerable to market shifts or competition affecting this product[76] - Failure to retain existing customers could adversely affect revenue, as customers have no obligation to renew their annual subscriptions[77] - The business is susceptible to risks from international operations, including regulatory compliance, currency fluctuations, and political or economic instability[85] - The company relies on third-party cloud computing services (like AWS) and Content Delivery Networks (CDNs) to deliver its services; any disruption at these facilities could harm the business[138][126] - Evolving government regulations, particularly concerning data privacy in the U.S. (CCPA) and Europe (GDPR), could restrict business operations or increase compliance costs[147][151][152] Properties Brightcove's corporate headquarters are in Boston, Massachusetts, with additional sales, marketing, and R&D offices globally - Corporate headquarters are located at 281 Summer Street, Boston, MA, under a ten-year lease for approximately 40,000 square feet, which commenced in June 2022[180] - The company has additional sales, marketing, and R&D offices in various international locations including London, Tokyo, Sydney, Seoul, Singapore, Chennai, Guadalajara, and Portugal[181] Legal Proceedings The company is involved in ordinary course litigation, with management not expecting material adverse effects on financial position or results - The company is party to litigation from time to time in the ordinary course of business, but management does not believe the outcomes will have a material adverse effect on its financial condition[182] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Brightcove's common stock trades on NASDAQ under 'BCOV', with no history or current intent to pay cash dividends, and no share repurchases in 2022 - The company's common stock trades on the NASDAQ Global Market under the symbol "BCOV"[184] - Brightcove has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain cash flow for business growth[185] - There were no repurchases of common stock during the year ended December 31, 2022[189] Management's Discussion and Analysis of Financial Condition and Results of Operations Brightcove's 2022 revenue remained stable at $211.0 million, with a net loss of $9.0 million due to increased operating expenses, and a net revenue retention rate of 95% Key Operating Metrics | Key Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Customers (at period end) | 2,845 | 3,135 | | Premium Customers | 2,235 | 2,227 | | Volume Customers | 610 | 908 | | Net Revenue Retention Rate | 95% | 97% | | Recurring Dollar Retention Rate | 89% | 90% | | Avg. Annual Subscription Revenue per Premium Customer (ex-Starter, in thousands) | $95.2 | $94.1 | | Total Backlog (ex-prof. services, in millions) | $153.3 | $156.2 | - Total revenue was flat year-over-year, with a 3% ($5.2 million) increase in subscription and support revenue offset by a 43% ($5.2 million) decrease in professional services revenue[232][235] - The company reported a loss from operations of $8.0 million in 2022, compared to income from operations of $7.6 million in 2021, driven by a 9% increase in operating expenses[233] - Cash provided by operating activities was $25.4 million in 2022, an increase from $19.6 million in 2021[249][252] - Cash used in investing activities increased to $37.8 million in 2022 from $10.8 million in 2021, primarily due to the $13.2 million cash payment for the Wicket Labs acquisition and increased capital expenditures[253] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from foreign currency fluctuations and interest rate changes, with 27% of 2022 revenues and 16% of expenses denominated in foreign currencies - The company's primary market risks are foreign currency exchange fluctuations, interest rate changes, and inflation[263] Currency Exposure (2022) | Currency Exposure (2022) | % of Revenues | % of Expenses | | :--- | :--- | :--- | | Euro | 8% | 1% | | British Pound | 6% | 5% | | Japanese Yen | 10% | 2% | | Other | 3% | 8% | | Total Foreign Currency | 27% | 16% | - A hypothetical 20% unfavorable movement in foreign currency exchange rates would have decreased 2022 revenues by an estimated $11.0 million and increased operating losses by $3.8 million[269] - Interest rate risk is present due to cash and cash equivalents of $31.9 million at year-end 2022, which are primarily invested in money market funds Declines in interest rates would reduce future interest income[270] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2020-2022, including balance sheets and income statements, with an unqualified opinion from Ernst & Young LLP Selected Balance Sheet Data (in thousands) | Selected Balance Sheet Data (in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $31,894 | $45,739 | | Total current assets | $77,320 | $94,230 | | Total assets | $227,813 | $216,468 | | Deferred revenue (current) | $61,597 | $62,057 | | Total current liabilities | $103,957 | $96,621 | | Total liabilities | $125,466 | $120,208 | | Total stockholders' equity | $102,347 | $96,260 | Selected Statement of Operations Data (in thousands) | Selected Statement of Operations Data (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total revenue | $211,008 | $211,093 | $197,353 | | Gross profit | $133,935 | $138,065 | $121,256 | | Total operating expenses | $141,967 | $130,491 | $126,579 | | (Loss) income from operations | $(8,032) | $7,574 | $(5,323) | | Net (loss) income | $(9,015) | $5,397 | $(5,813) | | Diluted (loss) income per share | $(0.22) | $0.13 | $(0.15) | - On February 1, 2022, the company acquired 100% of Wicket Labs, Inc. for approximately $2.0 million in stock and $15.0 million in cash The acquisition added $14.0 million in goodwill and $4.4 million in identifiable intangible assets[359][360][361] - As of December 31, 2022, the company had approximately $153.3 million in transaction price allocated to unsatisfied performance obligations (backlog), with $120.1 million expected to be recognized as revenue over the next 12 months[372] Controls and Procedures Management and independent auditors concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[428] - Management assessed internal control over financial reporting using the COSO 2013 framework and concluded it was effective as of December 31, 2022[430] - The independent registered public accounting firm, Ernst & Young LLP, audited and issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[431][435] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information regarding directors, executive officers, corporate governance, compensation, and principal accountant fees is incorporated by reference from the 2023 Proxy Statement - Information for Item 10 (Directors, Executive Officers, and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership), Item 13 (Certain Relationships and Related Transactions), and Item 14 (Principal Accountant Fees and Services) is incorporated by reference from the company's 2023 Proxy Statement[442][443][444] PART IV Exhibits, Financial Statements and Schedules This section lists all exhibits filed with the Form 10-K, including financial statements referenced under Item 8, and various corporate and contractual documents - This section provides a list of all exhibits filed with the Form 10-K, including material contracts, incentive plans, and certifications by the CEO and CFO[447][448] - The financial statements are referenced under Item 8, and all financial statement schedules have been omitted because they are not applicable or the information is provided elsewhere[447]