Brightcove(BCOV) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Brightcove Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended March 31, 2023 Item 1. Financial Statements (Unaudited) This section presents Brightcove Inc.'s unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets This subsection provides a snapshot of Brightcove Inc.'s financial position at March 31, 2023, compared to December 31, 2022 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $12,478 | $31,894 | | Accounts receivable, net | $40,623 | $26,004 | | Total assets | $225,450 | $227,813 | | Total liabilities | $131,160 | $125,466 | | Total stockholders' equity | $94,290 | $102,347 | - Total assets decreased by 1.04% from December 31, 2022, to March 31, 2023[12] - Total liabilities increased by 4.54% from December 31, 2022, to March 31, 2023[12] Condensed Consolidated Statements of Operations This subsection details Brightcove Inc.'s financial performance for the three months ended March 31, 2023, compared to the prior year Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Total revenue | $49,063 | $53,379 | -8.09% | | Gross profit | $28,796 | $34,399 | -16.30% | | Loss from operations | $(10,744) | $(1,958) | -448.72% | | Net loss | $(11,714) | $(1,637) | -615.52% | | Net loss per share—basic and diluted | $(0.28) | $(0.04) | -600.00% | - Total revenue decreased by 8.09% year-over-year, primarily due to a decline in subscription and support revenue[15] - Net loss significantly widened to $(11,714) thousand in Q1 2023 from $(1,637) thousand in Q1 2022[15] Condensed Consolidated Statements of Comprehensive Loss This subsection presents Brightcove Inc.'s comprehensive loss for the three months ended March 31, 2023, reflecting net loss and other comprehensive income items Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :----------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net loss | $(11,714) | $(1,637) | -615.52% | | Foreign currency translation adjustments | $188 | $(243) | N/A | | Comprehensive loss | $(11,526) | $(1,880) | -513.00% | - Comprehensive loss increased by 513.0% year-over-year, driven by the higher net loss[18] - Foreign currency translation adjustments turned positive in Q1 2023, contributing $188 thousand[18] Condensed Consolidated Statements of Stockholders' Equity This subsection outlines changes in Brightcove Inc.'s stockholders' equity for the three months ended March 31, 2023 Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | March 31, 2023 | December 31, 2022 | Change (QoQ) | | :----------------------------- | :------------- | :---------------- | :----------- | | Additional paid-in capital | $318,293 | $314,825 | +1.10% | | Accumulated deficit | $(221,770) | $(210,056) | -5.58% | | Total stockholders' equity | $94,290 | $102,347 | -7.87% | | Shares of common stock issued | 42,992,371 | 42,449,677 | +1.28% | - Total stockholders' equity decreased by 7.87% quarter-over-quarter, primarily due to the accumulated deficit[21] - Additional paid-in capital increased by $3,468 thousand, mainly from stock-based compensation expense[21] Condensed Consolidated Statements of Cash Flows This subsection details Brightcove Inc.'s cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(12,632) | $(690) | -1730.72% | | Net cash used in investing activities | $(4,882) | $(17,942) | +72.79% | | Net cash (used in) provided by financing activities | $(1,925) | $100 | N/A | | Net decrease in cash and cash equivalents | $(19,416) | $(19,034) | -2.01% | | Cash and cash equivalents at end of period | $12,478 | $26,705 | -53.28% | - Net cash used in operating activities increased significantly to $(12,632) thousand in Q1 2023, primarily due to an increase in accounts receivable[24][128] - Net cash used in investing activities decreased by 72.79% year-over-year, mainly due to no cash paid for acquisitions in Q1 2023[24][129] Notes to Condensed Consolidated Financial Statements This subsection provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Business Description and Basis of Presentation This note describes Brightcove Inc.'s business operations and the accounting principles used for its interim financial statements - Brightcove Inc. is a leading global provider of cloud services for video, incorporated in Delaware on August 24, 2004[27] - The interim condensed consolidated financial statements are unaudited and prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2022[28][29] 2. Quarterly Update to Significant Accounting Policies This note outlines updates and changes to Brightcove Inc.'s significant accounting policies during the quarter Allowance for Credit Losses (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2022 | $294 | | Current provision for credit losses | $67 | | Write-offs against allowance | $(18) | | Balance as of March 31, 2023 | $343 | - No 'Other expense' was incurred in Q1 2023, unlike Q1 2022 which included $1.1 million related to the former CEO's retirement[32] - The adoption of ASU 2023-01 on leases is not expected to have a material impact on the company's consolidated financial statements[33] 3. Revenue from Contracts with Customers This note details Brightcove Inc.'s revenue recognition policies and contract balances with customers - Revenue is primarily derived from subscription to its online video platform, hosting/bandwidth services, and professional services[34] Contract Balances (in thousands) | Metric | December 31, 2022 | March 31, 2023 | Change (QoQ) | | :-------------------------- | :---------------- | :------------- | :----------- | | Accounts Receivable, net | $26,004 | $40,623 | +56.22% | | Deferred Revenue (current) | $61,597 | $71,537 | +16.14% | | Total Deferred Revenue | $61,957 | $71,930 | +16.09% | - Total aggregate transaction price allocated to unsatisfied performance obligations for subscription and support contracts was approximately $181.3 million as of March 31, 2023, with $129.3 million expected to be recognized over the next 12 months[37] 4. Cash and Cash Equivalents This note provides information on Brightcove Inc.'s cash and cash equivalents balances and composition Cash and Cash Equivalents (in thousands) | Metric | March 31, 2023 | December 31, 2022 | Change (QoQ) | | :-------------------------- | :------------- | :---------------- | :----------- | | Total cash and cash equivalents | $12,478 | $31,894 | -60.90% | - Cash and cash equivalents decreased by 60.90% from December 31, 2022, to March 31, 2023[39][42] - Cash and cash equivalents consist primarily of cash and money market funds[39][42] 5. Net Loss per Share This note details the computation of Brightcove Inc.'s basic and diluted net loss per share Net Loss per Share and Potentially Dilutive Shares (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Basic net loss per share | $(0.28) | $(0.04) | -600.00% | | Diluted net loss per share | $(0.28) | $(0.04) | -600.00% | | Options outstanding | 2,979 | 1,607 | +85.37% | | Restricted stock units outstanding | 6,036 | 4,589 | +31.54% | - Potentially dilutive shares (options and unvested restricted stock units) were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive due to net losses[43] 6. Stock-based Compensation This note provides information on Brightcove Inc.'s stock-based compensation expense and related equity awards Stock-based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Cost of subscription and support revenue | $138 | $109 | +26.61% | | Cost of professional services and other revenue | $100 | $119 | -16.00% | | Research and development | $688 | $722 | -4.71% | | Sales and marketing | $1,169 | $943 | +23.97% | | General and administrative | $1,448 | $1,337 | +8.30% | | Other expense | $0 | $249 | N/A | | Total Stock-based compensation | $3,543 | $3,479 | +1.84% | - As of March 31, 2023, there was $39.8 million of unrecognized stock-based compensation expense, expected to be recognized over a weighted-average period of 2.77 years[48] - The company granted 1,563,688 premium-priced options with a strike price of $7.00 in March 2023[45] 7. Income Taxes This note details Brightcove Inc.'s income tax expense, deferred tax assets, and valuation allowances - Income tax expense primarily relates to the Company's foreign operations[53] - A valuation allowance has been provided against U.S. net deferred tax assets due to historical U.S. losses and future projections[54] - During Q1 2022, the Company recorded a $1.0 million benefit from the release of a valuation allowance related to the Wicket Labs acquisition[56] 8. Commitments and Contingencies This note describes Brightcove Inc.'s legal claims, indemnification agreements, and other contractual obligations - Management does not believe that the outcome of current legal claims will have a material adverse effect on the consolidated financial position, results of operations, or cash flows[57] - The Company typically enters into indemnification agreements for intellectual property infringement, with maximum potential payments often unlimited, though more recently limited by contract value[58] - No significant costs have been incurred for guarantees and indemnities to date[58][59] 9. Debt This note provides information on Brightcove Inc.'s debt arrangements, including its asset-based line of credit - The Company has a $30.0 million asset-based line of credit, secured by substantially all assets excluding intellectual property, which expires on December 28, 2023[60] - As of March 31, 2023, the Company was in compliance with all applicable covenants under the Line of Credit and had no outstanding borrowings[60] 10. Segment Information This note presents Brightcove Inc.'s revenue breakdown by geographic area Total Revenue by Geographic Area (in thousands) | Geographic Area | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------- | :-------------------------------- | :-------------------------------- | :----------- | | North America | $29,101 | $29,461 | -1.22% | | Europe | $8,187 | $9,105 | -10.08% | | Japan | $5,196 | $7,261 | -28.44% | | Asia Pacific | $6,494 | $7,436 | -12.67% | | Other | $85 | $116 | -26.72% | | Total revenue | $49,063 | $53,379 | -8.09% | - Total revenue decreased by 8.09% year-over-year, with international revenue decreasing by 16.54%[63][111] - Japan experienced the largest revenue decrease of 28.44%, primarily due to lower average revenue per premium customer and non-recurring customer events in the prior period[63][112] 11. Restructuring This note details Brightcove Inc.'s restructuring activities and associated charges - The Company incurred approximately $0.4 million in restructuring charges in Q1 2023 due to headcount reductions aimed at aligning skills and achieving cost efficiencies[65] - On April 28, 2023, the Company authorized a new restructuring plan to reduce its workforce by approximately 10%, expecting to incur $2.0 million to $2.2 million in charges in Q2 2023[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Brightcove's Q1 2023 financial condition, results of operations, key metrics, external impacts, and liquidity Company Overview This subsection provides a general overview of Brightcove Inc.'s business, strategy, and recent financial performance - Brightcove Inc. is a leading global provider of cloud-based streaming services, offering core video products (e.g., Video Cloud, Live, Beacon) and modular technologies (e.g., SSAI, Ad Monetization)[70][71][72] - The company's strategy focuses on investing in product strategy, development, sales, and go-to-market activities to support long-term revenue growth[74] - Total revenue decreased from $51.6 million in Q1 2022 to $47.1 million in Q1 2023, primarily due to a decrease in subscription and support revenue from premium offerings[75] Key Metrics This subsection presents key performance indicators used by management to evaluate Brightcove Inc.'s business Key Performance Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Premium Customers | 2,180 | 2,299 | -5.18% | | Volume Customers | 559 | 832 | -32.81% | | Total Customers | 2,739 | 3,131 | -12.52% | | Net Revenue Retention Rate | 93.7% | 97.8% | -4.19% | | Recurring Dollar Retention Rate | 88.4% | 91.0% | -2.86% | | Average Annual Subscription Revenue per Premium Customer (excl. Starter) | $89.4 | $96.5 | -7.36% | | Average Annual Subscription Revenue per Premium Customer (Starter only) | $3.9 | $4.6 | -15.22% | | Total Backlog (excl. professional services) | $181.3 million | $159.2 million | +13.88% | | Total Backlog to be recognized over next 12 months (excl. professional services) | $129.3 million | $128.7 million | +0.47% | - Premium customers decreased due to some customers switching to in-house or other third-party solutions[77] - Volume customers continued to decrease due to the discontinuation of the promotional Video Cloud Express offering and a focus on premium solutions[77] Silicon Valley Bank This subsection discusses the impact of the Silicon Valley Bank failure on Brightcove Inc.'s financial operations - The failure of Silicon Valley Bank (SVB) in March 2023 caused delays in customer invoice collections, leading to an increase in accounts receivable to $40.6 million as of March 31, 2023[81] - An estimated $8 million to $10 million of receivables were delayed, but the majority have been collected since March 31, 2023, with no losses incurred due to FDIC guarantees[81] - The company is assessing its overall banking structure and plans to establish a new line of credit before the current one matures in December 2023[81] COVID-19 and Geopolitical Events This subsection addresses the ongoing impact of the COVID-19 pandemic and geopolitical events on Brightcove Inc.'s business - Brightcove plans to continue investments in business growth, focusing on expanding its customer base, product offerings, and customer service, despite uncertainties from the COVID-19 pandemic[82] - The company has no operations or customers in Russia or Ukraine and none of its material vendors source services from these regions, while continuing to monitor the geopolitical situation[82] Components of Consolidated Statements of Operations This subsection analyzes the individual components contributing to Brightcove Inc.'s consolidated statements of operations Revenue This section details Brightcove Inc.'s revenue streams from subscription and professional services - Subscription and support revenue is generated from various online video platform products, while professional services and other revenue comes from implementation and customization[83][88] - Subscription and support revenue decreased in Q1 2023 due to lower average annual subscription revenue per premium customer and fewer premium customers, while professional services and other revenue increased by 10%[75][103][109] - The company is discontinuing lower-level pricing options for volume offerings and focusing on premium solutions[84][86] Cost of Revenue This section analyzes the costs directly associated with generating Brightcove Inc.'s revenue - Cost of subscription and support revenue increased by 8% in Q1 2023, primarily due to higher employee-related expenses, amortization of capitalized internal-use software, and network hosting services, partially offset by decreased content delivery network expenses[113] - Cost of professional services and other revenue remained materially unchanged year-over-year[114] - The company expects cost of revenue to increase in absolute dollars as revenue grows, with fluctuations depending on professional services engagements and delivery costs[90] Operating Expenses This section examines Brightcove Inc.'s operating expenses, including research and development, sales and marketing, and general and administrative costs - Research and development expenses increased by 20% in Q1 2023, mainly due to employee-related expenses and amortization[118] - Sales and marketing expenses increased by 6% in Q1 2023, primarily driven by employee-related expenses[119] - General and administrative expenses increased by 24% in Q1 2023, due to higher employee-related, stock-based compensation, recruiting, consultant, and computer maintenance expenses[120] - Merger-related expenses decreased by 76% in Q1 2023 due to lower costs associated with the Wicket Acquisition in the prior year[120] Other Expense, net This section discusses Brightcove Inc.'s other non-operating expenses and income - Other expense, net, primarily consists of interest income earned on cash and cash equivalents, and foreign exchange gains and losses[94] - Other expense, net, was $(543) thousand in Q1 2023, compared to $(387) thousand in Q1 2022[15] Income Taxes This section provides an overview of Brightcove Inc.'s income tax provisions and related considerations - Income tax expense is estimated based on current tax liability and deferred tax assets/liabilities in each jurisdiction, with a valuation allowance against U.S. net deferred tax assets due to historical U.S. losses[95] - A non-recurring benefit of $1.0 million was recorded in Q1 2022 from the release of a valuation allowance related to the Wicket Acquisition[96] Stock-Based Compensation Expense This section details Brightcove Inc.'s stock-based compensation expense recognized across various financial statement categories - Stock-based compensation expense was $3.5 million for both Q1 2023 and Q1 2022, recognized across cost of revenue and operating expense categories[97] - The company expects stock-based compensation expense to increase in absolute dollars in future periods[97] Foreign Currency Translation This section discusses the impact of foreign currency exchange rate fluctuations on Brightcove Inc.'s financial results - The company's revenue, expenses, and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly the euro, British pound, Australian dollar, and Japanese yen[98] - The strengthening U.S. dollar in Q1 2023 led to a decrease in foreign currency-based revenues when translated into U.S. dollars[98] - The percentage of total net revenue derived from outside North America is expected to remain relatively unchanged or decrease due to exchange rate fluctuations and a decrease in usage-based fees[76][98] Critical Accounting Policies and Estimates This subsection highlights Brightcove Inc.'s critical accounting policies and estimates that require significant management judgment - Critical accounting policies and estimates include revenue recognition, income taxes, business combinations, intangible assets, and goodwill[101] - These policies require management to make estimates and assumptions that affect reported amounts, and actual results may differ[99] Results of Operations This subsection provides a detailed analysis of Brightcove Inc.'s financial performance for the three months ended March 31, 2023, compared to the prior year Overview of Results of Operations for the Three Months Ended March 31, 2023 and 2022 This section summarizes Brightcove Inc.'s overall financial performance for the periods presented - Total revenue decreased by 8% ($4.3 million) in Q1 2023 compared to Q1 2022, primarily due to a 9% ($4.5 million) decrease in subscription and support revenue from premium offerings[103] - Gross profit decreased by 16% ($5.6 million), and loss from operations widened significantly to $10.7 million from $2.0 million in the prior year[107] - In constant currency, total revenue for Q1 2023 would have been approximately $50.3 million, indicating a negative impact from a strengthening U.S. dollar[106] Revenue by Product Line This section breaks down Brightcove Inc.'s revenue by its premium and volume product offerings Revenue by Product Line (in thousands, except percentages) | Product Line | Three Months Ended March 31, 2023 | Percentage of Revenue | Three Months Ended March 31, 2022 | Percentage of Revenue | Change (YoY) | | :----------- | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | :----------- | | Premium | $48,736 | 99% | $52,772 | 99% | -8% | | Volume | $327 | 1% | $607 | 1% | -46% | | Total | $49,063 | 100% | $53,379 | 100% | -8% | - Premium revenue decreased by 8% due to fewer customers and lower average revenue per premium customer, particularly from decreased usage-based fees outside North America[108] - Volume revenue decreased by 46% as the company continues to focus on its premium solutions market[108] Revenue by Type This section categorizes Brightcove Inc.'s revenue into subscription and support, and professional services Revenue by Type (in thousands, except percentages) | Revenue Type | Three Months Ended March 31, 2023 | Percentage of Revenue | Three Months Ended March 31, 2022 | Percentage of Revenue | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | :----------- | | Subscription and support | $47,102 | 96% | $51,601 | 97% | -9% | | Professional services and other | $1,961 | 4% | $1,778 | 3% | +10% | | Total | $49,063 | 100% | $53,379 | 100% | -8% | - Subscription and support revenue decreased by 9% year-over-year[109] - Professional services and other revenue increased by 10% year-over-year, with fluctuations expected based on project implementations[109] Revenue by Geography This section presents Brightcove Inc.'s revenue distribution across different geographic regions Revenue by Geography (in thousands, except percentages) | Geographic Area | Three Months Ended March 31, 2023 | Percentage of Revenue | Three Months Ended March 31, 2022 | Percentage of Revenue | Change (YoY) | | :-------------- | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | :----------- | | North America | $29,101 | 59% | $29,461 | 55% | -1% | | Europe | $8,187 | 17% | $9,105 | 17% | -10% | | Japan | $5,196 | 11% | $7,261 | 14% | -28% | | Asia Pacific | $6,494 | 13% | $7,436 | 14% | -13% | | Other | $85 | 0% | $116 | 0% | -27% | | International subtotal | $19,962 | 41% | $23,918 | 45% | -17% | | Total | $49,063 | 100% | $53,379 | 100% | -8% | - Total revenue outside North America decreased by 17% year-over-year[112] - Japan's revenue decreased by 28%, primarily due to lower average revenue per premium customer from usage-based fees and non-recurring events[112] Cost of Revenue This section analyzes the costs directly associated with Brightcove Inc.'s revenue generation, broken down by type Cost of Revenue (in thousands, except percentages) | Cost of Revenue | Three Months Ended March 31, 2023 | Percentage of Related Revenue | Three Months Ended March 31, 2022 | Percentage of Related Revenue | Change (YoY) | | :-------------------------- | :-------------------------------- | :---------------------------- | :-------------------------------- | :---------------------------- | :----------- | | Subscription and support | $18,265 | 39% | $16,982 | 33% | +8% | | Professional services and other | $2,002 | 102% | $1,998 | 112% | 0% | | Total | $20,267 | 41% | $18,980 | 36% | +7% | - Cost of subscription and support revenue increased by 8%, driven by higher employee-related expenses, amortization of capitalized internal-use software, and network hosting services, partially offset by decreased content delivery network expenses[113] - Cost of professional services and other revenue remained materially unchanged year-over-year[114] Gross Profit This section analyzes Brightcove Inc.'s gross profit and gross profit percentage by revenue type Gross Profit (in thousands, except percentages) | Gross Profit | Three Months Ended March 31, 2023 | Percentage of Related Revenue | Three Months Ended March 31, 2022 | Percentage of Related Revenue | Change (YoY) | | :-------------------------- | :-------------------------------- | :---------------------------- | :-------------------------------- | :---------------------------- | :----------- | | Subscription and support | $28,837 | 61% | $34,619 | 67% | -17% | | Professional services and other | $(41) | -2% | $(220) | -12% | +81% | | Total | $28,796 | 59% | $34,399 | 64% | -16% | - Overall gross profit percentage decreased to 59% in Q1 2023 from 64% in Q1 2022, primarily due to the decrease in subscription and support revenue[117] - Subscription and support gross profit decreased by 17% year-over-year[117] Operating Expenses This section provides a detailed breakdown and analysis of Brightcove Inc.'s operating expenses Operating Expenses (in thousands, except percentages) | Operating Expenses | Three Months Ended March 31, 2023 | Percentage of Revenue | Three Months Ended March 31, 2022 | Percentage of Revenue | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | :----------- | | Research and development | $9,866 | 20% | $8,237 | 15% | +20% | | Sales and marketing | $19,465 | 40% | $18,288 | 34% | +6% | | General and administrative | $10,064 | 21% | $8,089 | 15% | +24% | | Merger-related | $145 | 0% | $594 | 1% | -76% | | Other expense (benefit) | $0 | 0% | $1,149 | 2% | N/A | | Total | $39,540 | 81% | $36,357 | 68% | +9% | - Total operating expenses increased by 9% year-over-year[118] - Research and development, sales and marketing, and general and administrative expenses are expected to decrease in absolute dollars in the second half of 2023[118][119][120] Liquidity and Capital Resources This subsection discusses Brightcove Inc.'s ability to generate and manage cash, including its cash position, credit facilities, and future cash flow expectations Cash and cash equivalents This section provides details on Brightcove Inc.'s cash and cash equivalents, including amounts held by international subsidiaries - Cash and cash equivalents decreased to $12.5 million at March 31, 2023, from $31.9 million at December 31, 2022[122] - Approximately $9.2 million of cash and cash equivalents were held by international subsidiaries at March 31, 2023, which can be repatriated tax-free but may be subject to foreign withholding taxes[122] Accounts receivable, net This section discusses the factors influencing Brightcove Inc.'s accounts receivable balance - Accounts receivable balance fluctuates based on billing activity, cash collections, and changes to the allowance for doubtful accounts[127] - Deferred revenue positively affects accounts receivable balances by recording cash payments received prior to revenue recognition[127] Cash flows used in operating activities This section analyzes the cash generated or used by Brightcove Inc.'s primary business operations - Cash used in operating activities was $12.6 million in Q1 2023, primarily due to a net loss of $11.7 million and net changes in operating assets and liabilities of $8.5 million[128] - The primary reason for the decrease in cash flow from operations was the increase in accounts receivable, net, due to the Silicon Valley Bank transition[128] Cash flows used in investing activities This section details Brightcove Inc.'s cash flows related to the acquisition and disposal of long-term assets - Cash used in investing activities was $4.9 million in Q1 2023, primarily for capitalized internal-use software costs ($3.9 million) and capital expenditures ($1.0 million)[129] Cash flows used in financing activities This section outlines Brightcove Inc.'s cash flows from debt, equity, and other financing transactions - Cash used in financing activities was $1.9 million in Q1 2023, primarily from deferred acquisition payments and other financing activities[130] Credit facility This section describes Brightcove Inc.'s available credit facility and its compliance with covenants - The company has a $30.0 million asset-based line of credit, secured by most assets excluding intellectual property, and was in compliance with all covenants as of March 31, 2023, with no outstanding borrowings[131] Net operating loss carryforwards This section provides information on Brightcove Inc.'s net operating loss carryforwards and tax credits - As of December 31, 2022, the company had federal NOLs of approximately $164.0 million (expiring through 2037/2041) and $45.7 million (indefinite), and state NOLs of $82.8 million (expiring through 2037/2041) and $3.1 million (indefinite)[132] - Federal and state research and development tax credits were $9.8 million and $6.0 million, respectively, expiring through 2041[132] - A valuation allowance is maintained against U.S. deferred tax assets, as it is not considered more likely than not that the benefits will be realized due to historical U.S. losses[133] Contractual Obligations and Commitments This section outlines Brightcove Inc.'s significant contractual obligations and commitments - Principal commitments include office leases and agreements with primary providers for content delivery network services, hosting, and other support services, with minimum commitments of $90 million over three years and $4.8 million over two years[134] - The company has no commercial commitments under lines of credit, standby repurchase obligations, or other such debt arrangements, nor any off-balance sheet arrangements[134] Restructuring This section details Brightcove Inc.'s recent restructuring plan and its expected financial impact - On April 28, 2023, the company authorized a restructuring plan to reduce operating costs, improve operating margins, and focus on key growth and strategic priorities, including a reduction of approximately 10% of its workforce[135] - The company estimates it will incur between $2.0 million and $2.2 million in restructuring charges in Q2 2023, primarily for post-employment benefits[135] Recent Accounting Pronouncements This section refers to Note 2 for information on recently issued accounting pronouncements - For information on recent accounting pronouncements, refer to Note 2 to the condensed consolidated financial statements[136] Anticipated Cash Flows This section discusses Brightcove Inc.'s expectations for future cash flows and liquidity needs - The company expects significant operating costs and capital expenditures for the foreseeable future, with net cash flows dependent on future sales, changes in deferred revenue, and infrastructure cost management[137] - Existing cash and cash equivalents and the credit facility are believed to be sufficient for the next 12 months, but additional funds may be needed for future activities, acquisitions, or if interest rates continue to rise[138] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details Brightcove's exposure to market risks, including foreign currency exchange, interest rate, and inflation, and their potential financial impact Financial instruments This subsection discusses the fair value of Brightcove Inc.'s financial instruments - The fair value of financial instruments, including cash equivalents, accounts receivable, and accounts payable, approximates their carrying amount[141] Foreign currency exchange risk This subsection analyzes Brightcove Inc.'s exposure to fluctuations in foreign currency exchange rates - The company's results are subject to fluctuations due to changes in foreign currency exchange rates, particularly the euro, British pound, and Japanese yen[142][146] Foreign Currency Exposure | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenues generated in locations outside the United States | 45% | 48% | | Revenues in currencies other than the United States dollar | 27% | 29% | | Expenses in currencies other than the United States dollar | 17% | 16% | - A hypothetical 20% unfavorable movement in foreign currency exchange rates would have decreased revenues by $2.6 million, expenses by $2.0 million, and operating income by $0.5 million for Q1 2023[146] Interest rate risk This subsection discusses Brightcove Inc.'s exposure to changes in interest rates - Cash and cash equivalents totaling $12.5 million at March 31, 2023, are held for working capital purposes, and the company does not use derivative financial instruments[147] - Declines in interest rates would reduce future interest income, but a 10% unfavorable movement in the interest rate on the Line of Credit would not have a material effect on interest expense[147][149] Inflation Risk This subsection addresses the potential impact of inflation on Brightcove Inc.'s business - The company does not believe that inflation has had a material effect on its business[149] - However, significant inflationary pressures on costs (personnel, sales and marketing, hosting) could harm the business if not offset by price increases[149] Item 4. Controls and Procedures This section confirms the effectiveness of Brightcove's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the period Evaluation of Disclosure Controls and Procedures This subsection reports on the effectiveness of Brightcove Inc.'s disclosure controls and procedures - As of March 31, 2023, management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective[150] Changes in Internal Control over Financial Reporting This subsection reports on any material changes in Brightcove Inc.'s internal control over financial reporting - No change in internal control over financial reporting was identified during the period that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[151] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, trading plan disclosures, and a list of exhibits filed with the Form 10-Q Item 1. Legal Proceedings This section states that Brightcove is involved in ordinary course litigation, but management does not anticipate any material adverse effects on the company's financial position, results of operations, or cash flows - The company is, from time to time, party to litigation arising in the ordinary course of business[152] - Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial position, results of operations, or cash flows[152] Item 1A. Risk Factors This section outlines additional risks, including the impact of adverse developments in the financial services industry (e.g., SVB failure) and challenges associated with managing organizational changes and workforce reductions - Adverse developments affecting the financial services industry, such as the failures of Silicon Valley Bank and Signature Bank, could adversely affect the company's business and financial condition[154][155] - The company's ability to access existing cash, maintain credit arrangements, or adequately fund its business could be impacted if financial institutions with which it does business become insolvent[156] - The April 2023 restructuring plan, which includes a 10% workforce reduction, may not adequately reduce operating costs, could lead to additional workforce attrition, reduced morale, or operational disruptions[159][161][163] Item 5. Other Information This section discloses that Brightcove's policy permits officers, directors, and employees to enter into Rule 10b5-1 trading plans, with Kristin Frank having established such a plan for tax management related to RSU vesting - The company's policy allows officers, directors, and employees to enter into trading plans complying with Rule 10b5-1 under the Exchange Act[164] - Kristin Frank has entered into a trading plan to manage tax implications associated with the vesting of restricted stock units in 2023[164] - The company anticipates that other officers, directors, and employees may establish similar trading plans in the future and intends to disclose their names[165] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and Inline XBRL data files - Exhibits include the Eleventh Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws, and Form of Common Stock certificate[167][168] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[168] - Inline XBRL Instance Document and Taxonomy Extension Documents are also furnished[167][168] SIGNATURES This section contains the official signatures of Brightcove Inc.'s Chief Executive Officer and Chief Financial Officer, certifying the report's submission Signatures This section contains the official signatures of Brightcove Inc.'s Chief Executive Officer and Chief Financial Officer, certifying the report's submission - The report is duly signed on behalf of Brightcove Inc. by Marc DeBevoise, Chief Executive Officer, and Robert Noreck, Chief Financial Officer[171] - The signing date for the report is May 3, 2023[171]