Q3 2020 Brightcove Inc Earnings Call
Greetings and welcome to <unk> third quarter to 2020 guidance call.
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Turn the conference over to your host Brian you may begin.
Good afternoon, and welcome to Brightcove third.
A quarter 2020 earnings call.
They will discuss the results announced in our press release issued after market closed with me on the call are Jeff Wright breakup, Chief Executive Officer, and Rob Nork, Brightcove Chief Financial Officer.
During the call we will make statements related to our business to maybe considered forward looking and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements concerning our financial guidance for the fourth quarter of 2020, and the full year <unk> expense.
Expected profitability and positive free cash flow our position to execute our go to market and restaurants, you are going to expand our leadership position our ability to maintain the upsell existing customers as well as 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.
Subsequent day.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
Really if not for the covered my teams have done like our business operations as well.
General economic and financial market conditions.
Our discussion immature rest and other important factors that could affect our actual results.
Refer to those contained in our most recently filed annual report on form 10-K.
Updated by our other Asixty filings.
Also during the course of today's call, we will refer to certain non-GAAP financial measures.
There is 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 Dot Franco Dot com.
In terms of the agenda for todays call, Jeff will provide a summary view of our financial results not done our operations and a review of our strategy Rob will finish with additional details regarding our third quarter 2020 results.
Our outlook for the fourth quarter and full year 2021.
With that let me turn the call over to Josh.
Thanks, Brian and thanks to all of you for joining today.
I hope all of you and your families remain healthy and safe right.
Right Coke had an exceptional third quarter, which built upon and exceeded our record sales results in the second quarter the strip.
The strategic dirt decisions and investments made across every aspect of the business over the past two and a half years are all coming together and delivering the performance Weve long known this business is capable of achieving.
Incredible customer wins, we achieved this quarter demonstrate that video is becoming a central tool for organizations, who need to connect and communicate with their customers employees and partners are best in class platform and product portfolio combined with our deep video technology expertise is.
Bring the promise of video to enterprises, and media companies alike, which is driving faster more profitable growth in our business.
Rob will provide the details later, but based on our third quarter performance and outlook for the fourth quarter, we are raising our guidance for the full year.
In fact, our updated guidance is within the original range. We provided at the beginning of the year, which is a remarkable achievement given the retention rate issues earlier this year and the overall economic uncertainty related to the cobot pandemic.
Turning to our financial results briefly for the person for the third quarter, we delivered revenue of $49.1 million up 3% year over year and well ahead of our guidance.
Adjusted EBITDA was $5.9 million, which was also well ahead of our guidance already.
I would like to spend some time, highlighting what's driving our success in the market why we're confident it is sustainable and what we are doing to drive top line performance.
Brightcove at its core is a product driven company over the past 15 years, we have developed the most scalable high performing video platform on the market the reef.
The recent introduction of solutions like bright Coke Beacon Bright Coke campaign, right Kobin gauge and Brightcove virtual a bad experiences leverage the sophistication of our video platform with elegant purpose built apps that drive critical business value for our customers.
With customers using video in new and exciting ways across their operations. They are looking for a partner they can trust with proven experience and easy to use products that can scale to meet all their needs.
Coax mission is to simplify the complexity of video so that any enterprise or media company can deliver exceptional video experiences to its audience. We believe our market momentum over the past six months demonstrates that brightcove as the video partner of choice for enterprises and media company.
Thanks.
From a sales perspective, the changes we have discussed on prior earnings calls are paying off this big.
This began with a more targeted and bold demand generation strategy with the.
With a focus on global field marketing and custom virtual events like our recent Brightcove three day virtual summit, we have enjoyed a robust pipeline to fuel growth in every region.
Within our sales team the significant number of new reps, we brought into the company. This past year are quickly becoming productive thanks to our comprehensive onboarding and sales engagement processes, where.
We're seeing great success with our strategy of having dedicated reps focused on acquiring new logos, while others are responsible for selling back into our installed base we've.
We've developed a proactive and skilled sales organization that strategically engages customers to identify help reichow can solve specific business problems.
The changes to our product portfolio and go to market efforts are generating great improvement in sales activity.
Our third quarter results were notable for the strong performance among new customers existing customers and by geography with each region well ahead of plan.
We'd like to spend some time highlighting a few of the key drivers of our performance in the quarter.
The first is the tremendous success, we continue to have with Brightcove beacon.
Our deal volume and average deal size for Brightcove Beacon are exceeding our expectations. We are transforming the delivery of an old T. service from a bespoke development project into a technology rich platform deployment with leading capabilities in shorter time frames right.
Right Coke Beacon has opened up several exciting opportunities due to its ease of use and flexibility to enable any organization to maintain an old PT offer this.
This gives customers greater freedom to use video in new ways that truly drive value.
Second is our ability to deliver exciting live events with the best friends and partners in the World. We're seeing continued strength with our live events offerings.
The growing number of successful live virtual event is reinforcing the belief that hybrid bottle of that increase ROI.
Expand the audience reach and open up new opportunities to engage with customers and prospects.
We're signing key wins in several different industries, including technology fitness sports and media.
Through the end of September we have already helped more than 170 organizations pivot how they connect with their customers employees and pads and we have a growing list of events that will be powered by bright coke in the near future.
Our virtual events momentum is just getting started and we are honored to have partnered with brands like inbound 2020, Hubspots annual user conference a need to be dot orgs annual Grace Hopper Gallo and the U.S.G.A.U.S. open over the past few months.
I'd like to highlight a few recent wins south.
South by southwest is a recent win we are particularly proud of Robert.
For over 30 years, South by southwest has gathered the world's most innovative minds in Austin, Texas.
In 2019, the if that had 280000 attendees.
This coming year will be an incredible pivot to the organization as it goes truly virtual for the first time you.
Using brightcove south by southwest will expand its reach to a broader audiences in new and innovative ways using video to deliver its 2021 festival.
We recently partnered with Vmware to power its VM World 2020 annual user conference. This event virtual for the first time and it was deliberate flawlessly.
World hosted more than 80000 attendees from 180 countries, who watched more than 1000 speakers present at 900 live and on demand sessions. The number of attendees continues to grow weekly as more customers and prospects engage with the on demand content.
Lastly, the event industry has had to re imagine a new world where virtual is the primary connection in it.
In addition to adding major logos to the Brightcove portfolio, our reach will expand with new agreements with the three biggest event planning companies in the world see bad rain focus and Jack Morton culling.
Collectively these leaders in the event industry have the strongest reputations and deepest understanding of how to build engaging a bad experiences.
Back that these industry leaders chose brightcove as their video partner is a strong endorsement of the power and scalability of our platform and enjoy.
And then just a short period of time, we have delivered more than 200 events of all sizes with the help of these partners.
All three have a unique approach to connecting with their audiences and we play an essential role in their video strategy. Each of these partners extends our reach in the marketplace and provides us access to far more potential customers that we could target on our own.
The future of a bad will certainly be a hybrid model and video will remain a key component for conducting audiences. We believe virtual events will be a long term demand driver for brightcove.
In addition, we delivered a balanced mix of new customer wins and existing customers, who continue to expand their engagement with brightcove. Some other customer wins and renewals we signed in the quarter included Coop paying Corporation Dark communications get after it media Hitachi Boston consulting.
Good thing group Chick Fil, a chip outlay, the Figaro and time USA I would like to highlight a few of our key wins in the quarter.
Among the more than 40 logos in our fitness portfolio is class pass an online fitness brands that connect its customers with exercise classes from numerous geographically disbursed studios once cope it put a halt to traditional in person fitness instruction clay.
Class path pivoted its business by uploading Vod content from previous classes as well as posting new live classes. So that its members can continue to work out from home.
We partnered with them as they experienced incredible growth over the past year and continue to be a reliable source for their content and other growing vertical for US is faith based organizations Lifeway Christian resources is a nonprofit ministry focused on the southern Baptist Convention, which has.
10 million members across 47000 churches in the U.S. it needed to quickly transform its operations. Its cobot restrictions required its Bible study in church services be conducted virtually.
This past quarter Lifeway expanded its relationship with Brightcove, because we are the only one to deliver on scale and exceptional viewer experiences lastly, we have all watch sports at bald dramatically during the pandemic the football Federation of Australia, a brightcove customers since 2017.
Mean learn firsthand what it meant to deliver a new experience to fads. The epay, if the governor body of soccer, what Sol and Beach soccer within Australia and use that Brightcove for all video on demand content of a league matches.
Each club has its own brightcove account to upload snackable content to engage with their grass roots audience.
Besides the event partnerships I mentioned previously we also had encouraging early traction with our recently Lodge Master license partner program.
Which allows partners to deliver our video technology and solutions as part of a broader managed service offerings. We have already signed five partners to this program and are pleased with the level of interest for embedding Brightcove into third party services. We continue to believe a robust channel program will be an important.
Contributor to growth by expanding our market reach and increasing our sales velocity.
As we look to the future we are mindful of the uncertainty in the economy. However.
However, we feel the need for video will remain a focus for brands, who understand the power it can deliver to unite engage and communicate.
We are confident current market trends are sustainable and that video has reached an inflection point that will continue after cobot goes away.
We've had much success this year, but acknowledge we still have work to do as Rob will discuss we had a good retention rate this quarter, but our goal is to build a stronger more predictable bolt renewal business. This is an area that I'm intensely focused on and our chief revenue Officer, Rick Hanson is leading a comprehensive.
It's a process to build a best in class renewals business.
Just as we have successfully rebuilt our product development and go to market efforts, we will do the same with our renewal business in future quarters. The combination of our strong sales dynamic and an improved retention rate will be a powerful catalyst for improved more profitable revenue growth.
Before I turn it over to Rob I'd like to welcome our two new board members Dr. to Dol Neely and reach a group to Roger to Dol is a Harvard business School Professor and member of record 10 Advisory Board and reach a is the director of product management for Google Finance their forward thinking.
He is an expertise will help shape the future of Brightcove from a technology leadership and organizational perspective, we're excited to have them onboard and look forward to their ongoing insight and guidance.
To wrap up I am excited by how the business is performing the third quarter demonstrates that our strategy is working and that we are on the right track to achieve our long term strategic objectives.
I'm amazed by the dedication and passion.
Coats employees, who have worked tirelessly to get us to this point.
I think tremendous personal challenges as they adapted to life during cold, but our team has always remained focused on ensuring our customers success.
We have a great team and I know, we have the right people to take this company to the next level. We're building a new chapter in the history of Brightcove. One we're confident will generate significant value for shareholders. As we continue to successfully execute on our strategy.
With that let me turn the call over to Rob to walk you through the numbers Rob.
Thank you, Jeff and good afternoon, everyone I will begin with a detailed review of our third quarter, and then I'll finish with our outlook for the fourth quarter and the full year 2020.
Total revenue in the third quarter was $49.1 million, which is well above our guidance range. This was due.
This was driven by better than expected bookings throughout the quarter.
Breaking revenue down further subscription and support revenue was $46.3 million and professional services revenue was $2.8 million.
So look back backlog, which we define as the aggregate amount of committed subscription revenue related to future performance obligation in the next 12 months was $109.6 million.
This represents a 9% year over year increase on a gene.
On a geographic basis, we generated 56% of our revenue in North America during the quarter and 44% International.
Breaking down international revenue, a little more Europe generated 17% of our revenue in Japan, and Asia Pacific generated 27% of revenue during the quarter.
Let me now turn to the supplemental metrics, we share on a quarterly basis.
Recurring dollar retention rate in the third quarter was 101%.
It was above our target range of low to mid Ninetys.
This was a notable improvement from recent quarters, driven primarily by extremely strong upsell activity at the time of renewal.
While we don't specifically report gross dollar retention rate. It also showed some improvement from recent quarters.
While we are pleased with the performance of this metric in the quarter, we still have more work to do to build a consistent renewals business.
As Jeff mentioned this is a key strategic priority for us and an area we are investing significant resources.
We expect this metric may continue to have some volatility in the near term before we feel the full impact of the changes we're making in the second half of 2021.
Our customer count at the end of the third quarter.
Was 3381 of which 2267 were classified as premium customers.
Looking at our ARPU within our premium customer base, our annualized revenue per premium customer was $89000, which was up 5% year over year and excludes our entry level pricing for starter customers, which averaged $4300 in annualized revenue.
Looking at our results on a GAAP basis, our gross profit was $31 million operating income was $1.3 million and net income per share was three cents for the quarter.
Turning to our non-GAAP results, our non-GAAP gross profit in the third quarter was $31.5 million.
Fair to $29.8 million in the year ago period, and represented a gross margin of 64%. This was.
This was our strongest gross margin performance in four years, driven by the better than expected revenue performance efficiencies gained with our providers and the increasing diversification of our business.
Subscription and support revenue represented 94% of our total revenue and generated a 67% gross margin in the quarter compared to.
Compared to a 65% gross margin in the third quarter of 2019.
Non-GAAP income from operations was $4.5 million in the third quarter compared to $2.8 million in the third quarter of 2018.
Adjusted EBITDA was $5.9 million in the third quarter compared to a $4.1 million in the year ago period and above the high end of our guidance range for the quarter.
For the first time in our history, we generated a double digit adjusted EBITDA margin powerful indication of the scalability of our business model.
Our focus is to continue to find ways to drive productivity improvements and reallocate existing spend towards our gross growth initiatives.
Non-GAAP net income per share was 11 cents based on 40.6 million weighted average shares outstanding.
This compares to net income per share of six cents on 40 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 $30.3 million during the third quarter, we generated $3.6 million in cash flow from operations and free cash flow was $1.4 million after taking into account $2.2 million in capital expenditures and capitalized internal use software.
[music].
I would now like to finish by providing an updated outlook for the fourth quarter and the full year 2020, we are performing at a high level and have delivered the best to sales quarters in our history in the second and third quarters.
We're also seeing positive trends in our pipeline and overall business activity.
Having said that we are mindful of the uncertain economic environment and the difficulty in predicting when sales cycles will close we.
We don't think it is prudent to assume will be as successful as we were in the third quarter and closing new business as we contemplate our guidance for the fourth quarter.
For the fourth quarter, we are targeting revenue of $49.5 million to $50.5 million, including approximately $2.5 million of professional services revenue or.
From a profitability perspective, we're expecting non-GAAP operating income to be $2.9 million to $3.4 million and adjusted EBITDA.
Me between $4.2 million at $4.7 million.
Non-GAAP net income per share is expected to be in the range of seven cents to eight cents based on 41.1 million weighted average shares outstanding.
For the full year, we are targeting revenue of $193.2 million to $194.2 million, including approximately $9.5 million and professional services revenue.
From a profitability perspective, we expect non-GAAP operating income $12.7 million to $13.2 million and adjusted EBITDA to be between 18 $18.5 million now.
Non-GAAP net income per share is expected to be in the range of 29 cents to 30 cents based on 40.3 million weighted average shares outstanding.
Our adjusted EBITDA guidance reflects the third consecutive year of annual growth.
For the full year, we are now targeting free cash flow of $4 million to $5 billion.
To summarize we had a great third quarter, our market leadership and the superior performance of our platform of products puts breakup in a great spot to benefit from the growing market for video solutions we are.
We are executing very well through the challenging economic environment and believe we are well positioned to build upon our recent success to generate faster more profitable growth with.
With that we will now take your questions. Operator, we are ready to begin <unk>.
[noise] and at this time, we'll be conducting a question and answer session. She would actually ask your question. Please press star one on your telephone keypad, a confirmation Tony would indicate your line in your question Keith you made.
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One moment, please while we pull for questions.
Our first question is from Eric.
Martin Newsy with Lake Street Capital markets. Please proceed with your question.
Thanks, and congrats on the quarter and the outlook.
Always good to not screw it up in my first quarter of coverage.
So Steve.
I'm curious to know obviously, we've got a rising tide here I'm wondering how much of the success in the quarter, just kind of stepping back and taking a look at the <unk>.
Tentative landscape, just rising tide lifting all boats or do you feel like there's some share shifts going on in favor of [noise].
Hey, Art, Eric welcome Great timing on your part of this is Jeff yes.
Yes, certainly there is a rising tide and that there is a lot more I think the urgency in companies to make a decision on video that being said I think we're winning more than our fair share because when they start talking about quality of experience quality of service reliability scalability. So.
Purity. The fact that we have the best customer support organization on the planet.
They end up picking us so yes, the urgency is driving more interest and what may in the past have been a two or three months engagement may now be measured in single digit numbers of weeks [laughter] we.
We are pleased with our win rate.
Okay and then the other area of success that you saw there was definitely kind of Brightcove specific.
The pendulum swung really hard the other way in favor of the recurring dollar retention rate here in Q3 can you kind of compare and contrast, Q3 versus Q2 for somebody who's relatively fresh to the story why was Q2, where it was.
[laughter].
Yeah sure this is Rob.
If you remember if you go back to the Q2 call we talked about having some challenges into space is one it was a couple of large media customers, who left us or downsized their agreements and the second was really around upsells at the time of renewals some growing those customers.
This quarter, we had success on both sides, we got that gross retention rate up from last quarter, not a not quite where it has historically been but then we also saw a lot of success with up selling our existing customers at the time or renewals. So that's really what you saw happen from last quarter to this quarter and again as we think about that retention rate out of it.
Go forward basis, it's a focus of ours, we certainly had a really strong quarter this quarter, but I do expect some volatility there over the next few quarters until we get all of our plans implemented and we start seeing a consistent retention rate in the back half a 2021.
Okay and then last question for me is on the gross margin, obviously terrific success here and with the revenue outperformance and you had some efficiencies is there anything we should keep in mind as we look to model for Q4 on the gross margins for the business.
Yeah, I think as you as you look at Q4.
We should see some of that success going forward, but it could be a little volatile as you saw in Q2, we saw some increased usage.
From our customers that Didnt necessarily line up with the ratable revenue model. So as you look out at Q4, a there is a potential for some of that happening again.
Okay.
Thanks for taking my questions and congrats again on the good quarter.
Thanks, Eric slowly thanks art.
Your next question is from Mike Latimore with Northland Capital markets. Please proceed with your question.
Great Yeah excellent quarter.
Excellent quarter to 200 Rona beautiful.
Sales on the liability than what what percent bookings would you put in that kind of live events category in the quarter.
We don't break it out I'll tell you that Rob wants to jump into we don't breakout.
[laughter] certainly it's growing very very quickly I think what I'm. Most excited about is just the balanced performance balanced in terms of Gi Joe's balance in terms of types of business, even our core base business.
So if you want to call it legacy even though we continue to refresh the whole technology stack all of those were healthy as where our target segments.
Okay, Great and then just in terms.
Just in terms of the pipeline.
How would you characterize sort of the pipeline entering the fourth quarter here relative to when you were entering the third quarter and any quantification of change would be great.
We feel good about it it's a it's a very very healthy pipeline.
In the past the focus had been.
Building the pipeline is getting to the point, where we had enough coverage to handle the the.
The.
The plans the booking plans, we're now at a point, where we're happy with coverage, but I think more importantly, we're happy with the quality of the pipeline and the conversion rate.
Great and then.
And then just to take you mentioned on revenue retention, obviously, great quarter, you said, a little bit of volatility maybe for a while I guess what is there any particular area that would cause that is the media side of things or what what would cause potential all due until June.
[noise] yeah, the volatility we're going to continue to see on the media side of that you know.
As we go forward, particularly into next year, it's really two things one you've got the overall economic environment that can provide some headwinds to some of those media business models that we have out there and the second piece is really on the media customers, where it's a little bit more of a complex implementation.
Those customers are making their choices to migrate six to nine months out so as we're putting all the plans in place in Q4 of this year and starting to execute on.
On the on the retention plans, we may not have an impact on that until the back half of next year.
Right.
Well I congratulate you.
Yes.
Thank you thanks, Mike.
Yes.
And our next question is from Lee crowd with B. Riley Securities. Please proceed with your question.
Great. Thanks for taking my questions and.
Echoing the congrats on the good quarter and a sequential execution.
Wanted to start off on revenue guidance, if I kind of take the implied revenue guidance from last quarter for the full year and what that meant for Q4, and then I take your established Q4 guidance. It looks like you took up guidance for Q4 by about 4 million versus the implied Q2 guidance.
I guess, what are the kind of drivers of that $4 million increase I guess, what I'm asking is it's a pretty significant increase for this this business to see such a quick uptick I guess is there a improved visibility or is it just flat out new customer wins or.
Maybe less conservatism towards the macro outlook just curious on your thoughts there.
Yeah. Okay. I'll go first as we really haven't changed our view of the macro outlook weve been pretty consistent really since the March 13th when we started the locked down.
That.
But there is still a lot of uncertainty in the market that really doesn't we don't know today, whether or not we're going to have a.
A a resolution to this or a vaccine any more than we did in March so that really hasn't changed.
Well, if things have changed our confidence in our in our ability to attract and close business and engage with the competition and beat them also there's a timing factor. The the sales team is doing a better job of getting business hold in earlier into the quarter.
Which which certainly helps us from a from a revenue standpoint, I'll, let rob expand on anything else.
Yeah, and we as you can imagine kind of at the start of a quarter Weve got much better visibility into that quarter than we do even one quarter out, particularly given the macro environment and walked the pressures that our customers can be under so as we look at Q4. It's really you know we've got great visibility and as an outcome of the sales performance and the retention rate for.
Formats that we saw in the third quarter.
Got it and then switching over to your EBITDA guidance.
Solid double digit result in Q3, but it looks like you have kind of a down tick into the high single digits for Q4 are there.
Are there any particular expense items to call out a high on that that guidance outlook.
Yeah, we're really looking at making the investments for 2021 early so as we look at what are the sales investment sort of the marketing investments that we're going to need to get a fast start into 2021, where we're making those investments in the <unk> in the fourth quarter.
Got it and then last question from me and.
I'll try to frame this in a way that makes sense, but you know you guys are starting to kind of ramp the channel and I just kind of wanted to get a sense of where progress is and so you know with this upside in Q3.
Could you maybe break down the function of it being direct sales versus channel sales in terms of the mix of upside and I guess.
I guess you know maybe just talk about the productivity of the channel sales right now and kind of how you expect that to ramp over the next couple of quarters.
Sure. We're since its Jeff were still in the early days, obviously, we only got serious about launching channels at the beginning of this year.
We are we're pleased with where we are in channel, but the channel team is well ahead of plan.
The pipeline is very very healthy and what I'm. Most encouraged about is the quality of the kinds of deals that we're winning with channel partners.
It just it just exceeds our expectation so we feel very good about that and we'll be accelerating some of our investments for for that team. It's really premature I'm going to kind of pull I think a little bit further than what you're asking but you know, but what I hear you implying is about the future.
Sure.
In terms of where we'll direct the wearable channel B. I think we're still some time away from where we're going to have any discussions about channel conflict or cannibalism right now, there's very clear delineation and in there there is zero conflict.
And so we feel very very good about that.
Got it congrats on the results and thank you for taking my question.
Thank you.
But.
And our next question is from Steven Frankel from Dougherty.
Sorry. Please proceed with your question.
Congratulations.
Relations.
You talked about the success in the live event business.
Can you give us some insight into your ability to take some of those one off events, especially the ones that come through partners and convert those customers into a a recurring revenue relationship around maybe some of your other products.
Sure I'll start this is Jeff and then and Rob will then jumping kind of on how we construct the deal.
The deal, which which gives us better confidence on on the recurring revenue element typically live events is triggered obviously by some kind of an issue where an entity has to replace what was going to be Uh huh.
No.
Attended a bad to a virtual of that that's typically what triggers the discussion that first as we jump into it with them. They most customers really don't even know what questions to ask because this is so new and our team is very very good at helping them understand look here's the pitfalls here's the challenges.
That's the kind of things you need to avoid to make sure that you have an exceptional a bet.
We can do one in as little as two weeks on a pretty large scale I'm talking about 10000, plus attendees then the discussion.
Typically goes beyond here that these customers, calling a journey they say, okay, well, that's pretty good but maybe I should be doing more live events, maybe there's a reason for me to have a better relationship with customers prospects any whoever the stakeholders our appeal maybe to supply chain and so that gives us an opportune.
We need to start talking about upgrading the quality of their engagement either for for just digital marketing or four O T T and the use of beacon to establish their own TV channel. If you will so even though life events is certainly we're seeing a good pop we spend a lot of time studying this.
We feel that this has a very very long tail and then I'll turn it over to Rob on any commentary on kind of the deal constructs.
Yes, so as you think about the deal cost structure, it's too cold, there's obviously, a pizza services that data right around the event, but to Jeff's point. The team is really selling that longer term engagement with the customers prospects and employees depending on the type of invent. So you end up with a license.
[laughter] over a period of time, which is more in line with our typical model and that's to drive that engagement, we talked about it a little bit but we've seen some of these event customers buy into our beacon product in order to drive that kind of engagement and then the sales team is taking that entry point into these customers and starting to sell our other products across the broader customer.
Okay, Great and does it.
It's the same kind of process. The if these leads are coming in through see that or some of these other that partners as well.
Yeah, so that each one of our partnerships is a little bit different and some are referral partner or one off engagements and some are more of an OEM type engagements.
Okay, and then on the retention rate, which obviously was great progress this quarter and but you talked about how under the covers there may be one yet.
While some of the Big Upsells, you still have work to do.
Jeff could you give us a couple of specifics because you've been working on this for multiple quarters.
Okay, and what have you learned through the process that you weren't doing correctly and and what are the big things you still have to do to get this right where are you.
Right, where you want it to be.
Well as we shared in the last quarterly call, we were going to get serious about attacking this just as we have altogether aspects of the business product marketing sales engineering and this is for US it's the last domino that needs to fall.
And so we have kicked off an internal project. We started it back in August with an outside firm, we benchmarked ourselves against the market in the best of breed, we identified where our strengths were and where our gap SAR, we prioritize those in terms of the impact on the business and the difficult.
Multi of of fixing resolving deploying.
And that plan is now in place we've shared with the board they've blessed it and now it's.
And now it's time for us to start executing.
So for US Yeah, I wouldn't expect to see any kind of near term results. This takes a while to deploy it takes a while to move the needle, but there's really nothing in this that we have to do that is groundbreaking that no. Other company has ever done before it is there's.
Very very little risk in this and we're venturing off into into uncharted waters. It's just things that we need to do and we're going to get it done.
And in general are your upsell and renewal rates materially higher on the enterprise side.
Versus the media side.
I don't know if I would call it materially it really depends on where the customer is in the journey and the level of sophistication.
I mean.
Meaning the dares that if the customer is too sophisticated you can get engineered out and if.
And if there.
Not getting enough value out of your product you get dropped out as well so the sweet spots in the middle.
Yeah, I think just the opposite we yeah. We're we're now engaging more and more with them and helping them understand how they're using video and how they can do even more with video, but that's the power of the consulting team the power of a really talented professional sales and pre sales organization that could sit.
On the customer say, but there's a lot more that you can be doing next kit that you can see benefit problem and that's true for media as well as for enterprise, We just had not.
Persistently historically engaged it at that level and so you know you certainly saw it with the up sell activity in the in the third quarter.
Okay, great. Thank you.
Thank you.
Thanks, Steve.
And our next question is from might not have more with Northland capital markets. Please proceed with your question.
Like either.
Are you on mute sorry about that [laughter] I was it was a wonderful question I'm sorry.
So the subscription gross margin did you say that that was relatively.
Relatively sustainable going forward.
Yeah, I think it's similar to our retention rates is give you a little bit of volatility there.
Got a quarter to quarter basis, but in the long term. We think we can continue to work on that.
Okay.
And then in terms of sales force productivity.
My guess is it's kind of where you want it but just wanted to clarify you know.
Any color on sales force productivity.
Yeah, I think from a productivity standpoint, we've got to where we want them I think as we go into next year, we're going to continue to invest in that channel.
In an effort to drive down that cost of acquisition.
Got it and then just last one was overage in the quarter.
Overages were about 1.5 level.
Okay great.
Yes.
Thank you.
Thank you we have reached the end of the question and answer session I'll now turn the call over to CEO Geoffrey for closing remarks.
Thank you should Molly and thank you for your help to everyone. Its.
It's a it was an exciting third quarter I hope you can tell him the tone and my voice that being said, we're very excited about the fourth quarter also we know what our challenges are we're sharing those.
We're sharing those with you, but we also see great opportunities.
Please continue to stay safe and healthy and go vote. Thanks, everybody bye.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.