Q3 2021 Brightcove Inc Earnings Call

October 27, 2021

Greetings welcome to Brightcove third quarter 2021 earnings call. At this time all participants are in a listen only mode. A question answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note. This conference is being recorded I will now turn the conference over to Brian Dan you from ICR. Thank you you may begin.

Good afternoon, and welcome to the Brightcove third quarter 2021 earnings call.

He will discuss the results announced in our press release issued after market close.

With me on the call are Jeff right Breakfast, Chief Executive Officer, and Rob <unk> Chief Financial Officer.

During the call we will make statements related to our business that maybe considered forward looking and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Including statements concerning our financial guidance for the fourth fiscal quarter of 2021, and the full year of 2021.

The profitability and positive free cash flow our position to execute on our go to market and growth strategy, our ability to expand our leadership position.

To maintain and 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 for similar indications of future expectations.

These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date.

These statements are subject to a variety of risks and uncertainties could cause actual results to differ materially from expectations.

Including the effects of the COVID-19 pandemic on our business operations as well as the impact on general economic and financial market conditions.

For a discussion of the material risks and other important factors that could affect our actual results. Please refer to those contained in our most recently filed annual report on Form 10-K, and as updated by our other SEC filings.

Also during the course of today's call, we refer to certain non-GAAP financial measure.

There is a reconciliation scheduled showing GAAP versus non-GAAP results currently available in our press release issued after market close today.

Found on our website at Www Dot Brightcove dot com.

In terms of the agenda for today's call, Jeff will provide a summary review of our financial results and update on our operations and a review of our strategy.

Rob will finish with additional details regarding our third quarter 2021 results as well as our outlook for the fourth quarter and full year 2021.

With that let me turn the call over to Jeff.

Thanks, Brian and thank you everyone for joining today I Hope you and your families are well.

We had a very productive third quarter, we prepared for and executed our annual virtual user conference play 2021 made multiple innovation announcements and continued to execute on our retention strategies. We also signed an agreement to acquire technology that will enhance video interactivity.

Yeah.

Late 2021 was a resounding success is our largest user of that to date with almost 6000 registrants from 100 countries.

A testament to the power of virtual events. We grew the event by nearly three times that of play 2020, attracting new companies to witness the power of Brightcove with half of the registrations being new to our community.

During our primary promotion time in the six weeks, leading up to play we saw a 4000% increase in viewing volume of Brightcove videos driving massive growth in awareness and new contacts for Brightcove.

Over two days, we served up 60, plus sessions 35 of them by customers and partners, including AMC network Akamai South by Southwest Academy of Motion Picture Arts and Sciences hub spot, New South Wales Department of Education Tennis, Australia. The L. P.

Reverie and the Metropolitan Opera.

Thankful to all of our customer speakers for sharing their success stories you couldn't attend play like you can tune into Brightcove play TV, our very own corporate TV channel to view all the content.

So with that let's start with an overview of our results for the third quarter revenue was $52 $2 million up six 3% year over year and above the high end of our guidance of 51 5 million.

Adjusted EBITDA was $4 $2 million ahead of the high end of our guidance.

While we had a solid performance relative to our guidance our sales performance in the quarter was below expectations.

<unk>, our Asia Pacific and Japan regions, underperformed, and we saw lower than anticipated levels of up selling activity across our customer base. As a result, we're adjusting our full year revenue guidance, which Rob will provide more detail on later.

We've made several changes to address the challenges from the quarter.

<unk>, making sales leadership changes in Asia Pacific and doubling down on the positive sales execution and enablement strategies, such as value selling methodology standardized proposal formats and deal coaching that have proven successful in driving significant bookings growth in North America over a two year period.

We're moving quickly to implement the proven and successful sales tactics for North America, not just in Asia Pacific, but globally. It will take several quarters for these changes to impact our results fully.

Additionally, we continue to work on our renewals business and make good progress in the quarter, we remain confident our product and go to market strategy will generate the revenue growth. We know this business can deliver.

I would like to spend a few minutes highlighting the significant progress and our strategic focus areas.

Customer success and retention and go to market.

Let me give you some detail on each of these areas first innovation.

We have heavily invested in R&D and it is paying off with innovative products coming to market. This quarter, we had multiple product announcements that add considerable value to our customers and help them better engage with their audiences monetize their content and sell their products and services.

Let's start with Brightcove marketing studio, our new video communication solution that allows marketers to drive more significant results from their digital campaigns using video across all communication mediums tipping.

Typically marketing professional search multiple systems to find ideal videos for their initiatives, often lacking insight into which videos perform best or which valuable assets exist.

Brightcove marketing studio provides role based access to video assets through a team's preferred social platforms marketing automation digital asset management and content management tools.

Brightcove marketing studio will be available early next year and current video marketing suite customers can automatically be upgraded to marketing studio.

We also announced Brightcove Corp television.

A solution designed for companies to serve content to their audiences more compelling and engaging format.

Brightcove Corp television enables organizations to create channel similar to Netflix or Hulu that stream content to customers and employees each with their own audience specific branded content. This dynamic engaging solution empowers companies using video to forge stronger connections with their customers partners.

And employees.

We're proud to be serving net app, a global cloud led data centric software company with this solution.

<unk> launched its court TV channel that Apple TV that it's insights virtual conference on October 22nd.

James Whitemoor, EVP and CMO of net out said quote.

There's no denying the ever increasing popularity of streaming content to entertain educate and influence audiences, even b to B World. It's why we recently launched <unk> TV, a new always on video channel powered by Brightcove with net App TV, we're providing customers.

<unk> and employees with a rich seamless experience when accessing the content, they want when and where and how they want 365 days of the year, we keep them thinking of net up all year.

Cook Corp television has enabled us to maximize the return on our content creation cost, while serving our audiences through a highly engaging channel and quote.

Another exciting announcement highlights our open platform extensive technology integrations and use of Apis.

Coke marketplace enables brightcove customers to add powerful functionality to their video solutions directly from the Brightcove platform without the need to go to other third party sites.

We launched the Brightcove marketplace with over 40 technology solutions and this ecosystem will continue to grow.

And last we recently announced our intent to acquire a significant portion of the assets of half year, including its existing global customer base commercial interactive video technology, IP brand and marketing assets Hap.

You Act as a leader in the video interactivity market was a longtime partner brightcove with the integration of the happy X technology Brightcove customers can quickly and easily incorporate interactivity into any video our team has successfully sold <unk> for years, and it's a natural fit to bring the technology into our portfolio.

We expect this deal to close before the end of the year.

We also continue to focus on bringing added value specifically to our media customers evidenced by our enhancements to rights management AD insertion performance and low latency for live streaming all also released last quarter.

For retention, let's move on to these efforts.

Retention has always been a critical focus for us as you know.

Delighted that we are making excellent progress in improving the customer experience.

Some highlights from the past quarter include.

Brightcove continues to have an award winning 24 seven in house support team. This month the Tsi a recognize the team for support staff excellence for the eight consecutive year. Our support has long been and continues to be a true differentiator for brightcove.

Our revamped Onboarding program includes free and paid onboarding options, ensuring that all customers have a successful launch of Brightcove and we recently implemented a roadmap initiative to engage with our customers regularly and solicit their feedback on our product roadmap and the latest customer requests.

We're pleased with our improvements to drive customer attention towards best in class level for a SaaS company.

Still have more work to do but we're clearly on the right path.

Sample of our retention progress is seven network a media customer we've had a close strategic relationship with since 2015.

During the recent renewal we were at risk of losing seven for do it yourself and competitive solution.

Throughout the renewal process, we demonstrated the value of the Brightcove platform and instilled confidence in ongoing innovation technology improvements and Brightcove support we retained and grew our Vod business with seven asset sign a new agreement.

Turning to our go to market highlights, we're proud that customers worldwide selected brightcove as their video provider of choice for our reputation and reliability scalability security innovation and the return on investment we can deliver to them.

Let's look at a few examples from this past quarter that demonstrate how we are helping customers succeed with video.

Football Koh is a new brightcove customer serving a global audience of 400 million people across their digital destinations in syndication partners. The organizational will use brightcove to power video on demand soccer content on its owned and operated websites, including gold Dot Com one of.

The world's most popular digital footfall destinations and its syndication partners.

Football co will increase its flexibility by leveraging brightcove unrivaled ability to allow content creators to distribute and monetize content at scale on a global level.

Mars is a new customer that selected Brightcove as the video platform to host manage and deliver Mars video content to its external consumer facing properties globally and its internal audience of over 133000 employees across six continents.

Brightcove will be used by Mars associates.

<unk> partners and content managers to organize approve and manage bars owned content.

Port for multiple languages regions and formats.

<unk> came to Brightcove for our unrivaled security when its previous vendor couldnt meet bars demanding security requirements.

A long time brightcove customer ITV has a broadcaster that creates owns and distribute high quality content.

Multiple platforms globally.

Brightcove powers ITV short form websites and apps for shows including good morning Britain Love Island News and sports content.

<unk> renewed and grew its contract with Brightcove to continue to deliver flawless video to its millions of users.

Gamestop is a videogame consumer electronics and gaming merchandise retailer and longtime brightcove customer.

The organization uses Brightcove video across its primary web properties and recently renewed its engagement with US Gamestop continues to use brightcove engage with its customers and deliver a seamless video experience across its digital properties.

In the third quarter, we added 16 partners globally.

We continue to add partners in the events and production space, including Leno's visible brand live ovation and encore.

We also added new partners in India, Latin America, and EMEA to expand our geographical reach these partners add value for our customers using Brightcove world class screening technology.

Our referral partner program and Master license program allow brightcove to fit into our partners' business models, enabling us to expand our reach through our partners existing customer basis.

Several of these partners shifted from competing platforms to the Brightcove platform. This past quarter, not only due to our superior technology and global reach but because we recognize the importance of a highly responsive support team.

Deborah Chong Leno's software CEO said quote a video player in streaming service can make or break out of that we integrated brightcove broadcast quality video capabilities into our hybrid event marketing platform to guarantee our clients reliability high fidelity and a scalable video solution.

<unk> customers can now power up branded event engagement for employees customers partners and prospects.

Seamlessly incorporating video to engage inspire and deliver sales ready lead generation enterprise wide and quote.

We know video drives business and we know our customers benefit from deploying Brightcove video.

To better help our sales organization show Brightcove total economic benefits, we commissioned Forrester consulting to conduct two total economic impact for <unk> studies, one focused on media organizations and the other on enterprise companies for.

The enterprise study the decision maker of interviews and financial analysis found that a composite enterprise organization, using brightcove technology experiences and ROI of 225% over three years.

The interviewed decision makers shared that in their organizations legacy state They had limited visibility and control over their video content.

Organizations struggle to syndicate video consumption on multiple platforms in a timely manner.

And it took several weeks to process the content and they could not trans code fast enough.

These decision makers now use brightcove as an asset in their customer journey to drive increased sales and additional revenue.

Turning to the media study the composite media organization, using Brightcove technology experiences and ROI of 226% over three years interviewee shared that their organizations expanded their delivery to new markets and new devices using brightcove.

Brightcove allowed these organizations to quickly duck content to reach expanded geographies offering their services to entirely new audiences.

Legacy solutions did not provide an easy path to entering new markets.

We know we have the best technology, but now our sellers have further evidence to demonstrate this.

Before I hand, it off to Robb to cover the financials in depth I want to reiterate that we made progress this quarter, even though we are not satisfied with the sales execution challenges we experience.

We hosted our best play ever ramped up innovation with the announcement of multiple new products increased our retention rates and signed many new partners worldwide.

Continue to make progress on our key focus areas and are quickly addressing the areas that need additional improvement I'm confident in the team we have in place and our strategy and that we will achieve our long term financial goals.

I'd also like to take a moment to address the other news we released today relating to my eventual retirement from Brightcove.

Came out of retirement to join Brightcove in 2018.

Facilitate the transformation of Brightcove and to put the right team in place to lead the company to the next chapter in its growth.

While we are not fully satisfied with our current results and we know we have more work to do I have every confidence in our strategy and the great team we have built.

My plan is announced today is to retire from Brightcove I will serve as CEO until a successor is on board and thereafter, we will remain in an advisory capacity with the company until the end of 2022.

This approach ensures that our board will have enough time to find the right leader to continue and build upon this company's amazing opportunity.

This approach gives the company the ability to continue to focus on execution and deliver the expected results to our shareholders. While also having the time to find the ideal next CEO for Brightcove.

The board has retained an executive search firm and has launched the search process for the new CEO with that let me turn the call over to Rob to walk you through the numbers Rob.

Thanks, Jeff.

As you mentioned, we still have a lot of work to do and now more than ever we need to focus on execution. So with that I would like to begin with a detailed review of our third quarter and then ill finish with our outlook for the fourth quarter and the full year 2021.

Total revenue in the third quarter was $52 $2 million, which was above our guidance range breaking revenue down further subscription and support revenue was $49 $2 million and professional services revenue was $2 $9 million.

12 month backlog, which we define as the aggregate amount of committed subscription revenue related to future performance obligations. In the next 12 months was $115 million. This represents a 5% year over year increase.

Finally geographic basis, we generated 56% of our revenue in North America during the quarter and 44% internationally breaking.

Breaking down international revenue, a little more Europe generated 19% of our revenue and Japan and Asia Pacific generated 25% 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 92, 8%, which was within our target range of low to mid Ninety's.

While we are pleased by the improvement over the first half performance, we'd like to see a few quarters in a row in our target range before we are satisfied.

Net revenue retention in the quarter was 95%, which compares to 98% from the second quarter of 2021 and 98% in the third quarter of 2020.

Since the beginning of 2019 net revenue retention is range from 92% to 100%.

As a reminder, we introduced net revenue retention last quarter to better align our reporting most leading SaaS companies.

We calculate net revenue retention by comparing the current annualized recurring revenue to the annualized recurring revenue from 12 months prior to those premium customers that exist in 12 months prior.

As Jeff mentioned, we have made significant progress in our effort to rebuild our renewals business. We saw clear signs of improvement in the third quarter and are confident we are on the right track.

Net revenue retention is calculated on a trailing 12 month basis, there will be a natural lag before the improvements we are making will be reflected in this metric.

We expect that as we continue to make improvements in our renewals business. This metric will consistently be with over 100% overtime.

Our customer count at the end of the third quarter was 3205.

Of which 2265 were classified as premium customers.

Looking at our <unk> within our premium customer base, our annualized revenue per premium customer was $93000, which was up 5% year over year and excludes our entry level pricing for starter customers, which averaged $4400 in annualized revenue.

Looking at our results on a GAAP basis, our gross profit was $33 5 million operating loss was $233000.

Net income per share was a loss of <unk> <unk> for the quarter.

Turning to our non-GAAP results, our non-GAAP gross profit in the third quarter was $34 1 million compared.

Compared to $31 $5 million in the year ago period, and represented a gross margin of 65%, which is up from 64% in the third quarter of 2020.

Subscription and support revenue represented approximately 94% of our total revenue and generated a 68% gross margin in the quarter compared to a 67% gross margin in the third quarter of 2020.

The improvement in gross margin throughout this year has been an area of strength for the business.

Through the first nine months of the year, we have grown subscription revenue by $12 million, while reducing the cost of subscription revenue by $403 million.

Reducing our Cogs has been one of our areas of focus for our R&D organization in 2021.

The success, we have had scaling subscription gross margin.

Adding additional resources to invest in our growth initiatives in the near term that will drive greater improvement in profitability as revenue growth accelerates in the future.

Non-GAAP income from operations was $2 $9 million in the third quarter compared to $4 $5 million in the third quarter of 2020.

Adjusted EBITDA was $4 $2 million in the third quarter compared to $5 $9 million in the year ago period and above the high end of our guidance range adjusted EBITDA margin was 8% in the quarter.

Non-GAAP diluted net income per share was <unk> <unk> based on $41 7 million weighted average shares outstanding. This compares to net income per share of 11 says on $40 6 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 $45 $3 million, we generated $7 $4 million in cash flow from operations and free cash flow was $4 $9 million after taking into account $2 $5 million in capital expenditures and capitalized internal use software.

I would like to finish by providing our guidance for the fourth quarter and the full year 2021.

For the fourth quarter, we are targeting revenue of $51 million to $52 million.

Including $1.6 million of Overages, and approximately $2 $2 million of professional services revenue from.

From a profitability perspective, we expect non-GAAP operating income the 1 million to $2 million and adjusted EBITDA to be between $2 2 million and $3 $2 million.

Non-GAAP net income per share is expected to be in the range of <unk> <unk> based on 41 9 million weighted average shares outstanding.

For the full year, we are revising our full year outlook.

Now targeting revenue of $295 million to $210 $5 billion, including $7 $7 million of Overages at approximately $12 million of professional services revenue.

This is down from our previous guidance of $211 million to $213 million.

From a profitability perspective, we expect non-GAAP operating income of $15 $3 million to $16 3 million and adjusted EBITDA to be between $25 million and $21 5 billion. These are both within our previously provided guidance of $14 million $17 million for non-GAAP operating income and 19.

$1 million to $22 $1 million for adjusted EBITDA.

Non-GAAP net income per share is expected to be in the range of 32 to 35.

Based on 42 million weighted average shares outstanding.

The full year, we are now targeting free cash flow of $6 $5 million to $7 $5 million down from our previous guidance of $7 million to $10 billion.

To wrap up we made progress in many of our key focus areas in the third quarter, but more work has to be done we are addressing the sales challenges that occurred and are confident we will begin to see positive impact of those changes in the coming quarters. Our belief in the long term opportunity has not changed we are committed to delivering better top and bottom line performance for our shareholders.

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

Thank you and if he would like to ask a question. Please press star one on your telephone keypad.

Chantel will indicate your line is in the queue.

Press Star two.

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Our first question is from Steve Frankel with Colliers. Please proceed.

Good afternoon.

Jeff I'd like to dig in a little bit.

Lower expectations for Q4, so how much of that.

<unk>.

Sales disappointment in Q3 versus.

Higher churn and then on the sales front, maybe you could define for us is this.

New account issue is this an upsell cross sell issue what's what's.

Leading to this poor sales productivity, especially in Asia Pac.

Alright, Thanks, Steve good to hear from you.

Looking at all the aspects of this I think you've hit it.

That which impacted us the most of this quarter with sales as Rob noted we are progressing with the renewals business in the right direction and I feel good about the progress that that team is making and the nature of the kinds of deals that were renewing I'm also thrilled that we have a lot more insight downstream on.

The renewals business. So that is on the mend the big challenge with sales as I know it oversimplifies it but its consistent predictable execution. It's one of the key reasons why I'm happy that we promoted Brian Froylan, who ran Americas sales into the global job.

He is he's introducing that same rigor and discipline in the Asia Pac that he did for the Americas as he crawled through the pipeline and interviewed and spend time with literally each sales rep.

And looked at every deal.

He just discovered that we work demonstrating the same rigor and discipline that we are in Americas. So when his words, it's a problem, but it is eminently fixable I think the other thing I am encouraged by is the team. There is really embracing this they also wanted to see the business grow and succeed.

And so we're not really getting any pushback from.

The Asia Pac sales teams in getting this done so that's the most important what certainly we can improve around the world and you know me I'm never satisfied, but we've got a real disciplinarian now running sales.

And we are doing a much much deeper level of investigation and inspection of deals. We've also introduced some new technology that literally left us track the number of customer touches and prospects such as <unk> and so we know we have the data demonstrates that if you have touched a prospect and number of time.

Over a period of weeks or months, you have a correlating much much higher opportunity to win that deal. The other thing. He did was he inspected every proposal that has been delivered in the last six months every proposal that went out and he sees great opportunity for changing the dynamic of how we're delivering for them.

<unk> so it's consistent.

And predictable execution on the sales side that will drive expansion, but it will also drive new logo acquisitions.

And in North America are you satisfied with your ability to upsell and cross sell on the enterprise side of the business or is there still a lot of work that needs to be done there.

Yes, again, I'm never satisfied, but I feel that the Americas team is in pretty good control of their destiny.

Predictability.

The insight the hard data that we have to support that.

Puts us in a much much better position.

Yes.

And add to that.

Steve This is Rob just to add to that real quick you know we mentioned in the script with the challenges really came on the upsell side, we actually had a really strong quarter on the new business acquisition. So well you don't necessarily see it roll through the customer count from a dollar perspective, we had a really strong new business in the quarter.

Okay.

That's that's.

That's good and then walk us through the divergence between the two retention metrics.

What kind of would have thought they would directionally the same way, but they deferred this quarter, so help us understand that.

Yeah, I think Steve that the big difference there is the calculation and that too is if you recall the recurring dollar retention rate that came in at the 93 that is actually for those contracts that happened in the quarter right.

Those contracts that were up for renewal and what happened in the quarter. The second metric that net revenue retention rate looks at the ECB of every customer that has.

That was a customer 12 months ago.

What the retention of that is so it includes upsells throughout the time of course, the contract any deals that up sold or downgraded throughout so that debt.

That net revenue retention rate will catch up it's just a lagging indicator.

And it'll take a couple of quarters to catch up.

Okay.

Jeff do you fundamentally still believe this is a business that can grow double digits.

Absolutely, perhaps I've never felt better about it like I don't like the performance right now any any better than anyone else, but when you look at the underlying strength of the business and the work that we've done, especially in the last six months to reconfirm and re validate that we have the right target market that it's a sizeable target market.

And that we're bringing really new innovative products to that market.

I feel great about it I also just see it in the energy and excitement of the core staff that team that works directly for me.

We are putting more products out more innovation out than ever before.

Obviously, we would love to be able to ship everything tomorrow. It will take a little while to get those out the door, but everything that we see says that we're heading in the right direction I'll give you. Just one example of why I feel good about that we noted net app and their launch of <unk> television and what they're doing is not unlike.

What salesforce did with their television.

This case the.

Net up took a true OTT approach. So it will send videos to any device anywhere. So it's much more robust in Oakland than what Salesforce is doing but they they get it they understand that the future of connections is video that the days of people sitting and reading static screens or looking at graphic.

Our images are fast growing behind and they get it.

And so when they first approached US about this back in the spring. It was a perfect time for us to talk because we were well underway in developing Corp television.

It's a great affirmation that this is the way companies will communicate there are certainly a lot of challenges probably the biggest challenge is the ability to capture and use interesting sticky content, but that problem will get solved we don't.

Not worried about that whatsoever. We also are thrilled with the work that we've been done that has been done.

For for our marketing studio.

Product because it literally was built up from scratch by watching how users who are not video experts tried to get their job done and this will be a sea change because up until this point everyone who's out there no matter, what they say about ease of use basically companies go to the video AD.

Bert to get help to do things.

And what we're doing with marketing studio will make it easy for anyone who needs to deploy video to do marketing campaigns and communications to be able to do that it will no longer be in the hands of the video expert and then certainly we announced prior to to play TV the.

The developers marketplace and I was just I was so encouraged by the fact that we had 40 developers around the world.

Line up on day, one to be participants in that marketplace. So great traction came out of play TV also the numbers were dramatically up so I've never felt better I am not satisfied with our performance at this moment, but I've never felt more confident about the future.

Okay, Great and then one last quick one for Rob what were Overages in the quarter.

Yes.

Overages were about $1 $7 million.

Okay, great. Thank you.

Yes.

As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Aaron Martin of <unk> with Lake Street Capital markets. Please proceed.

Yes, I wanted to focus on the Q4 outlook here if I have this right it looks like the <unk>.

Scripture business.

Relatively flat given the services guidance and I would have expected that.

Given your color there Rob on the new.

New sales.

Going out help me understand why the subscription line would be relatively flat at the midpoint.

Two quarters.

Yeah, Eric there's two pieces there one is a small headwind cardholders as we're bringing that down to a $1 6 million and the second piece is my comment around new business was net new customers and sell into net new logos, where we were challenged in the quarters on the upsell side. So from a dollar perspective it was the <unk>.

So that gave us the challenge in the quarter.

Okay.

Look at your the premium customer count.

That actually I guess it is a net number but I'd see that declining sequentially.

I guess, it's just a question of not all customers created equal.

The color here.

Yes, that's 100% right. When you when you think about it and you put it in conjunction with our <unk>, we continue to drive stronger customers and the ability to grow our customers. So you see that growth happening on the <unk> side again customer count is not something we focused on.

We understand that it is critical over time to get that number moving in the right direction, but we're really focused on maximizing dollars and share of wallet from our existing customers and from those customers that do come up.

Okay and then.

Jeff.

You talked a little bit about your kind of moving on here at the end of the year.

It's driving retirement again I can't remember, if it was golfing or fishing.

That you did or didn't do but I.

I know you've got a relief.

Leaving with some regrets given what you saw the potential as you came aboard back little over three years ago, but just kind of if you could get retrospect little bit introspective for a moment.

One or two things that maybe you would focus on more intently or done differently.

You've been in the seat now for three and a half years.

What is it that's kind of kept this this company from from realizing the full potential that you talked about coming out of play 2021.

It's pretty it's a great question. Thanks, I try not to spend too much time looking over my shoulder, it's kind of dangerous to do.

And I live in Florida, and quite frankly, when you go out with people around here. They spent a lot of time talking about the past.

It's a freaky place to be.

I'll just stay with what I shared in the last quarter and that is I should have jumped on the renewals much more aggressively the day I walked in the door.

More than anything else that has been I think a real source of frustration that being said awesome team running it like I said, just tsi a recognized again.

Great insight into the underlying health of the relationships with our customers that we just didn't have before I sit in on a lot of those reviews with customers and I feel very good about that and I'm just kicking myself because I should have just been much more aggressive.

I was I was paying attention to it.

But I think I was a little too trusting and I just didn't move fast enough on the renewals business on innovation I feel great about it we've dramatically grown the R&D engineering head count around the world and we're putting more innovation each quarter than I would challenge that we did in a year's time before.

I arrived and you certainly saw the evidence of that with what we with what we delivered to play TV.

Sorry.

The joy of doing this at home.

So we have a dog that barks that everyone, who walks in the door.

So I feel great about that sales execution.

Consistency I think is the biggest challenge there consistent and predictable and as I said, Brian definitely have that under control and we will see that.

To deliver the kind of results we need.

But I'm not going anywhere I've I've, given the worlds longest notice period.

Does that mean the board its.

14 months.

And youre going to be a consultant for our for all of 2022. So.

It definitely picked up on that.

Lastly, the shares are weak hereafter ours, it looks like they are little below $10.

The balance sheet is there as a board talk at all about perhaps using the balance sheet.

Back more aggressively I can't recall I think you have one in place, but what's the thinking on use of cash for the money that you've got on the balance sheet.

So it never comes up Rob Let me go first man.

Yeah Alright.

Rob Rob was coming name answer either on that one no. It does not come up period, and we just had our board meeting yesterday it does not come up.

We are now in a position where we're in an enviable position, where we're EBITDA positive cash flow positive generating cash building a bigger war chest I wanted to see the equity go up of course, because that's the gear effect for the war chest that lets us do a lot more M&A.

But know that that is absolutely not in the cards whatsoever. We wanted to invest in the things that will grow the business not just taking shares off the one off the street and I just wanted to clarify you said that.

They'll be on the sidelines in 2022 I want to make sure that we all understand I will stay in this role through the end of 2022.

Sometime between now and then if and when the new CEO is appointed.

I'll step out of this role I'll be I'll be reporting to the CEO and whatever capacity I can help that person and it will continue to be unemployed of the business through the end of 2022. This gives the board all the time in the world to get exactly the right person into the job.

Understood I appreciate that clarification.

Okay, Rob do you want to jump in and correct anything I said.

No you said it all Jeff.

That's the first.

Our next question is from Sharon <unk> with Northland Capital. Please proceed.

Hi.

I'm Shannon on behalf of Mike Latimore.

Well I have two questions for you today at one <unk>.

How is the demand isn't related to the last nine or 12 months ago and the media segment. The main focus of your revenue and you can see Netflix.

Great I'll start with that Rob feel free to break in so the first is where whereas the evolution of events, especially as were <unk>.

Thankfully finally, starting to wind down from from Covid, and where does that go and I'll be happy to comment on that and the second is media in terms of its priority and retention.

Cover that correctly.

Yes, that's right.

Great. Thanks, and please give mike or best.

Events a.

A year ago.

We were discussing this and last year's earnings calls Covid compress the adoption cycle.

So we saw things happening in a fraction of the time that we normally saw it and certainly we benefited from that we saw a significant improvement and growth in events. We were careful to make sure that the kind of events business that we were doing would give us an opportunity to have an ongoing relationship with customers as we come out.

Of Covid and that has not changed one bit certainly the events activity has calmed down quite a lot, but we've got a much much larger set of candidates now and prospects are going back into and building more relationships and that's one of the reasons why I'm. So excited about the new.

<unk> that we'll be bringing to market early next year.

On media and retention quite frankly, we focus on both media and enterprise. We don't play favorites, we know that our customers be they media or enterprise everyday count on video to help them grow their business do a better job of engaging.

Its mission critical for them and we enjoy the fact that we are kind of on that high end of when it really has to be perfect and flawless and broadcast quality, we're the ones to do business with.

So we take that very seriously for both media and enterprise what I love about the media market is it does there's no tolerance for anything less than perfection theres no tolerance for anything less than perfect security scalability reliability.

Those things are great because by by building technology that satisfies big media companies. We know we can handle anything that an enterprise may want to throw at us and we see that over and over again.

And our wins.

Okay. Thank you and my next question is.

On the churn rate so I believe sometimes when you get customers give you a full wanting in third quarters about whether they reach scale and then the next year did you get any notable ones this year.

No.

I haven't seen anything notable that changes anything again I feel good about the fact that we have more insight than we've ever had before and that it's earlier insight.

So that we can can act preemptively.

And certainly we saw that with the renewal of certain network that was a great example of a really really big.

Renewal they signed up for two years instead of the traditional one.

And ITV which was another really big renewal that was very very competitive.

So I feel very very good about the progress we've made there again, we need to do a lap. So that we know that we are back in control of the.

The recurring revenue business, we're not there yet.

Okay.

Thank you.

We have reached the end of our question and answer session I would like to turn the conference back over to Jeff Ray for closing comments.

Thank you operator, thank you everyone for joining US again, I'm grateful that you are safe and sound.

As I said the job is not done.

If there is anything that you should take away from the announcement of my departure in 14 months.

Is that we will act with even greater urgency driving topline growth.

Moving our renewals business and getting these exciting new products to market. Thank you and stay safe.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

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Greetings and welcome to Brightcove third quarter 2021 earnings call. At this time all participants are in a listen only mode. A question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being record.

I will now turn the conference over to Brian <unk> from ICR. Thank you you may begin.

Good afternoon, and welcome to Brightcove third quarter 2021 earnings call.

They will discuss the results announced in our press release issued after market close.

With me on the call are Jeff right, frankly, I was chief Executive Officer, and Rob <unk> Branco, Chief Financial Officer.

Including statements concerning our financial guidance for the fourth fiscal quarter of 2021, and the full year of 2021.

We expect that the profitability and positive free cash flow our position to execute on our go to market and growth strategy, our ability to expand our leadership position, our ability to maintain and 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 for similar indications of future expectations.

These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date.

These statements are subject to a variety of risks and uncertainties could cause actual results to differ materially from expectations.

Including the effects of the COVID-19 pandemic on our business operations as well as the impact on general economic and financial market conditions.

Also during the course of today's call, we will refer to certain non-GAAP financial measure.

A reconciliation scheduled 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 Brightcove dot com.

In terms of the agenda for today's call, Jeff will provide a summary review of our financial results.

In our operations and a review of our strategy.

Rob will finish with additional details regarding our third quarter 2021 results.

Our outlook for the fourth quarter and full year 2021.

With that let me turn the call over to Jeff.

Thanks, Brian and thank you everyone for joining today I Hope you and your families are well.

Late 2021 was a resounding success as our largest user event to date with almost 6000 registrants from 100 countries.

Estimate to the power of virtual events. We grew the event by nearly three times that of play 2020, attracting new companies to witness the power of Brightcove with half of the registrations being new to our community.

During our primary promotion time in the six weeks, leading up to play we saw 4000% increase in viewing volume of Brightcove videos driving massive growth in awareness and new contacts for Brightcove.

For two days, we served up 60, plus sessions 35 of them by customers and partners, including AMC network.

Akamai South by Southwest Academy of Motion Picture Arts, and Sciences hub spot, New South Wales Department of Education Tennis, Australia, the LPGA reverie and the Metropolitan Opera, we're thankful to all of our customer speakers for sharing their success stories.

You couldn't attend play live you can tune into Brightcove play TV, our very own corporate TV channel to view all the content.

So with that let's start with an overview of our results for the third quarter revenue was $52 2 million up six 3% year over year and above the high end of our guidance of $51 5 million.

Adjusted EBITDA was $4 2 million ahead of the high end of our guidance.

While we had a solid performance relative to our guidance our sales performance in the quarter was below expectations.

We've made several changes to address the challenges from the quarter.

We're moving quickly to implement the proven and successful sales tactics from North America, not just in Asia Pacific, but globally. It will take several quarters for these changes to impact our results fully.

Additionally, we continue to work on our renewals business and made good progress in the quarter.

We remain confident our product and go to market strategy will generate the revenue growth. We know this business can deliver.

I would like to spend a few minutes highlighting the significant progress and our strategic focus areas.

Customer success and retention and go to market.

Let me give you some detail on each of these areas first innovation.

Typically marketing professional search multiple systems to find the ideal videos for their initiatives, often lacking insight into which videos perform best or which valuable assets exist.

Brightcove marketing studio provides role based access to video assets through a team's preferred social platforms marketing automation digital asset management and content management tools.

Brightcove marketing studio will be available early next year and current video marketing suite customers can automatically be upgraded to marketing studio.

We also announced Brightcove Corp television or.

Our solution designed for companies to serve content to their audiences and more compelling and engaging format.

Brightcove Corp television enables organizations to create channel similar to Netflix or Hulu stream content to customers and employees each with their own audience specific branded content just die.

Dynamic engaging solution empowers companies using video to forge stronger connections with their customers partners and employees.

We're proud to be serving net app, a global cloud led data centric software company with this solution net App launched its Corp television channel net App T V.

Insights virtual conference on October 22nd.

James Whitemoor EVP and CMO of net out said quote there is no denying the ever increasing popularity of streaming content to entertain educate and influence audiences, even b to B World. It's why we recently launched net App TV a new.

<unk> always on video channel powered by Brightcove with Netapp, TV, we're providing customers partners and employees with a rich seamless experience when accessing the content, they want when and where and how they want 365 days of the year, we keep them thinking of net up all year.

<unk> Corp television has enabled us to maximize the return on our content creation costs, while serving our audiences through a highly engaging channel and quote.

Another exciting announcement highlights our open platform extensive technology integrations and use of Apis. The brightcove marketplace enables brightcove customers to add powerful functionality to their video solutions directly from the Brightcove platform without the need to go to other third party sites we.

Launched the Brightcove marketplace with over 40 technology solutions and this ecosystem will continue to grow.

Last we recently announced our intent to acquire a significant portion of the assets of happier.

Including its existing global customer base commercial interactive video technology, IP brand and marketing assets Happy Act as a leader in the video interactivity market was a longtime partner brightcove with the integration of the happy X technology Brightcove customers can quickly and easily <unk>.

Corporate interactivity into any video our team has successfully sold <unk> for years, and it's a natural fit to bring the technology into our portfolio.

We expect this deal to close before the end of the year.

For retention, let's move on to these efforts.

Retention has always been a critical focus for us as you know and I've done.

Lighting that we are making excellent progress in improving the customer experience.

Some highlights from the past quarter include.

Cove continues to have an award winning 24, 7% in house support 14. This month the Tsi a recognize the team for support staff excellence for the eight consecutive year. Our support has long been and continues to be a true differentiator for brightcove.

Our revamped Onboarding program includes free and paid onboarding options, ensuring that all customers have a successful launch on brightcove.

We recently implemented a roadmap initiatives to engage with our customers regularly and solicit their feedback on our product roadmap and the latest customer requests were.

We're pleased with our improvements to drive customer attention towards best in class level for a SaaS company, we still have more work to do but we're clearly on the right path like sample of our retention progress is seven network a media customer we've had a close strategic relationship with since 2015.

During the recent renewal we were at risk of losing seven for a do it yourself and competitive solution.

Throughout the renewal process, we demonstrated the value of the Brightcove platform and instill confidence in ongoing innovation technology improvements and Brightcove support we retained and grew our Vod business with seven asset signed a new agreement.

Turning to our go to market highlights, we're proud that customers worldwide select brightcove as their video provider of choice for our reputation and reliability scalability security innovation and the return on investment we can deliver to them less.

Let's look at a few examples from this past quarter that demonstrate how we are helping customers succeed with video.

The world's most popular digital footfall destinations and syndication partners.

<unk> will increase its flexibility by leveraging brightcove unrivaled ability to allow content creators to distribute and monetize content at scale on a global level.

Bars, as a new customer that selected Brightcove as the video platform to host manage and deliver March video content to a text journal consumer facing properties globally and its internal audience over 133000 employees across six continents.

Brightcove will be used by <unk> associates.

<unk> partners and content managers to organize approve and manage bars owned content.

Port for multiple languages regions and formats.

<unk> came to Brightcove for our unrivaled security when its previous vendor couldn't meet ours demanding security requirements.

A longtime brightcove customer ITV has a broadcaster that create owns and distribute high quality content.

<unk> platforms globally.

Brightcove powers Itv's short form websites and apps for shows including good morning Britain Love Island News and sports content.

<unk> renewed and grew its contract with Brightcove to continue to deliver flawless video to its millions of viewers.

Gamestop is a videogame consumer electronics and gaming merchandise retailer and longtime brightcove customer.

In the third quarter, we added 16 partners globally.

We continue to add partners in the events and production space, including Leno's visible brand live ovation and encore.

We also added new partners in India, Latin America, and EMEA to expand our geographical reach these partners add value for our customers using brightcove world class streaming technology.

Our referral partner program and Master license program allow brightcove to fit into our partners' business models, enabling us to expand our reach through our partners existing customer basis.

All of these partners shifted from competing platforms to the Brightcove platform. This past quarter, not only due to our superior technology and global reach but because we recognize the importance of a highly responsive support team.

Deborah Chong Leno software CEO said quote a video player in streaming service can make or break an event we.

Integrated Brightcove broadcast quality video capabilities into our hybrid event marketing platform to guarantee our clients reliability high fidelity and a scalable video solution.

<unk> customers can now power up branded event engagement for employees customers partners and prospects seamlessly incorporating video to engage inspire and deliver sales ready lead generation enterprise wide and quote.

We know video drives business and we know our customers benefit from deploying Brightcove video.

To better help our sales organization show Brightcove total economic benefits, we commissioned Forrester consulting to conduct two total economic impact or <unk> studies.

One focused on media organizations and the other enterprise companies for the Enterprise study the decision maker of interviews and financial analysis found that a composite enterprise organization, using brightcove technology experiences and ROI of 225% over three years.

The interviewed decision makers shared that in their organizations legacy state.

Had limited visibility and control over their video content.

Organizations struggle to syndicate video for consumption on multiple platforms in a timely manner.

And it took several weeks to process the content and they could not transco fast enough.

These decision makers now use brightcove as an asset in their customer journey to drive increased sales and additional revenue.

Turning to the media study the composite media organization, using Brightcove technology experiences and ROI of 226% over three years interviewee shared that their organization expanded their delivery to new markets and new devices using brightcove.

Brightcove allowed these organizations to quickly duck content to reach expanded geographies offering their services to entirely new audiences.

<unk> solutions did not provide an easy path to entering new markets.

We know we have the best technology, but now our sellers have further evidence to demonstrate this.

We hosted our best play ever ramped up innovation with the announcement of multiple new products increased our retention rates and signed many new partners worldwide. We continue to make progress on our key focus areas and are quickly addressing the areas that need additional improvement I'm confident in the team we have in place.

And our strategy and that we will achieve our long term financial goals.

I'd also like to take a moment to address the other news we released today relating to my eventual retirement from Brightcove.

I'm out of retirement to join Brightcove in 2018 to facilitate the transformation of Brightcove and to put the right team in place to lead the company to the next chapter in its growth.

While we are not fully satisfied with our current results and we know we have more work to do I have every confidence in our strategy and the great team we have built.

This approach ensures that our board will have enough time to find the right leader to continue and build upon this company's amazing opportunity.

The board has retained an executive search firm and has launched the search process for the new CEO with that let me turn the call over to Rob to walk you through the numbers Rob.

Thanks, Jeff as you mentioned, we still have a lot of work to do and now more than ever we need to focus on execution. So with that I would like to 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 2021.

Balanced geographic basis, we generated 56% of our revenue in North America during the quarter and 44% internationally breaking.

Breaking down international revenue, a little more Europe generated 19% of our revenue and Japan and Asia Pacific generated 25% 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 92, 8%, which was within our target range of low to mid Ninety's.

While we are pleased by the improvement over the first half performance, we'd like to see a few quarters in a row in our target range before we are satisfied.

Net revenue retention in the quarter was 95%, which compares to 98% in the second quarter of 2021 and 98% in the third quarter of 2020.

Since the beginning of 2019 net revenue retention is range from 92% to 100%.

As a reminder, we introduced net revenue retention last quarter to better align our reporting most leading SaaS companies.

Since net revenue retention is calculated on a trailing 12 month basis, there will be a natural lag before the improvements, we're making will be reflected in this metric.

We expect that as we continue to make improvements in our renewals business. This metric will consistently be with over 100% overtime.

Our customer count at the end of the third quarter was 3205.

Of which 2265 were classified as premium customers.

Looking at our results on a GAAP basis, our gross profit was $33 5 million operating loss was $233000 and net income per share was a loss of <unk> <unk> for the quarter.

Turning to our non-GAAP results, our non-GAAP gross profit in the third quarter was $34 1 million compared to $31 $5 million in the year ago period and represented a gross margin of 65%.

Which was up from 64% in the third quarter of 2020.

Subscription and support revenue represented approximately 94% of our total revenue and generated a 68% gross margin in the quarter.

Third to a 67% gross margin in the third quarter of 2020.

Improvement in gross margin throughout this year has been an area of strength for the business.

Through the first nine months of the year, we have grown subscription revenue by $12 million, while reducing the cost of subscription revenue by $403 million.

Reducing our Cogs has been one of our areas of focus for our R&D organization in 2021.

The success, we have had scaling subscription gross margin is providing additional resources to invest in our growth initiatives in the near term it will drive greater improvement in profitability as revenue growth accelerates in the future.

Non-GAAP income from operations was $2 $9 million in the third quarter compared to $4 $5 million in the third quarter of 2020.

Adjusted EBITDA was $4 $2 million in the third quarter compared to $5 9 million in the year ago period and above the high end of our guidance range.

Adjusted EBITDA margin was 8% in the quarter.

Turning to the balance sheet and cash flow, we ended the quarter with cash and cash equivalents of $45 $3 million, we generated $7 $4 million in cash flow from operations and free cash flow was $4 9 million after taking into account $2 $5 million in capital expenditures and capitalized internal use software.

I would like to finish by providing our guidance for the fourth quarter and the full year 2021.

For the fourth quarter, we are targeting revenue of $51 million to $52 million, including $1 $6 million of Overages and approximately $2 $2 million of professional services revenue from.

From a profitability perspective, we expect non-GAAP operating income the 1 million to $2 million and adjusted EBITDA to be between $2 2 million and $3 $2 million non.

Non-GAAP net income per share is expected to be in the range of two sets of <unk> based on 41 9 million weighted average shares outstanding.

For the full year, we are revising our full year outlook. We are now targeting revenue of $209 $5 million to $210 $5 billion, including $7 $7 million of Overages and approximately $12 million of professional services revenue.

This is down from our previous guidance of $211 million to $213 million.

From a profitability perspective, we expect non-GAAP operating income of $15 3 million to $16 $3 million and adjusted EBITDA to be between $25 million and $21 $5 million.

They are both within our previously provided guidance of $14 million of $17 million for non-GAAP operating income of $19 $1 million to $22 1 million for adjusted EBITDA.

Non-GAAP net income per share is expected to be in the range of 32 to 35.

Based on 42 million weighted average shares outstanding.

The full year, we are now targeting free cash flow of $6 $5 million to $7 $5 million down from our previous guidance of $7 million to $10 billion.

To wrap up we made progress in many of our key focus areas in the third quarter, but more work has to be done we are addressing the sales challenges that occurred and are confident we will begin to see positive impact of those changes in the coming quarters. Our belief in the long term opportunity has that changed and we are committed to delivering better top and bottom line performance for our shareholders.

With that we'll now take your questions operator, we are ready to begin Q&A.

Thank you and if he would like to ask a question. Please press star one on your telephone keypad.

Chantelle indicate your line is in the queue you May press star two.

He would like to remove your lines and thank you and for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star T is.

Our first question is from Steve Frankel with Colliers. Please proceed.

Good afternoon.

Jeff I'd like to dig in a little bit.

Lower expectations for Q4, so how much of that.

<unk>.

Sales disappointment in Q3 versus.

Higher churn and then on the sales front, maybe you could define for us is this.

New account issue is this an upsell cross sell issue, what's what's leading to this poor sales productivity, especially in Asia Pac.

Alright, Thanks, Steve good to hear from you.

Looking at all the aspects of this I think you've hit it.

That which impacted us the most this quarter with sales as Rob noted we are progressing with the renewals business in the right direction and I feel good about the progress that that team is making and the nature of the kinds of deals that were renewing I'm also thrilled that we have a lot more insight downstream on.

And the renewals business. So that is on the mend the big challenge with sales as I know it oversimplifies it but its consistent predictable execution. It's one of the key reasons why I'm happy that we promoted Brian Froylan, who ran Americas sales into the global job.

He is he's introducing that same rigor and discipline in the Asia Pac that he did for the Americas as he crawled through the pipeline and interviewed and spent time with literally each sales rep.

And looked at every deal.

And so we're not really getting any pushback.

The Asia Pac sales teams in getting this done so that's the most important one certainly we can improve around the world and you know me I'm never satisfied.

We've got a real disciplinarian now running sales.

And we are doing a much much deeper level of investigation and inspection of deals. We've also introduced some new technology that literally less us track the number of customer touches and prospect touches and so we know we have the data demonstrates that if you have touched a prospect and number of tie.

<unk>, so it's consistent and predictable execution on the sales side that will drive expansion, but it will also drive new logo acquisitions.

And in North America are you satisfied with your ability to upsell and cross sell on the enterprise side of the business or is there still a lot of work that needs to be done there.

Yeah, again, I'm never satisfied, but I feel that the Americas team is in pretty good control of their destiny.

Predictability.

The insight the hard data that we have to support that.

Puts us in a much much better position.

Yes.

And add to that.

Steve This is Rob just to add to that real quickly you mentioned in the script with the challenges really came on the upsell side, we actually had a really strong quarter.

New business acquisition, so well you don't necessarily see it roll through the customer count from a dollar perspective, we had a really strong new business in the quarter.

Okay.

That's debt.

That's good and walk us through the divergence between the two retention metrics.

Kind of where they thought they would directionally go the same way, but they deferred this quarter, so help us understand that.

Those contracts that were up for renewal and what happened in the quarter. The second metric that net revenue retention rate looks at the ECB of every customer that has.

That was a customer 12 months ago.

What the retention of that is so it includes upsells throughout the course of the contract any deals that are sold are downgraded throughout so that.

That net revenue retention rate will catch up it's just a lagging indicator.

And I will take a couple of quarters to catch up.

Okay.

Jeff the fundamentally still believe this is a business that can grow double digits.

Absolutely, perhaps I've never felt better about it.

I don't like the performance right now any any better than anyone else, but when you look at the underlying strength of the business.

And the work that we've done, especially in the last six months to reconfirm and re validate that we have the right target market that it's a sizeable target market and that we're bringing really new innovative products to that market.

Feel great about it I also just see it in the energy and excitement of the core staff that team that works directly for me.

We are putting more products out more innovation out than ever before.

Obviously, we would love to be able to ship everything tomorrow. It will take a little while to get those out the door, but everything we see says that we're heading in the right direction I'll give you just just one example of why I feel good about that we noted net app and their launch of net Apple TV and what they're doing is not unlike.

What salesforce did with their television.

In this case.

Took a true OTT approach so it will send videos to any device anywhere. So it's much more robust and open then what sales force is doing.

Get it they understand what the future of connections is video that the days of people sitting and reading static screens or looking at graphics or images are fast growing behind and they get it.

So when they first approached us about this.

Back in the spring it was a perfect time for us to talk because we were well underway in developing Corp television.

Also we're thrilled with the work that we've been done that has been done.

For for our marketing studio.

Expert to get help to do things and what we're doing with marketing studio will make it easy for anyone who needs to deploy video to do marketing campaigns and communication to be able to do that it will no longer be in the hands of the video expert and then certainly we announced prior to two.

Play TV.

The developers marketplace and I was just I was so encouraged by the fact that we had 40 developers around the world.

Okay, Great and then one last quick one for Rob.

We're just in the quarter.

Overages were about $1 7 million.

Okay, great. Thank you.

Yes.

As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Aaron Martin of <unk> with Lake Street Capital markets. Please proceed.

Yes, I wanted to focus on the Q4 outlook here if I have this right it looks like the <unk>.

A description business.

Relatively flat given the services guidance and I would've expected that given your color there Rob.

New sales.

Going out help me understand why the subscription line would be relatively flat at the midpoint.

The two quarters.

Yeah, Eric there's two pieces there one is a small headwind.

We're bringing that down to a $1 $6 million and the second piece is my comment around new business was net new customers and so the net new logos, where we were challenged in the quarters on the upsell side. So from a dollar perspective. It was the Upsells that gave us the challenge in the quarter.

Okay.

Look at your the premium customer count, though I've got that actually and I guess it is a net number but I see that declining sequentially.

I guess, it's just a question of not all customers created equal.

The color here.

Yes, that's the 100% right when you think about it and you put it in conjunction with our ARPA, we continue to drive stronger customers and the ability to grow our customers. So you see that growth happening on the <unk> side again customer count is not something we focused on.

We understand that it's critical over time to get that number moving in the right direction, but we're really focused on maximizing dollars and share of wallet from our existing customers and from those customers that do come up.

Okay and then.

Jeff you.

You talked a little bit about your kind of moving on here at the end of the year and test driving retirement again I can't remember if it was golfing or fishing.

You did or didn't do but.

I know you've got to leave.

Leaving with some regrets given what you saw the potential as you came aboard back little over three years ago, but just kind of if you could get retrospect little bit introspective for a moment.

One or two things that maybe you would focus on more intently or done differently.

You've been in the seat now for three and a half years.

What is it that's kind of kept this this company from from realizing the full potential that you talked about coming out of play 2021.

It's pretty it's a great question. Thanks, I try not to spend too much time looking over my shoulder, it's kind of dangerous to do.

And I live in Florida, and quite frankly, when you go out with people around here. They spent a lot of time talking about in the past.

It's a freaky place to be.

I'll just stay with what I shared in the last quarter and that is I should have jumped on the renewals much more aggressively the day I walked in the door.

More than anything else that has been I think a real source of frustration that being said awesome team running it like I said, just tsi a recognized again.

Great insight into the underlying health of the relationships with our customers that we just didn't have before I sit on a lot of those reviews with customers and I feel very good about that and I'm just kicking myself because I should have just been much more aggressive.

I was paying attention to it.

But I think I was a little too trusting.

And I just didn't move fast enough on the renewables business on innovation I feel great about it we've dramatically grown the R&D engineering head count around the world and we're putting more innovation each quarter than I would challenge that we did in a year's time before I arrived and you certainly saw the evidence of that with.

What we with what we delivered at play TV sorry.

Sorry. This is the joy of doing this at home.

So we have a dog that barks that everyone, who walks in the door.

So I feel great about that sales execution consistency.

Consistency I think is the biggest.

<unk>, they're consistent and predictable and as I said, Brian definitely have that under control and we will see that.

Deliver the kind of results we need.

And I'm not going anywhere I've I've, given the worlds longest notice period.

The board its.

14 months.

And youre going to be a consultant for our for all of 2022. So.

Definitely picked up on that.

Lastly, the shares are weak here after hours it looks like they're a little below $10.

The balance sheet is there a as a board talk at all about perhaps using the balance sheet.

I back more aggressively I can't recall I think you have one in place, but what's the thinking on use of cash for the money that you've got on the balance sheet.

Yes.

It never comes up Rob Let me go first man yeah.

Alright.

Rob was coming and he may answer either on that one.

It does not come up period, and we just had our board meeting yesterday, it does not come up.

We are now in a position where we're in an enviable position, where we're EBITDA positive cash flow positive generating cash and building a bigger war chest I wanted to see the equity go up of course, because thats the gear effect for the war chest that lets us do a lot more M&A.

But know that that is absolutely not in the cards whatsoever. We wanted to invest in the things that will grow the business not just taking shares off the off the street.

Wanted to clarify you said that.

I'll be on the sidelines in 2022.

I want to make sure that we all understand I will stay in this role through the end of 2022 some.

Sometime between now and then if and when the new CEO is appointed.

I'll step out of this role I'll be I'll be reporting to the CEO and whatever capacity I can help that person and I will continue to be unemployed of the business through the end of 2022. This gives the board all the time in the world to get exactly the right person into the job.

I understand I appreciate that clarification.

Yes.

Okay, Rob do you want to jump in and correct anything I said.

No you said it all Jeff.

That's averse.

Our next question is from Sharon <unk> with Northland Capital. Please proceed.

Hi.

I am Shannon on behalf of Mike Latimore.

Well I have two questions for you today, one how is the demand isn't related to the last nine or 12 months ago and the media segment. The main focus of good afternoon. It into your network.

Great I'll start with that Rob feel free to breakdown. So the first is where is the evolution of events, especially as where we are.

Thankfully finally, starting to wind down from from Covid, and where does that go and I'll be happy to comment on that and the second is media in terms of its priority and retention.

Cover that correctly.

Yes, that's right.

Great. Thanks, and please give mike or best.

Events a.

A year ago.

We were discussing this and last year's earnings calls Covid compressed the adoption cycle and so we saw things happening in a fraction of the time that we normally saw it and certainly we benefited from that we saw a significant improvement and growth in events, we were careful to make sure that the kind of events.

<unk> that we were doing would give us an opportunity to have an ongoing relationship with customers as we come out.

Of Covid and that has not changed one bit certainly the events activity has calmed down quite a lot, but we've got a much much larger set of candidates now and prospects for going back into and building more relationships and that's one of the reasons why I'm. So excited about the new products.

It will be bringing to market early next year.

Its mission critical for them and we enjoy the fact that we are kind of on that high end of when it really has to be perfect and flawless and broadcast quality, we're the ones to do business with.

Things are great because by by building technology that satisfies big media companies. We know we can handle anything that an enterprise may want to throw at us and we see that over and over again.

<unk> in our wins.

Okay. Thank you and my next question is.

On the churn rate so I believe sometimes when you get customers give you a full wanting and Doug what goes about whether they return in the next year did you get any notable ones this year.

No.

I haven't seen anything notable that changes anything again I feel good about the fact that we have more insight than we've ever had before and that it's earlier insight.

So that we can can act preemptively.

And certainly we saw that with the renewal of the southern network that was a great example of a really really big.

Renewal they signed up for two years instead of the traditional one.

And ITV which was another really big renewal that was very very competitive.

So I feel very very good about progress we've made there again, we need to do a lap so that we know that we are back in control.

The recurring revenue business, we're not there yet.

Okay.

Thank you.

We have reached the end of our question and answer session I would like to turn the conference back over to Jeff Ray for closing comments.

Thank you operator, thank you everyone for joining US again, I'm grateful that you are safe and sound.

As I said the job is not done.

If there is anything that you should take away from the announcement of my departure in 14 months.

It is that we will act with even greater urgency driving topline growth.

Proving our renewals business and getting these exciting new products to market. Thank you and stay safe.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Q3 2021 Brightcove Inc Earnings Call

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