Brightcove Announces Financial Results for Fourth Quarter and Fiscal Year 2018

BOSTON–(BUSINESS WIRE)–Brightcove
Inc. (Nasdaq: BCOV), the leading provider of cloud services for
video, today announced financial results for the fourth quarter and
fiscal year ended December 31, 2018.

“In the fourth quarter Brightcove continued to execute on the strategic
priorities it has targeted to generate stronger, more consistent revenue
growth and profitability. The Company has accomplished much in 2018 and
is in a far stronger position to achieve its long-term objectives than
when we entered the year,” said Jeff Ray, Brightcove’s chief executive
officer.

Ray added, “Brightcove enters 2019 with a clear market focus, a robust
product development pipeline and a new go-to-market strategy focused on
driving faster sales velocity. Our clear leadership in a dynamic,
fast-growing, multi-billion dollar marketplace provides ample
opportunity for the company to be successful.”

Fourth Quarter 2018 Financial Highlights:

• Revenue for the fourth quarter of 2018 was $40.9 million, an
  increase of 2% compared to $40.1 million for the fourth quarter of
  2017. Subscription and support revenue was $37.8 million, an increase
  of 2% compared to $36.9 million for the fourth quarter of 2017.
• Gross profit for the fourth quarter of 2018 was $24.4 million,
  representing a gross margin of 60% compared to a gross profit of $23.8
  million for the fourth quarter of 2017. Non-GAAP gross profit for the
  fourth quarter of 2018 was $24.8 million, representing a non-GAAP
  gross margin of 61%, compared to a non-GAAP gross profit of $24.5
  million for the fourth quarter of 2017. Non-GAAP gross profit and
  non-GAAP gross margin exclude stock-based compensation expense and the
  amortization of acquired intangible assets.
• Loss from operations was $2.5 million for the fourth quarter of
  2018, compared to a loss from operations of $1.3 million for the
  fourth quarter of 2017. Non-GAAP operating income, which excludes
  stock-based compensation expense, the amortization of acquired
  intangible assets and merger-related expense, was $237,000 for the
  fourth quarter of 2018, compared to non-GAAP operating income of $1.3
  million during the fourth quarter of 2017.
• Net loss was $2.6 million, or $0.07 per diluted share, for the
  fourth quarter of 2018. This compares to a net loss of $1.4 million,
  or $0.04 per diluted share, for the fourth quarter of 2017. Non-GAAP
  net income, which excludes stock-based compensation expense, the
  amortization of acquired intangible assets and merger-related expense,
  was $147,000 for the fourth quarter of 2018, or $0.00 per diluted
  share, compared to non-GAAP net income of $1.3 million for the fourth
  quarter of 2017, or $0.04 per diluted share.
• Adjusted EBITDA was $1.4 million for the fourth quarter of
  2018, compared to adjusted EBITDA of $2.3 million for the fourth
  quarter of 2017. Adjusted EBITDA excludes stock-based compensation
  expense, merger-related expense, the amortization of acquired
  intangible assets, depreciation expense, other income/expense and the
  provision for income taxes.
• Cash flow from operations was $2.8 million for the fourth
  quarter for 2018, compared to $5.2 million for the fourth quarter of
  2017.
• Free cash flow was $2.1 million after the company invested
  $682,000 in capital expenditures and capitalization of internal-use
  software during the fourth quarter of 2018. Free cash flow was $4.2
  million for the fourth quarter of 2017.
• Cash and cash equivalents were $29.3 million as of December 31,
  2018 compared $26.9 million at September 30, 2018.

Full Year 2018 Financial Highlights:

• Revenue for the full year 2018 was $164.8 million, an increase
  of 6% compared to $155.9 million for 2017. Subscription and support
  revenue for 2018 was $150.9 million, an increase of 5% compared to
  $143.2 million for 2017.
• Gross profit was $98.2 million for 2018, representing a gross
  margin of 60%, compared to $91.3 million for 2017. Non-GAAP gross
  profit was $100.6 million for 2018, representing a non-GAAP gross
  margin of 61%, compared to $94.0 million for 2017. Non-GAAP gross
  profit and non-GAAP gross margin exclude stock-based compensation
  expense and the amortization of acquired intangible assets.
• Loss from operations was $13.1 million for 2018, compared to a
  loss from operations of $19.7 million for 2017. Non-GAAP loss from
  operations, which excludes stock-based compensation expense, the
  amortization of acquired intangible assets, executive severance and
  merger-related expense, was $2.2 million for 2018, compared to
  non-GAAP loss from operations of $9.0 million for 2017.
• Net loss was $14.0 million, or $0.39 per diluted share, for
  2018. This compares to a net loss of $19.5 million, or $0.57 per
  diluted share, for 2017. Non-GAAP net loss, which excludes stock-based
  compensation expense, the amortization of acquired intangible assets,
  executive severance and merger-related expense, was $3.1 million for
  2018, or $0.09 per diluted share, compared to non-GAAP net loss of
  $8.8 million for 2017, or $0.26 per diluted share.
• Adjusted EBITDA was $2.3 million for 2018, compared to an
  adjusted EBITDA loss of $4.5 million for 2017. Adjusted EBITDA
  excludes stock-based compensation expense, executive severance,
  merger-related expense, the amortization of acquired intangible
  assets, depreciation expense, other income/expense and the provision
  for income taxes.
• Cash flow from operations was $2.6 million for 2018, compared
  to cash flow used in operations of $6.4 million for 2017.
• Free cash flow was negative $2.0 million after the company
  invested $4.5 million in capital expenditures and capitalization of
  internal-use software during 2018. Free cash flow was negative $10.6
  million for 2017.

A Reconciliation of GAAP to Non-GAAP results has been provided in the
financial statement tables included at the end of this press release. An
explanation of these measures is also included below under the heading
“Non-GAAP Financial Measures.”

Other Fourth Quarter and Recent Highlights:

• Average annual subscription revenue per premium customer was $75,000
  in the fourth quarter of 2018, excluding starter customers who had
  average annualized revenue of $4,500 per customer. This compares to
  $73,000 in the comparable period in 2017.
• Recurring dollar retention rate was 104% in the fourth quarter of
  2018, which was well above our historical target of the low to mid-90
  percent range.
• Ended the quarter with 3,783 customers, of which 2,226 were premium.
• New customers and customers who expanded their relationship during the
  fourth quarter include: HOOQ, McCormick and Co., Reelz, Adobe, AMC
  Entertainment, Forbes Media, MVMNT TV, Ascension Health, Bibel TV,
  TaTatu, Rajasthan Patrika Private Limited, DNV GL, among others.
• Brightcove was named, for a second consecutive time, a Leader in
  Gartner’s Magic Quadrant for Enterprise Video Content Management.
  Brightcove was positioned highest on the ability to execute axis
  within the entire Magic Quadrant.
• Rick Hanson joined Brightcove as Chief Revenue Officer, a new role for
  the company. Hanson will oversee the global sales organization
  including all customer facing direct sales, channel sales, and
  professional services organizations. He joins the company after
  previous sales management roles at CA Technologies, HP, RSA and
  Skyport Systems.

Business Outlook

Based on information as of today, February 13, 2019, the Company is
issuing the following financial guidance. Please note that this guidance
does not incorporate the recently announced signing of a purchase
agreement for the Ooyala OVP business, which we expect to close in the
first half of 2019.

First Quarter 2019:

• Revenue is expected to be in the range of $40.0 million to
  $40.5 million, including approximately $2.7 million of professional
  services revenue.
• Non-GAAP loss from operations is expected to be in the range of
  $900,000 to $1.4 million, which excludes stock-based compensation of
  approximately $1.6 million and the amortization of acquired intangible
  assets of approximately $400,000.
• Adjusted EBITDA is expected to be in the range of an Adjusted
  EBITDA loss of $200,000 to generating Adjusted EBITDA of $300,000,
  which excludes stock-based compensation of approximately $1.6 million,
  the amortization of acquired intangible assets of approximately
  $400,000, depreciation expense of approximately $1.2 million and other
  income/expense and the provision for income taxes of approximately
  $300,000.
• Non-GAAP net loss per diluted share is expected to be $0.03 to
  $0.05, which excludes stock-based compensation of approximately $1.6
  million and the amortization of acquired intangible assets of
  approximately $400,000, and assumes approximately 36.7 million
  weighted-average shares outstanding.

Full Year 2019:

• Revenue is expected to be in the range of $168.0 million to
  $172.0 million, including approximately $11.1 million of professional
  services revenue.
• Non-GAAP income from operations is expected to be in the range
  of breakeven to $3.0 million, which excludes stock-based compensation
  of approximately $6.9 million and the amortization of acquired
  intangible assets of approximately $1.6 million.
• Adjusted EBITDA is expected to be in the range of $5.2 million
  to $8.2 million, which excludes stock-based compensation of
  approximately $6.9 million, the amortization of acquired intangible
  assets of approximately $1.6 million, depreciation expense of
  approximately $5.2 million and other income/expense and the provision
  for income taxes of approximately $1.1 million.
• Non-GAAP net income/loss per diluted share is expected to be a
  loss of $0.03 to income of $0.05, which excludes stock-based
  compensation of approximately $6.9 million and the amortization of
  acquired intangible assets of approximately $1.6 million, and assumes
  approximately 38.6 million weighted-average shares outstanding.

Conference Call Information

Brightcove will host a conference call today, February 13, 2019, at 5:00
p.m. (Eastern Time) to discuss the Company’s financial results and
current business outlook. A live webcast of the call will be available
at the “Investors” page of the Company’s website,
http://investor.brightcove.com. To access the call, dial
877-407-3982 (domestic) or 201-493-6780 (international). A replay of
this conference call will be available for a limited time at
844-512-2921 (domestic) or 412-317-6671 (international). The replay
conference ID is 13686457. A replay of the webcast will also be
available for a limited time at http://investor.brightcove.com.

About Brightcove

Brightcove
Inc. (NASDAQ:BCOV) is the leading global provider of powerful cloud
solutions for managing, delivering, and monetizing video experiences on
every screen. A pioneering force in the world of online video since the
company’s founding in 2004, Brightcove’s award-winning technology,
unparalleled services, extensive partner ecosystem, and proven global
scale have helped thousands of companies in over 70 countries achieve
better business results with video. To learn more, visit www.brightcove.com.

Forward-Looking Statements

This press release includes certain “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995,
including statements concerning our financial guidance for the first
fiscal quarter of 2019 and full year 2019, our position to execute on
our growth strategy, and our ability to expand our leadership position
and market opportunity. These forward-looking statements include, but
are not limited to, plans, objectives, expectations and intentions and
other statements contained in this press release that are not historical
facts and statements identified by words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or
words of similar meaning. These forward-looking statements reflect our
current views about our plans, intentions, expectations, strategies and
prospects, which are based on the information currently available to us
and on assumptions we have made. Although we believe that our plans,
intentions, expectations, strategies and prospects as reflected in or
suggested by those forward-looking statements are reasonable, we can
give no assurance that the plans, intentions, expectations or strategies
will be attained or achieved. Furthermore, actual results may differ
materially from those described in the forward-looking statements and
will be affected by a variety of risks and factors that are beyond our
control including, without limitation: our history of losses; the timing
and successful integration of the Ooyala acquisition; expectations
regarding the widespread adoption of customer demand for our products;
the effects of increased competition and commoditization of services we
offer, including data delivery and storage; our ability to expand the
sales of our products to customers located outside the U.S.; keeping up
with the rapid technological change required to remain competitive in
our industry; our ability to retain existing customers; our ability to
manage our growth effectively and successfully recruit additional
highly-qualified personnel; the price volatility of our common stock;
and other risks set forth under the caption “Risk Factors” in our most
recently filed Annual Report on Form 10-K, as updated by our
subsequently filed Quarterly Reports on Form 10-Q and our other SEC
filings. We assume no obligation to update any forward-looking
statements contained in this document as a result of new information,
future events or otherwise.

Non-GAAP Financial Measures

Brightcove has provided in this release the non-GAAP financial measures
of non-GAAP gross profit, non-GAAP gross margin, non-GAAP income (loss)
from operations, non-GAAP net income (loss), adjusted EBITDA and
non-GAAP diluted net income (loss) per share. Brightcove uses these
non-GAAP financial measures internally in analyzing its financial
results and believes they are useful to investors, as a supplement to
GAAP measures, in evaluating Brightcove’s ongoing operational
performance. Brightcove believes that the use of these non-GAAP
financial measures provides an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing its
financial results with other companies in Brightcove’s industry, many of
which present similar non-GAAP financial measures to investors. As
noted, the non-GAAP financial results discussed above of non-GAAP gross
profit, non-GAAP gross margin, non-GAAP income (loss) from operations,
non-GAAP net income (loss) and non-GAAP diluted net income (loss) per
share exclude stock-based compensation expense, the amortization of
acquired intangible assets, executive severance and merger-related
expenses. The non-GAAP financial results discussed above of adjusted
EBITDA is defined as consolidated net income (loss), plus stock-based
compensation expense, the amortization of acquired intangible assets,
executive severance, merger-related expenses, depreciation expense,
other income/expense, including interest expense and interest income,
and the provision for income taxes. Executive severance represents
severance paid to the former interim CEO of the company as well as
former key executives. Merger-related expenses include fees incurred in
connection with an acquisition. Non-GAAP financial measures have
limitations as an analytical tool and should not be considered in
isolation from, or as a substitute for, financial information prepared
in accordance with GAAP. Investors are encouraged to review the
reconciliation of these non-GAAP measures to their most directly
comparable GAAP financial measures. As previously mentioned, a
reconciliation of our non-GAAP financial measures to their most directly
comparable GAAP measures has been provided in the financial statement
tables included below in this press release. The Company’s earnings
press releases containing such non-GAAP reconciliations can be found on
the Investors section of the Company’s web site at http://www.brightcove.com.

Contacts

Investors:
ICR for Brightcove
Brian Denyeau,
646-277-1251
brian.denyeau@icrinc.com
or
Media:
Brightcove
Meredith
Duhaime
mduhaime@brightcove.com