Brightcove, a provider of cloud services for video, reported revenue for the second quarter of 2016 of $37 million, a 13% increase over the second quarter of 2015, and a 1.9% increase over the preceding quarter, Q1 2016. The revenue result was above management’s guidance of $35.8 million to $36.3 million issued during the first quarter of 2016.
Commenting on the results, David Mendels, Chief Executive Officer at Brightcove stated, “Brightcove delivered strong second quarter results that met or exceeded our expectations from both a revenue and profitability perspective. We are excited by the positive momentum we are seeing across our business, highlighted by the signing of multi-year, multi-million dollar contracts with two media customers, including our first 8 figure contract.”
During Brightcove’s subsequent call with earnings analyst, Mr. Mendels elaborated on the two media deals (noted above) landed during the quarter. Both are large Japanese media companies (no additional details were provided). One of the deals has a total committed value of more than $10 million over a 3.5 year period.
Brightcove provides services across several industry verticals including media. Management disclosed its media business represented 51% of revenue for the quarter. This compares to 46% during Q2 2015 and 51% Q1 2016. These figures imply a year-over-year growth in the media vertical of 24.7% by Brightcove.
It is important to note Brightcove maintains a broad definition of media. New or expanded customers in the media segment for the quarter included AMC and OTT service provider Pluto TV, as well as organizations such as Woven Digital and Yelp.
Gross margins for the quarter were 64%, a slight decline versus the 64.8% gross margins during Q2 2015, and a slight increase over the 63.4% gross margins from the preceding quarter.
Brightcove recorded a loss from operations of $2.2 million for the second quarter of 2016, compared to a loss of $3.2 million for Q2 2015, and a loss of $1.5 million in Q1 2016.
Net loss was $2.4 million for the quarter or $0.07 per diluted share. This compares to a net loss of $3.6 million or $0.11 per diluted share in Q2 2015 and a net loss of $1.6 million or $0.05 per diluted share in the preceding quarter, Q1 2016.
While Brightcove is not generating an accounting profit, it is generating cash. Operating cash flow for the quarter was $2.0 million, an increase over the $385,000 generated during Q2 2015. In the preceding quarter, Q1 2016, operating cash flow was $2.9 million.
Revenue by Customer Type:
During the quarter, 95% of Brightcove’s revenue came from the Company’s premium offerings versus its volume offerings. The volume offerings consist of Video Cloud express customers and Zencoder customers on month-to-month and pay-as-you-go contracts.
For the quarter the number of premium customers increased to 1,926 (as of June 30, 2016) from 1,910 at the end of the first quarter. Average revenue per premium customer was $69,000 in the quarter, an increase of 8% when compared to last year’s quarter, and flat versus the first quarter of 2016.
Revenue by Service Type:
- Subscription and support revenue contributed $35.1 million in the quarter, an increase of 10% versus the year-earlier period, and a 1.2% increase over the preceding quarter. On a percentage basis, Subscription and support revenue accounted for almost 95% of revenue in quarter. This compares to 97.1%% of revenue for Q2 2015 and 95.5% for Q1 2016.
- Professional services revenue was $1.9 million during the quarter, an increase of 101.9% over Q2 2015, and a 19% increase over Q1 2016. As a percentage of sales, Professional services contributed 5% of the total revenue for the quarter. For Q2 2015, professional services accounted for 2.9% of sales and during Q1 2016 it was 4.5% of sales.
Revenue by Geography:
- Revenues in North America were $22.6 million for the quarter, an increase of 7.4% against the year-over-year period, and a 1.9% decrease versus the preceding quarter. As a percentage of sales, North America was responsible for 61.2% of Brightcove’s revenue in the quarter, compared to 64.1% in Q2 2015 and 63.4% in Q1 2016.
- The European region contributed $6.4 million, a decrease of 1.6% versus Q2 2015, and a 5.3% increase when compared to the preceding quarter. On a percentage basis, Europe accounted for 17.2% of total sales during Q2 2016, in comparison to 19.6% in Q2 2015, and 16.7% during Q1 2016.
- Revenues in Asia Pacific (including Japan) were $7.7 million for the quarter, a 57.3% increase over Q2 2015, and a 12.2% increase against the preceding quarter. Asia-Pacific represented 20.8% of total sales in the quarter, compared to 14.9% during Q2 2015 and 18.4% in Q1 2016.
Operating Expenses by Type:
- Research and development (“R&D”) expenses were $7.3 million in the quarter, flat versus Q2 2015, and a decrease of 1.3% against the preceding quarter. Expressed as a percentage of total sales, R&D costs were 19.6% of revenue in the quarter, which compares to 22.1% during Q2 2015 and 20.4% in Q1 2016
- Sales and marketing (“S&M”) costs were $13.9 million for Q2 2016, a 17.4% year-over-year increase and an 11.2% sequential increase. S&M was 37.8% of total sales during the quarter. In the year-earlier period S&M was 36.3% of sales, and for the preceding quarter S&M represented 34.5% of total sales
- General and administrative (“G&A”) expenses were $4.5 million during the quarter, a decrease of 13.9% from the year-earlier period and flat against the preceding quarter. In terms of overall revenue, G&A was 12.1% of sales in Q2 2015. This compares to 15.8% in Q2 2015 and 12.6% in Q1 2016
As of the end of the quarter on June 30, 2016 Brightcove’s cash, cash equivalents, and investments was $30.2 million. It was $29.3 million at March 31, 2016.
The Company finished the quarter with 450 employees. At this same time last year, Brightcove had 420 employees.
Management is providing revenue guidance for the upcoming third quarter of 2016 in the range of $37.0 million to $37.5 million.
Also as part of the earnings release, Management raised 2016 revenue guidance. For the full year, revenue is now anticipated in the range of $148.3 million to 149.3 million. If achieved, this revenue ranges would represent annual year-over-year growth of 10% to 11%.
Press Release: Brightcove Q2 2016 Earnings Release
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