Good afternoon and welcome to Brightcove's Third Quarter 2024 Earnings Presentation. Today, we'll discuss the results announced in our press release issued after the market closed.

During today's presentation, we will make statements related to our business that may be considered forward-looking and are made pursuant to these Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, including statements concerning our financial guidance for the fourth fiscal quarter of 2024 and the full-year 2024, expected revenue, profitability and cash flow, our potential 2025 business performance, 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, or similar indications of future expectations. These statements reflect management's beliefs 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, uncertainties, and changes in circumstances that are difficult to predict and many of which are outside of our control.

For a discussion on 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 subsequent SEC filings. Also, during the course of today's presentation, we will refer to certain non-GAAP financial measures.

There is a reconciliation schedule showing the most directly comparable GAAP financial measures versus non-GAAP measures available in our press release issued after market close today, which can be found on our website at www.brightcove.com..

Thank you all for joining today. I'm Marc DeBevoise, CEO at Brightcove, and with me today is John Wagner, Brightcove's CFO.

As always, we are pleased to be streaming this to you on our own video cloud platform, and today we'll discuss our third quarter results as well as provide an update on our strategic progress and view for the remainder of 2024 and beyond.

I'll begin with a quick overview of the strong financial results we delivered in Q3, which were meaningfully above the high end of our guidance range on both top and bottom line. Total revenue for Q3 was $49.9 million, well above the high end of our guidance range of $48 million to $49 million.

This better-than-expected performance showed growth over 1% sequentially. Similarly, revenue excluding overages was $48.4 million, also better-than-expected and showed 1% sequential growth.

Adjusted EBITDA was $5.1 million meaningfully above the high end of our guidance range of $2.5 million to $3.5 million and up significantly, nearly 35% quarter-over-quarter. This also represents a 10% adjusted EBITDA margin.

We generated $1.6 million of free cash flow and have increased our cash balance every quarter this year now to $27 million, up $8 million since the beginning of the year. This was a good quarter.

I'm pleased with the consistent performance of the business this year as we have hit or exceeded the high end of our guidance on both revenue and adjusted EBITDA each quarter in 2024. And as John will hit on later, based on our performance year-to-date and outlook for Q4, we are raising our full-year guidance on both the top and bottom line today.

The top end of our revenue range is now $700,000 above the top of our initial range set earlier this year, and the midpoint is now $1.7 million higher.

Our beat and raise here is even more pronounced on adjusted EBITDA where the top end of our revised range is now $1.8 million above the top end of our initial range, and the midpoint is over $2 million higher.

Ensuring we consistently deliver on or beat our financial targets has been a key priority, and I would like to thank our teams at Brightcove for making this a reality. I think it's important to note some of the key attributes of our anticipated performance this year.

First, we have committed to delivering meaningful profitability and to drive improved efficiency across the company in any revenue scenario. We've done a really good job on this regard. We now expect revenue to be only down fractionally, but we will have grown adjusted EBITDA 40% to 50% even faster than we expected at the beginning of the year.

We have done this by focusing on improving the efficiency of our delivery and systems, which has lowered the cost of goods sold, as well as rigorously evaluating and managing our spending across the business. Second, it's important that this adjusted EBITDA profitability improvement translate to free cash flow.

We are pleased to be tracking well to our full-year cash targets and noting the sizable growth we have seen in our cash balance as a result. Third, we've continued to progress in building the long-term stability of our business.

This has been mainly supported by our focus on longer term deals, leaving less up for renewal in any given quarter and our move up market where customers are more apt to do larger, longer deals with us. Our record long-term backlog and record ARPU this quarter both demonstrate how this is working.

And lastly, we have continued to invest in innovation that we believe will return the business to topline growth over time. I'll talk more about this in a moment, but we continue to see a number of opportunities to create more value for customers and generate future revenue growth over time with new products and solutions.

Let me provide you with some color on our business and sales performance in Q3. Overall, it was in line with our expectations and was up slightly compared to our trailing four quarters average and similar to the second quarter.

From a new business perspective, we had our best quarter of the year so far and saw a meaningful improvement from Q2 and similar performance to a very strong Q3 last year.

We had a good mix of wins across the business with some specific strength in our international media business and continued success against our goal of signing larger new business transactions. More specifically, new business in Q3 was up over 50% quarter-over-quarter and up 20% versus the trailing four quarters average.

Average annual contract values for new business were up nearly 50% year-over-year and over 90% quarter-over-quarter and versus our trailing four quarters average. As we talked about last quarter, overall demand trends have remained solid and our team did a better job proactively working with customers to complete deals in a timely fashion.

Driving consistent execution in new business is a key priority and I feel better about our execution in this area given our Q3 performance. Our add-on sales performance was up modestly about 5% year-over-year, albeit down compared to the very strong performance we saw in Q2.

We are seeing continued progress in building up our cross-sell and upsell motion, especially with our expanding portfolio of enterprise solutions.

Marketing and communication studio activity is increasing along with our .TV thought leadership marketing solution and we are also pleased with the initial traction we have with our new sales use case offering set for a more formal launch later this quarter, which I'll discuss in more detail shortly.

These solutions used as upsell and cross-sell as a critical part of our long-term strategy to deliver more diversified consistent growth. In terms of entitlements, we saw a similar dynamic to last quarter with some customers starting to add to their entitlement levels while others continuing to rightsize as contracts renew.

Positively, we now believe we are in a position to say that we expect the pressure from entitlement downgrades to subside in 2025. We have now worked through almost all of the largest entitlement customers and feel like the large majority of our media customers are at or near the right entitlement levels.

While there's always risk of specific customer entitlement pressure or specific customer churn from M&A in this market, we believe the pieces are in place for retention to improve in 2025. Generally, we believe the add-on business will likely be an area of strength for us in the fourth quarter as we move into next year.

I'd like to mention some of the exciting new business add-on renewal deals we signed in Q3 across a wide range of industries and geographies with some incredible companies.

On the enterprise side of the business, select new business customers included Pharma company, Parexel, J&J spin-off, Kenvue, Japanese drugstore company, Sugi Holdings, Korean HR Solutions company, Wanted Lab; and German exhibition company, Messe Frankfurt.

Select enterprise renewals and add-ons included Abbott Labs, Acquia, Apollo, Broadcom, Chick-fil-A, Deloitte, Dentsu, HP, Palo AltoNetworks, Pegasystems, Marriott, Nomura, Rakuten, S&P Global, ServiceNow, UnitedHealthcare and Wendy's just to name some of the deals we've completed in the quarter.

On the media side, select new business customers included international media company, Antenna Group with numerous properties across Central and Eastern Europe in a deal to power their ANT1+ streaming service. Philippine media and entertainment company TAP Digital Media to power their Blast TV streaming service.

A next set as we like to call them, U.S. streaming service, and now that's TV Plus moving to our OTT platform and powering streaming for the U.S. leading sports entity, The Premier Lacrosse League. Additionally, now we are able to mention that the large U.S. broadcaster win we mentioned in Q2, was actually the CW Network.

This multi-year seven figure dollar win was driven by superior technical feature set, the superior speed of our platform and an attractive total cost of ownership relative to its previous solutions and other competitive offerings.

This is a classic core media use case for Brightcove, where the CW will be utilizing our platform across their video value chain. Renewals and add-ons in the media sector also included leading Japanese Telco, KDDI to power a new live streaming use case across the U.S.

and Japan; leading Hispanic audience streamer, Canela Media; leading subscription service provider, Gaia, along with other major brands including BBC Studios, This Old House, Fremantle, Carnegie Hall, and The Academy of Motion Picture Arts and Sciences among others.

From a product perspective, we had a major announcement this quarter with the release of Brightcove's AI suite. Overall, we now believe AI will be a meaningful accelerant to our business in the coming years, especially our enterprise business, mainly from the volume of video that will be created via the advancement of AI tool sets.

We also believe our customers want us to help them utilize AI to drive real results in their business, either by helping them drive engagement and revenue or to be more efficient in their operations.

Building on our two decades of innovation in the video and engagement technology market, the Brightcove AI Suite we announced is a multifaceted push into the future of video and engagement.

Our new capabilities addressed our customer's growth driving and cost saving needs from creating content to optimizing it to growing its engagement and monetization, to reducing the cost of creating, managing, and delivering it without sacrificing quality.

We have positioned ourselves at the app layer of AI as the place where customers will come to truly use AI and execute real business operations and needs, and we have partnered with many of the world's leading AI and LLM engines to help power our solutions, including Anthropic, Google and AWS.

In mid-September, we launched five pilot products for a set of customers to start testing with us in this Q4 with the goal of commercializing the suite in early 2025. We also intend to add additional pilots and products to the mix over time and have already announced a few expansions.

As we deepen our AI offerings, we are focused on four specific areas of value creation for our customers. The first area is automatic Content Creation.

With the Brightcove AI Suite, customers will be able to take existing content and quickly repurpose it to create more content by auto-clipping, auto-summarization or creating highlight reels from long form videos. Auto creates alternative formats like vertical video or fully dubbed translations.

We launched our two major pilots in Q3, our AI Content Maximizer and our AI Universal Translator. Here in Q4, just last week, we also announced a new pilot in this focus area launching in January that will enable our customers to create almost any video with just a few keystrokes via our AI Text to Video capability.

The second area of focus is automated Content Management and Optimization. We are introducing capabilities to accelerate workflows and make our customers jobs easier in managing content libraries while turning those content libraries into a foundational layer of data.

Our first pilot in this area, our AI Metadata Optimizer, which helps transform content into a searchable and AI-optimizable dataset, is making it more discoverable and more monetizable automatically while saving our customers time in generating this data.

We also announced two additional capabilities in this area last week as well, including an AI aided auto mail thumbnail creation tool and an automated chaptering feature, which will both launch by year end as part of the AI Metadata Optimizer pilot. The third area of focus is Content Engagement and Monetization.

We want to help our customers find the best ways to maximize the engagement and revenue their content generates. Our first pilot here is our AI Engagement Maximizer using data from our analytics and insights products in addition to our customer's data, we are able to improve engagement through recommendations and enhanced search and discovery.

The fourth and final area is about Quality and Efficiency. We want to help our customers drive down the cost of encoding, storage and content delivery without sacrificing the viewer experience.

Leveraging our Emmy Award-winning Context-Aware Encoding technology with improved optimization via AI, we have developed an AI Cost-to-Quality Optimizer that will allow our customers to choose the level of necessary delivery quality against the meaningful savings small changes can deliver.

Initial reaction to our September announcement and launch has been incredible. We already have over 50 customers signed just in the first few weeks to the pilots to these initial products. As mentioned, we plan to commercialize these in early 2025 and continue to invest and iterate to add more in the coming quarters.

We believe AI will be central to every company's video and engagement strategies and that Brightcove is in a great position to be their trusted partner on this journey. We've also been making meaningful progress on rolling out other new capabilities for our customer base to enhance what they receive from our platform.

Most recently, we deployed marketing insights, our deep measurement and actions platform for marketers to help them maximize video engagement. We've taken our powerful broader insights platform and pointed it directly towards our enterprise marketing customer base to deeply track and derive actionable insights on their engagement.

Put simply, you can think of it as a marketing funnel manager's dashboard for success. Perhaps most impactful in the quarter, we signed our second major real estate brand to our newest use case, which is effectively repurposing our marketing studio solution for sales teams.

This use case capitalized on our core platform capabilities, but further reimagined and purpose-built a solution to serve thousands of sales professionals each coming into the Brightcove's platform to manage their own set of videos to reach their own specific potential customers.

In this specific case, approximately 30,000 real estate brokers each with the power of Brightcove at their fingertips, fully enabled to create and distribute video to engage their potential buyers. It's a powerful new use case developed on our same platform to serve a new customer set with evolving needs.

We intend to fully package this solution for broader deployment in the fourth quarter and grow its opportunity throughout 2025. Let me wrap up by saying that I'm pleased by the progress we have made so far in 2024 to meaningfully improve our business, especially our profitability and cash generation.

At the same time, we have also strengthened our product offerings and value proposition to customers, which we believe will enable us to return to revenue growth. It's too early to discuss the specifics about 2025 as we are focused on executing in Q4, which will be very influential on the 2025 outlook we provide in February.

Having said that, in any reasonable revenue scenario, we expect to target at least 10% adjusted EBITDA and free cash flow growth going forward.

We know there are additional productivity gains we can achieve across the business and that the steps we have taken to rightsize our cost structure will lead to continued profitability growth as the business returns to revenue growth.

And now with more than $0.50 a share in cash on our balance sheet and growing, adjusted EBITDA growth at 40% to 50% this year, and on a path to continued adjusted EBITDA and free cash flow growth going forward, we continue to believe our stock trades at a significant discount to our intrinsic value and that it represents an incredibly attractive investment opportunity at current levels.

With that, let me turn things over to John to walk through the financials and our guidance in more detail, and I'll be back for Q&A.

John?.

a $500,000 decline in overage revenue and the impact of a large down-sell I mentioned earlier, which occurred at the very end of the third quarter. This sequential decline in revenue will also impact adjusted EBITDA in the fourth quarter.

To wrap up, we are very pleased with the results in Q3, exceeding the high end of our guidance range on both the top and bottom line while generating meaningful free cash flow. We are successfully executing on our key strategic priorities that we expect will return the business to consistent revenue growth in the future.

We will continue to deliver on our commitment to disciplined expense management, which will deliver significant adjusted EBITDA growth in 2024 and into 2025 as well. Please give us a moment to transition to Q&A, and we'll be back to discuss our results further..

Our first question will come from Steven Frankel from Rosenblatt Securities..

Good afternoon and congratulations on the progress we saw in the quarter.

Marc, how much of that do you think is repeatable muscle memory of doing things you've been working on for several quarters versus the business continues to be lumpy and you've brought in some good business in Q3?.

Yes. Look, I mean, the Q3 performance comes from the stack of previous quarters of business we've developed. So I do think it is relatively durable. And we do feel like the cost structure changes we made over the past 18 months have really started to now pay the benefit that we thought would be there.

From a new business perspective, as I said earlier, I do feel really better about how we performed in the quarter, really brought deals in. Those are not always 90-day cycles, right? And so it's really nice to see those land and have the team really perform well when that did.

And then the add-on business, obviously, where it is how our customers' businesses are going, and we do, from an entitlement perspective, have to play in that regard. But I do feel better about the durability of our ability to upsell and cross-sell now with multiple product sets and suites.

And then when we look to the real future, we think about our AI suite, we think about our new use cases, and some of the other products we've released over the last 12 to 18 months that can really help us build behind that. So I feel very good about the durability in the long run.

There may be some choppiness in certain parts of our customer base, especially on the media side, but I think those are well-known, and we have a good plan on how to attack those. And I feel very good about the durability of our both upsell, add-on business as well as new business being able to close..

And this new Salesforce product, how should we think about something like that ability to raise ARPU going forward?.

Well, I mean, I think the great part there is it's a new use case from effectively the same or very similar technologies, right? We basically purpose-built, we sort of took Marketing Studio and purpose-built it for a sales team, a big broad sales team in this case of over 30,000 real estate agents, being able to one-to-one or one-to-many communicate with their potential buyers as opposed to sort of our normal marketing case, which is very few employees handling tonnage of video and putting it on to help develop marketing leads.

So I do feel like I'm very optimistic about the future of this specific use case. We haven't even really fully rolled it out yet. We've rolled it out to effectively one or two customers, had meaningful bookings from those customers in the first two quarters of its relative new existence.

So you'll see us roll it out more formally this quarter, the next few weeks, and we'll officially name it, and then we'll go to market and do believe it can help add, especially to the ARPU on the enterprise side of our business, right? It's going to be meaningfully helpful to that side of the business for sure..

Okay.

And I know you don't want to talk about 2025 yet, but do you need any additional elements to get to consistent growth? Or is it more the external environment and things like making sure you're at the bottom of the entitlement shrinkage that's holding you back from growing?.

Yes. I think it goes to multiple factors, Steve, but I think we're optimistic about where the business is headed. First, we obviously need to see retention improvement from this year to next to have that growth be real. And our belief is that we're on a path to that.

As we said on the call, that the entitlement sort of upgrade and downgrade cycle has been a little bit more normalized. We're getting through that sort of last few of the large media renewals through the end of this year.

And so we feel like next year is going to be the year where we will stop effectively talking about that COVID issue and sort of talk about it as this is what our customers' businesses are. And then obviously, we need to go book new business, and we need to go book more business with our existing customer base.

But we certainly believe we are on a path to do that, and our goal is going to be to grow the business going forward..

Okay, great. Thank you. I'll jump back in the queue..

Thanks, Steve..

Thanks, Steve. Our next question is from Max Michaelis with Lake Street Capital.

Max?.

Still got Max on? Mute or….

Unmute now..

Yes. We got you now, okay..

Okay. Sorry. Hey, guys. Thanks for the detail you guys gave on 2025 in terms of adjusted EBITDA and then free cash flow. When we think about growth, I know you guys don't want to talk about it.

I mean, is there areas in the market you've seen maybe from an inorganic perspective? I've seen cash rise throughout the year now, kind of get a sense of where you're comfortable with to go out and spend in the market. I think you're at $27 million in cash now. Yes.

So I guess, is there any areas out in the market right now from an inorganic perspective that you guys would be interested in maybe to jump-start growth a little bit for 2025 and beyond?.

Do you want to give a point of view on cash?.

Yes. I'll start by just saying we're pretty happy with what we've done with cash this year. We are now at over $8 million more in cash on the balance sheet than we started the year. We expect, like you say, to finish the year at about $30 million or over $11 million more than we started the year.

So we do think that cash is beginning to get to the point where it's more than sufficient for just working capital purposes. So we are starting to think about what is the best use of cash in terms of creating value for shareholders and value for the business. Certainly, inorganic opportunities is something that we look at.

I'd say nothing specific, but something that we do keep our ear to the ground on..

Yes. Well said, John. I think you nailed it. We're not going to talk about specific sectors or anything like that..

Yes. And I guess, great quarter from new biz.

I guess how has that trended into Q4? Can you give any details on that?.

Obviously I don't want to get ahead of ourselves there, but we feel good about the execution in Q3, really being able to close deals. I think on Q2, we had mentioned that it was a little bit more challenging. I think that got a little better for us. I think our team did a fantastic job. So congratulations to them on doing that.

I think we're going to have some interesting opportunities here in Q4. Q4 is obviously very influential over how we talk about 2025. Hence, we're going to wait until the appropriate time to talk about that in February. But I think we have a really important quarter on our hands here in Q4..

All right, guys. Thanks..

Well, with that, we'll wrap it up. I want to thank you all for joining today. Just to reiterate a little bit of what we discussed, we're extremely pleased with the strong Q3 results, delivering above the high end of our guidance range on revenue, adjusted EBITDA, and cash.

Also very pleased given the year-to-date performance to be raising the full-year top and bottom line guidance and setting us up to deliver adjusted EBITDA growth, as John said, of 40% to 50%.

Backlog and ARPU hitting all-time records this quarter, net revenue retention continuing to improve quarter-over-quarter, really demonstrating the resilience of the business and that our move upmarket and our multiyear deal focus has delivered.

And we continue to make some of those right innovation investments and have a meaningful future growth opportunity ahead of us, I believe, with new use cases and with our AI suite.

And obviously, as we just talked about, our cash position expected to be above $30 million by the end of the year, adding like $11 million or so over the course of the year and remaining debt-free. So we really do continue to believe our share price at current levels does not give us appropriate credit and provides investors a great opportunity.

So with that, I want to thank you again for joining, and we really do look forward to updating you on our progress after the New Year..