| • | | Recurring Dollar Retention Rate. We assess our ability to retain customers using a metric we refer to as our recurring dollarNet Revenue Retention Rate . We assess our ability to retain and expand customers using a metric we refer to as our net revenue retention rate. We calculate the net revenue retention rate by dividing: (a) the current annualized recurring revenue for premium customers that existed twelve months prior by (b) the annualized recurring revenue for all premium customers that existed twelve months prior. We define annualized recurring revenue for premium customers as the aggregate annualized contract value from our premium customer base, measured as of the end of a given period. We typically
| calculate our net revenue retention rate on a quarterly basis. For annual periods, we report net revenue retention rate as the average of the net revenue retention rate for all fiscal quarters included in the period. By dividing the retained recurring revenue by the base recurring revenue, we measure our success in retaining and growing installed revenue from the specific cohort of customers we served at the beginning of the period. The recurring dollar retention rate by dividing the retained recurring value of subscription revenuefocuses on contracts up for a period by the previous recurring value of subscription revenue for the same period. We define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renewrenewal in a given period, including any increase or decrease in contract value. We define previous recurring valuequarter and only captures expansion/upsells at time of subscriptionrenewal, and is more susceptible to swings than the net revenue retention rate. Accordingly, and as previously disclosed, we plan to continue to report the recurring value from committed subscription fees for all contracts that expire in that same period. We typically calculate ournet revenue retention rate and discontinue reporting recurring dollar retention rate after this Annual Report on a monthly basis. Recurring dollar retention rate provides visibility into our ongoing revenue. DuringForm10-K for the yearsyear ended December 31, 2017 and 2016, the recurring dollar retention rate was 89% and 96%, respectively. The decrease is primarily due to the loss of certain customers as well as a reduction in contract value for certain recurring customers, based on certain commodity elements being repriced within our media market.2021. |
| • | | Average Annual Subscription Revenue Per Premium Customer. We define average annual
Recurring Dollar Retention Rate . We assess our ability to retain customers using a metric we refer to as our recurring dollar retention rate. We calculate the recurring dollar retention rate by dividing the retained recurring value of subscription revenue for a period by the previous recurring value of subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by the average number of premium customers for that period. We believe that this metric is important in understanding subscription revenue for our premium offerings in addition to the relative size of premium customer arrangements. We began selling our Starter edition to customers in the second quarter of 2016. We consider Starter to be a premium offering and thus include Starter customers as premium customers. Our Starter edition has a price point of $199 or $499 per month, and as of the first quarter of 2017, sales of our Starter edition reached such a level that we determined that the overall average annual subscription revenue per premium customer is a more meaningful metric if we exclude revenue from Starter edition customers. |
| As such, we now disclose the average annual subscription revenue per premium customer separately for Starter edition customers and all other premium customers.
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The following table includes our key metrics for the periods presented:
| | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | Customers (at period end) | | | | | | | | | Volume | | | 2,001 | | | | 2,564 | | Premium | | | 2,167 | | | | 2,007 | | | | | | | | | | | Total customers (at period end) | | | 4,168 | | | | 4,571 | | | | | | | | | | | Recurring dollar retention rate | | | 89 | % | | | 96 | % | Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands) | | $ | 70.1 | | | $ | 70.7 | | Average annual subscription revenue per premium customer for Starter edition customers only (in thousands) | | $ | 4.3 | | | $ | 4.9 | |
same period. We define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renew in a given period, including any increase or decrease in contract value. We define previous recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in that same period. We typically calculate our recurring dollar retention rate on a monthly basis. Recurring dollar retention rate provides visibility into our ongoing revenue. Average Annual Subscription Revenue Per Premium Customer . We define average annual subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by the average number of premium customers for that period. We believe that this metric is important in understanding subscription revenue for our premium offerings in addition to the relative size of premium customer arrangements. As our Starter edition has a price point of $199 or $499 per month, we disclose the average annual subscription revenue per premium customer separately for Starter edition customers and all other premium customers.. We define backlog as the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied, excluding professional service engagements. We believe that this metric is important in understanding future business performance. While the implications ofthe COVID-19 pandemic remain uncertain, we plan to continue to make investments to support business growth. We believe that the growth of our business is dependent on many factors, including our ability to expand our customer base, increase adoption of our product offerings within existing customers, develop new products and applications to extend the functionality of our products and provide a high level of customer service. We expect to invest in sales and marketing to support customer growth. We also expect to invest in research and development as we continue to introduce new products and applications to extend the functionality of our products. We intend to maintain a high level of customer service and support which we consider critical for our continued success. We also expect to continue to incur general and administrative expenses to support our business and to maintain the infrastructure required to be a public company. We expect to use our cash flow from operations and, if necessary, our credit facility to fund operations. See the section titled “Risk Factors” included under Item 1A for further discussion of the possible impact ofthe COVID-19 pandemic on our business. Components of Consolidated Statements of Operations
Subscription and Support Revenue — We generate subscription and support revenue from the sale of our products.
Video Cloud is offered in two product lines. The first product line is comprised of our premium product editions. All premium editions include functionality to publish and distribute video to Internet-connected devices, with higher levels of premium editions providing additional features and functionality. Customer arrangements are typically one year one-year contracts, which include a subscription to Video Cloud, basic support and apre-determined amount of video streams, bandwidth, transcoding and storage. We also offer gold, support or platinum and platinum plus support to our premium customers for an additional fee, which includes extended phone support.fee. The pricing for our premium editions is based on the value of our software, as well as the number of users, accounts and usage, which is comprised of video streams, bandwidth, transcoding and storage. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. We believe that our bundled pricing approach has made it easier for our customers to purchase all of the elements required to manage, store and deliver their video assets to their viewers. Pricing for some of thenon-software elements of our products, however—such as bandwidth and storage—has been subject to moderate but consistent pricing pressure as a result of competition among bandwidth and cloud infrastructure providers. This pricing pressure has not historically had a meaningful impact on our results of operations. During the year ended December 31, 2017, we experienced an unexpected, significant increase in the impact of the price competition among bandwidth and cloud infrastructure providers in the markets for these increasingly commoditizednon-software services. As a result, our recurring dollar retention rate decreased in the year ended December 31, 2017. We have taken steps to reduce the portion of our revenue that is subject to such pricing pressure by bringing new solutions, such as Dynamic Delivery (formerly known as Bolt), to market. We believe that these new solutions increase the value of our software platform to customers and allow us to retain a larger portion of the customers’ total contract value while reducing the revenue related tonon-software elements. However, as a result of the impact of the commoditization of thenon-software elements, we now expect that our subscription revenue growth rate will be impacted through the first quarter of 2018.The second product line is comprised of our volume product edition. Our volume editions target small andmedium-sized businesses, or SMBs. The volume editions provide customers with the same basic functionality that is offered in our premium product editions but have been designed for customers who have lower usage requirements and do not typically require advanced features and functionality. We discontinued the lower level pricing options for the Express edition of our volume offering and expect the total number of customers using the Express edition to continue to decrease. Customers who purchase the volume editions generally enter intomonth-to-month agreements. Volume customers are generally billed on a monthly basis and pay via a credit card. Virtual Events Experience, Brightcove Live and Brightcove Player are offered to customers on a subscription basis. Customer arrangements aretypically one-year contracts, which include a subscription to Virtual Events Experience, Brightcove Live or the Brightcove Player, basic support anda pre-determined amount of video streams, bandwidth, transcoding, and storage and only video streams for Brightcove Player. We also offer gold, platinum, and platinum plus support to our Virtual Events Experience, Brightcove Live and Brightcove Player customers for an additional fee. The pricing for these products is based on the value of our software, as well as, the number of users, accounts and usage. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. Zencoder is offered to customers on a subscription basis, with either committed contracts or contracts. The pricing is based on usage, which is comprised of minutes of video processed. The committed contracts include a fixed number of minutes of video processed. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. Zencoder customers are considered premium customers other than Zencoder customerson month-to-month contracts or pay-as-you-go contracts, which are considered volume customers.SSAI is offered to customers on a subscription basis, with varying levels of functionality, usage entitlements
Brightcove Beacon and support based on the size and complexity of a customer’s needs.Player is offered to customers on a subscription basis. Customer arrangementsBrightcove Campaign aretypically one-year contracts, which include a subscription to Player, basic support anda pre-determined amount of video streams. We also offer gold support or platinum support to our Player customers for an additional fee, which includes extended phone support. The pricing for Player is based on the number of users, accounts and usage, which is comprised of video streams. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.
OTT Flow is each offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the size and complexity of a customer’s needs. Customer arrangements are typicallyone-year contracts.
Video Marketing Suite and Enterprise Video Suite are offered to customers on a subscription basis in Starter, Pro and Enterprise editions. The Pro and Enterprise customer arrangements are typically one-year contracts, which typically include a subscription to Video Cloud, Gallery, Brightcove Social (for Video Marketing Suite customers) or Brightcove Live (for Enterprise Video Suite customers), basic support and apre-determined amount of video streams or plays (for Video Marketing Suite customers), viewers (for Enterprise Video Suite customers), bandwidth and storage or videos. We also generally offer gold support or platinum support to these customers for an additional fee, which includes extended phone support. The pricing for our Pro and Enterprise editions is based on the number of users, accounts and usage, which is comprised of video streams or plays, viewers, bandwidth and storage or videos. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.entitlements, or will require the customer to upgrade its package upon renewal. The Starter edition provides customers with the same basic functionality that is offered in our Pro and Enterprise editions but has been designed for customers who have lower usage requirements and do not typically seek advanced features and
functionality. Customers who purchase the Starter edition may enter into one-year agreements oragreements. Starter customers withagreements are generally billed on a monthly basis and pay via a credit card.All Brightcove Beacon, Brightcove CorpTV™ , OTT Flow, Brightcove Campaign, Brightcove Live, SSAI, Player, OTT Flow,Virtual Events Experience, Video Marketing Suite, and Enterprise Video Suite customers are considered premium customers.
Professional Services and Other Revenue — Professional services and other revenue consists of services such as implementation, software customizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the remainder due when the related services have been completed, or on a time and materials basis. Our backlog consists of the total future value of our committed customer contracts, whether billed or unbilled. As of December 31, 2017, we had backlog of approximately $106 million compared to backlog of
approximately $99 million as of December 31, 2016. Of the approximately $106 million in backlog as of December 31, 2017, between $83 million and $85 million is expected to be recognized as revenue during the year ended December 31, 2018. During the year ended December 31, 2017, approximately $73 million of revenue was recognized from backlog as of December 31, 2016. Because revenue for any period is a function of revenue recognized from backlog at the beginning of the period as well as from contract renewals and new customer contracts executed during the period, backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from that of other companies in our industry.
Cost of subscription, support and professional services revenue primarily consists of costs related to supporting and hosting our product offerings and delivering our professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of our data centers, our customer support team and our professional services staff. In addition to these expenses, we incur third-party service provider costs such as data center and content delivery network, or CDN, expenses, allocated overhead, depreciation expense and amortization of capitalized internal-use software development costs and acquired intangible assets. We allocate overhead costs such as rent, utilities and supplies to all departments based on relative headcount. As such, general overhead expenses are reflected in cost of revenue in addition to each operating expense category. The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscription and support services due to the labor costs of providing professional services.Cost of revenue increaseddecreased in absolute dollars from 20162020 to 2017.2021. In future periods we expect our cost of revenue will increase in absolute dollars as our revenue increases. Cost of revenue as a percentage of revenue could fluctuate from period to period depending on the growthnumber of our professional services businessengagements and any associated costs relating to the delivery of subscription services and the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue, in any particular quarterly or annual period.
We classify our operating expenses as follows:
. Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, incentive compensation and stock-based compensation, in addition to the costs associated with contractors and allocated overhead. We have focused our research and development efforts on expanding the functionality and scalability of our products and enhancing their ease of use, as well as creating new product offerings. We expect research and development expenses to increase in absolute dollars as we intend to continue to periodically release new features and functionality, expand our product offerings, continue the localization of our products in various languages, upgrade and extend our service offerings, and develop new technologies. Over the long term, we believe that research and development expenses as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing products, features and functionality, as well as changes in the technology that our products must support, such as new operating systems or new Internet-connected devices.
. Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing staff, including salaries, benefits, incentive compensation, commissions, stock-based
compensation and travel costs, amortization of acquired intangible assets, in addition to costs associated with marketing and promotional events, corporate communications, advertising, other brand building and product marketing expenses and allocated overhead. Our sales and marketing expenses have increased in absolute dollars in each of the last three years. We intend to continue to invest in sales and marketing and increase the number of sales representatives to add new customers and expand the sale of our product offerings within our existing customer base, build brand awareness and sponsor additional marketing events. Accordingly, in future periods we expect sales and marketing expense to increase in absolute dollars and continue to be our most significant operating expense.expense in future periods. Over the long term, we believe that sales and marketing expense as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing customers
and fromsmall, medium-sized and enterprise customers, as well as changes in the productivity of our sales and marketing programs.
General and Administrative . General and administrative expenses consist primarily of personnel and related expenses for executive, legal, finance, information technology and human resources functions, including salaries, benefits, incentive compensation and stock-based compensation, in addition tocompensation. General and administrative expenses also include the costs associated with professional fees, insurance premiums, other corporate expenses and allocated overhead. In future periods we expect general and administrative expenses to increase in absolute dollars as we continue to incur additional personnel and professional services costs in order to support the growth of our business. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.
. Merger-related costs consistedconsist of transaction expenses incurred as part of the acquisition of substantially all of the assets of Unicorn Media, Inc. and certain of its subsidiaries, or Unicorn, as well as costs associated with the retention of key employees of Unicorn. Approximately $1.5 million was required to be paid to retain certain key employees from the Unicorn acquisition. The period in which these services were performed varies by employee. Given that the retention amount was related to a future service requirement, the related expense was recorded as merger-related compensation expense in the consolidated statements of operations over the expected service period.mergers and acquisitions, integration costs and general corporate development activities. Other expense consists primarily of interest income earned on our cash, cash equivalents, foreign exchange gains and losses and interest expense payable on our debt.losses. As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We have provided a valuation allowance against our existing U.S. net deferred tax assets and deferred tax assets of certain foreign subsidiaries at December 31, 2017, with the exception of the2021. We maintain net deferred tax assetsliabilities for temporary differences related to Brightcove KK.On December 22, 2017, the Tax Cutsour Japanese and Jobs Act was enacted in the United States. Refer to Note 7,Income Taxes, for additional information regarding this new tax legislation.
Portuguese subsidiaries. Stock-Based Compensation Expense Our cost of revenue, research and development, sales and marketing, and general and administrative expenses include stock-based compensation expense. Stock-based compensation expense represents the fair value of outstanding stock options and restricted stock awards, which is recognized as expense over the respective stock option and restricted stock award service periods. For the years ended December 31, 2017, 20162021, 2020 and 2015,2019, we recorded stock-based compensation expense of $7.2$10.0 million, $6.0$8.8 million, and $6.0$9.3 million, respectively. We expect stock-based compensation expense to increase in absolute dollars in future periods. Foreign Currency Translation With regard to our international operations, we frequently enter into transactions in currencies other than the U.S. dollar. As a result, our revenue, expenses and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro, British pound, Australian dollar, and Japanese yen. For the years ended December 31, 2017, 2016 and 2015, 45%, 42% and 40%, respectively, of our revenue was generated in locations outside the United States. During the same periods, 29%, 28% and 27%, respectively, of our revenue was in currencies other than the U.S. dollar, as were some of the associated expenses. In periods when the U.S. dollar declines in value as compared to the foreign currencies in which we conduct
business, our foreign currency-based revenue and expenses generally increase in value when translated into U.S. dollars. We expect our foreign currency-based revenue to remain relatively unchanged in absolute dollars and as athe percentage of total revenue.net revenue derived from outside North America to increase in future periods as we continue to expand our international operations. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. We believe that the following significant accounting policies, which are more fully described in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
We primarily derive revenue from the sale of our online video platform, which enables our customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from three primary sources: (1) the subscription to our technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which include customization services. Under ASC 606, when the transaction price includes a variable amount of consideration, an entity is required to estimate the consideration that is expected to be received for a particular customer arrangement. We recognize revenue when allevaluate variable consideration for usage-based fees at contractinception and re-evaluate quarterly over the course of the following conditions are satisfied: (1) therecontract. Specifically, we estimate the revenue pertaining to a customer’s usage that is persuasive evidence of an arrangement; (2)expected to exceed the service has been providedannual entitlement allowance and allocate such revenue to the customer; (3)distinct service within the collectionrelated contract that gives rise to the variable payment. Estimates of feesvariable consideration include analyzing customer usage against the applicable entitlement limit at the end of each reporting period and estimating the amount and timing of additional amounts to be invoiced in connection with projected usage. Estimates of variable consideration relating to customer usage do not include amounts for which it is probable; and (4)probable that a significant reversal will occur. Determining the amount of feesvariable consideration to be paid by the customer is fixed or determinable.Our subscription arrangements provide customers the right to access our hosted software applications. Customers do not have the right to take possession of our software during the hosting arrangement. Accordingly, we recognize revenue in accordance with Accounting Standards Codification (ASC) 605,Revenue Recognition. Contracts for premium customers generally have a term of one year and arenon-cancellable. These contracts generally provide the customer with an annual level of usage, and provide the rate at which the customer must pay for actual usage above the annual allowable usage. For these services, we recognize the annual fee ratably as revenue each month. Shouldinvolves significant judgment on the part of management and it is possible that actual revenue will deviate from estimates over the course of a customer’s usage of our services exceed the annual allowable level, revenue is recognized for such excess in the period of the usage. Contracts for volume customers are generallymonth-to-month arrangements, have a maximum monthly level of usage and provide the rate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage fees are recognized as revenue during the period in which the related cash is collected. committed contract term. Revenue recognition commences upon the later of when the application is placed in a production environment, or when all revenue recognition criteria have been met.
Professional services and other revenue sold on a stand-alone basis are recognized as the services are performed, subject to any refund or other obligation.
Deferred revenue includes amounts billed to customers for which revenue has not been recognized, and primarily consists of the unearned portion of annual software subscription and support fees, and deferred professional service fees.
Revenue is presented net of any taxes collected from customers.
Multiple-Element Arrangements
We periodically enter into multiple-element service arrangements that include platform subscription fees, support fees, and, in certain cases, other professional services. We assess arrangements with These contracts include multiple deliverables under Accounting Standards Update (ASU)No. 2009-13,Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements —promises that we evaluate to determine if the promises are separate performance obligations. Performance obligations are identified based on services to be transferred to a Consensuscustomer that are both capable of being distinct and are distinct within the context of the FASB Emerging Issues Task Force . Arrangementcontract. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration is allocated to deliverables based on their relative selling price.
In order to treat deliverables in a multiple-element arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. If the deliverables have stand-alone value upon delivery, we account for each deliverable separately. Subscription services have stand-alone value as such services are often sold separately. In determining whether professional services have stand-alone value, we consider the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the professional services work. To date, we have concluded that all of the professional servicesbe included in multiple-element arrangements executed have stand-alone value.
When multiple deliverables includedthe transaction price, if any. We then allocate the transaction price to each performance obligation in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate unitscontract based on a relative stand-alone selling price hierarchy. We determine the relative sellingmethod. The transaction price for a deliverable based on its vendor-specific objective evidence of fair value (VSOE), if available, or its best estimate of selling price (BESP), if VSOEpost allocation is not available. We have determined that third-party evidence of selling price is not a practical alternative due to differences in our service offerings compared to other parties and the availability of relevant third party pricing information. The amount ofrecognized as revenue allocated to delivered items is limited by contingent revenue, if any.
We have not established VSOE for our offerings due to the lack of pricing consistency, the introduction of new services and other factors. Accordingly, we use our BESP to determine the relative selling price. We determine BESP by considering our overall pricing objectives and market conditions. Significant pricing practices taken into consideration include our discounting practices, the size and volume of our transactions, the geographic area where services are sold, price lists, ourgo-to-market strategy, historical contractually stated prices and prior relationships and future subscription service sales with certain classes of customers.
The determination of BESP is made through consultation with and approval by our management, taking into consideration thego-to-market strategy. As ourgo-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes in selling prices, including both VSOE and BESP. We analyze the selling prices used in our allocation of arrangement consideration, at a minimum, on an annual basis. Selling prices are analyzed on a more frequent basis if a significant change in our business necessitates a more timely analysis or if we experience significant variances in our selling prices.
Allowance for Doubtful Accounts
We offset gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable and is based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with specific accounts. Provisions for allowances for doubtful accounts are recorded in general and administrative expense. If, upon signing a customer arrangement,as the related account receivableperformance obligation is not considered collectable, we will defer the associated revenue until we collect the cash. To date, we have not incurred any significant write-offssatisfied.
Table of accounts receivable and have not been required to revise any of our assumptions or estimates used in determining our allowance for doubtful accounts. As of December 31, 2017, our allowance for doubtful accounts was $146,000.Software Development Costs
Costs incurred to develop software applications used in ouron-demand application services consist of (a) certain external direct costs of materials and services incurred in developing or obtaininginternal-use computer software and (b) payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, it is probable the project will be completed, and the software will be used to perform the functions intended and certain functional and quality standards have been met. Qualified costs incurred during the operating stage of our software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades and enhancements to,internal-use software are expensed as incurred. These capitalized costs are amortized on a straight-line basis over the expected useful life of the software, which is three years. We capitalized $3.2 million in 2017, $4.0 million in 2016 and $1.5 million in 2015, respectively, ofinternal-use software development costs. Amortization ofinternal-use software development costs was $1.9 million in 2017, $690,000 in 2016 and $469,000 in 2015, respectively.
Contents We are subject to income taxes in both the United States and international jurisdictions, and we use estimates in determining our provision for income taxes. We account for income taxes under the asset and liability method for accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax basis of assets and liabilities using statutory rates. This process requires us to project our current tax liability and estimate our deferred tax assets and liabilities, including net operating losses and tax credit carryforwards. In assessing the need for a valuation allowance, we considered our recent operating results, future taxable income projections and feasible tax planning strategies. We have provided a valuation allowance against substantially all of our net U.S. deferred tax assets and deferred tax assets of certain foreign subsidiaries at December 31, 2021. We recognized a deferred tax liability in the U.S. for a portion of our indefinite lived intangibles and other deferred tax liabilities that would not be offset against deferred tax assets. We maintain net deferred tax assets at December 31, 2017 with the exception of the deferred tax assetsliabilities for temporary differences related to Brightcove KK.our Japanese and Portuguese subsidiaries. Due to the evolving nature and complexity of tax regulations combined with the number of jurisdictions in which we operate, it is possible that our estimates of our tax liability could change in the future, which may result in additional tax liabilities and adversely affect our results of operations, financial condition and cash flows. As of December 31, 20172021 and 2016,2020, we had no material unrecognized tax benefits.
We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. We then allocate the purchase price in excess of net tangible assets acquired to identifiable intangible assets based on detailed valuations that use information and assumptions provided by management. We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill. If the fair value of the assets acquired exceeds our purchase price, the excess is recognized as a gain. Significant management judgments and assumptions are required in determining the fair value of acquired assets and liabilities, particularly acquired intangible assets. The valuation of purchased intangible assets is based upon estimates of the future performance and cash flows from the acquired business. Each asset is measured at fair value from the perspective of a market participant. Critical estimates in valuing purchased technology and customer lists include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed. If different assumptions are used, it could materially impact the purchase price allocation and adversely affect our results of operations, financial condition and cash flows. Goodwill and Acquired Intangible Assets
We record goodwill when consideration paid in a purchase acquisition exceeds the fair value
Table of the net assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. Conditions that could trigger a more frequent impairment assessment include, but are not limited to, a significant adverse change in certain agreements, significant underperformance relative to historical or projected future operating results, an economic downturn in customers’ industries, increased competition, a significant reduction in our stock price for a sustained period or a reduction of our market capitalization relative to net book value. We evaluate impairment by comparing the estimated fair value of each reporting unit to its carrying value. We estimate fair value primarily utilizing the market approach, which calculates fair value based on the market values of comparable companies or comparable transactions. Actual results may differ materially from these estimates. The estimates we make in determining the fair value of our reporting unit involve the application of judgment, which could affect the timing and size of any future impairment charges. Impairment of our goodwill could significantly affect our operating results and financial position.Intangible assets are recorded at their estimated fair value at the date of acquisition. We amortize our intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefit or, if that pattern cannot be readily determined, on a straight-line basis. Amortization is recorded over the estimated useful lives ranging from two to fourteen years.
We review our intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, we will write down the carrying value of the intangible asset to its fair value in the period identified. In assessing recoverability, we must make assumptions regarding estimated future cash flows and discount rates. If these estimates or related assumptions change in the future, we may be required to record impairment charges. We generally calculate fair value as the present value of estimated future cash flows to be generated by the asset using a risk adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.
We adopted ASUNo. 2011-08,Intangibles — Goodwill and Other (Topic 350) Testing Goodwill for Impairment. Under ASU2011-08, we have the option to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount to determine whether further impairment testing is necessary. Based on the assessment of these qualitative factors, we determined that no impairment indicators were noted, allowing us to forego the quantitative analysis. Contents Stock-based Compensation
We value our shares of common stock in connection with the issuance of stock-based equity awards using the closing price of our shares of common stock on the NASDAQ Global Market on the date of the grant. Accounting guidance requires employee stock-based payments to be accounted for under the fair value method. Under this method, we are required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods. We use the straight-line amortization method for recognizing stock-based compensation expense associated with equity awards to employees. Upon the adoption ofASU 2016-09 on January 1, 2017, we have elected to recognize prospectively gross share based compensation expense with actual forfeitures recognized as they occur. Prior to the adoption of ASU2016-09, we estimated forfeitures at the time of grant and revised those estimates in subsequent periods if actual forfeitures differed from estimates.
We estimate the fair value of employee stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of highly subjective estimates and assumptions. For restricted stock awards issued we estimate the fair value of each grant based on the stock price of our common stock on the date of grant. The expected volatility of options granted has been determined using a weighted average of the historical volatility measures of a peer group of companies that issued options with substantially similar terms as well as the historical volatility of our own common stock. The expected life assumption is based on the “simplified method” for estimating expected term as we do not have sufficient stock option exercise experience to support a reasonable estimate of the expected term. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. We use an expected dividend rate of zero as we currently have no history or expectation of paying dividends on our common stock.
The relevant data used to determine the value of the stock option grants is as follows:
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Risk-free interest rate | | | 2.08 | % | | | 1.75 | % | | | 1.96 | % | Expected volatility | | | 42 | % | | | 45 | % | | | 46 | % | Expected life (in years) | | | 6.1 | | | | 6.2 | | | | 6.2 | | Expected dividend yield | | | — | | | | — | | | | — | |
The following tables set forth our results of operations for the periods presented. Theperiod-to-period comparison of financial results is not necessarily indicative of future results. | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | | | (in thousands, except share and per share data) | | Revenue: | | | | | | | | | | | | | Subscription and support revenue | | $ | 143,159 | | | $ | 142,022 | | | $ | 131,010 | | Professional services and other revenue | | | 12,754 | | | | 8,244 | | | | 3,696 | | | | | | | | | | | | | | | Total revenue | | | 155,913 | | | | 150,266 | | | | 134,706 | | Cost of revenue: | | | | | | | | | | | | | Cost of subscription and support revenue | | | 50,664 | | | | 48,011 | | | | 41,735 | | Cost of professional services and other revenue | | | 13,954 | | | | 7,836 | | | | 4,742 | | | | | | | | | | | | | | | Total cost of revenue | | | 64,618 | | | | 55,847 | | | | 46,477 | | | | | | | | | | | | | | | Gross profit | | | 91,295 | | | | 94,419 | | | | 88,229 | | Operating expenses: | | | | | | | | | | | | | Research and development | | | 31,850 | | | | 30,171 | | | | 29,302 | | Sales and marketing | | | 57,294 | | | | 54,038 | | | | 45,795 | | General and administrative | | | 21,847 | | | | 19,167 | | | | 19,862 | | Merger-related | | | — | | | | 21 | | | | 201 | | | | | | | | | | | | | | | Total operating expenses | | | 110,991 | | | | 103,397 | | | | 95,160 | | | | | | | | | | | | | | | Loss from operations | | | (19,696 | ) | | | (8,978 | ) | | | (6,931 | ) | Other expense, net | | | 547 | | | | (598 | ) | | | (258 | ) | | | | | | | | | | | | | | Loss before income taxes | | | (19,149 | ) | | | (9,576 | ) | | | (7,189 | ) | Provision for income taxes | | | 370 | | | | 410 | | | | 391 | | | | | | | | | | | | | | | Net loss | | $ | (19,519 | ) | | $ | (9,986 | ) | | $ | (7,580 | ) | | | | | | | | | | | | | | Net loss per share - basic and diluted | | $ | (0.57 | ) | | $ | (0.30 | ) | | $ | (0.23 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net loss per share - basic and diluted | | | 34,376 | | | | 33,189 | | | | 32,598 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except share and per share | | | | | | | | | | | | | | | Subscription and support revenue | | $ | 198,929 | | | $ | 187,341 | | | $ | 173,818 | | Professional services and other revenue | | | 12,164 | | | | 10,012 | | | | 10,637 | | | | | | | | | | | | | | | | | | 211,093 | | | | 197,353 | | | | 184,455 | | | | | | | | | | | | | | | Cost of subscription and support revenue | | | 62,773 | | | | 67,124 | | | | 67,064 | | Cost of professional services and other revenue | | | 10,255 | | | | 8,973 | | | | 8,405 | | | | | | | | | | | | | | | | | | 73,028 | | | | 76,097 | | | | 75,469 | | | | | | | | | | | | | | | | | | 138,065 | | | | 121,256 | | | | 108,986 | | | | | | | | | | | | | | | | | | 31,718 | | | | 33,978 | | | | 32,535 | | | | | 71,177 | | | | 59,812 | | | | 60,375 | | General and administrative | | | 29,261 | | | | 27,021 | | | | 25,692 | | | | | 300 | | | | 5,768 | | | | 11,447 | | | | | (1,965 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | 130,491 | | | | 126,579 | | | | 130,049 | | | | | | | | | | | | | | | Income (loss) from operations | | | 7,574 | | | | (5,323 | ) | | | (21,063 | )�� | Other income (expense), net | | | (1,375 | ) | | | 128 | | | | (280 | ) | | | | | | | | | | | | | | Income (loss) before income taxes | | | 6,199 | | | | (5,195 | ) | | | (21,343 | ) | Provision for income taxes | | | 802 | | | | 618 | | | | 560 | | | | | | | | | | | | | | | | | $ | 5,397 | | | $ | (5,813 | ) | | $ | (21,903 | ) | | | | | | | | | | | | | | Net income (loss) per share | | | | | | | | | | | | | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) | | | | | | | | | | | | | | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net income (loss) per share | | | | | | | | | | | | | | | | 40,717 | | | | 39,473 | | | | 38,028 | | | | | | | | | | | | | | | | | | 42,200 | | | | 39,473 | | | | 38,028 | | | | | | | | | | | | | | |
Overview of Results of Operations for the Years Ended December 31, 20172021 and 20162020 Total revenue increased by 4%7%, or $5.6$13.7 million, in 20172021 compared to 20162020 due to an increase in subscription and support revenue of 1%6%, or $1.1$11.6 million, primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existing customers. The increase in professional services and other revenue of 55%21%, or $4.5$2.2 million, was primarily related to the size and number of professional services engagements in 20172021 compared to 2016. The increases2020. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are offset by the loss of a major customer, during the first quarter of 2017, and a $1.5 million reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016.process. In addition, our revenue from premium offerings grew by $7.5$14.5 million, or 5%7%, in 20172021 compared to 2016.2020. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.
Our gross profit decreasedincreased by $3.1$16.8 million, or 3%14%, in 20172021 compared to 2016,2020, primarily due to increasesa decrease in the cost of subscription and support revenue and the costour transition of professional services revenue without corresponding increases in revenue. Cost of subscription and support revenue increased dueacquired Ooyala customers to additional content delivery network expenses and network hosting services incurred in order to support the launch of a major customer. Cost of professional services revenue increased due to a higher level of contractor costs and project hoursour technology during the year ended December 31, 2017.2020. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery. Loss
Income from operations was $19.7$7.6 million in 20172021 compared to $9.0a loss from operations of $5.3 million in 2016. Loss from operations in 2017 included stock-based compensation expense and amortization of acquired intangible assets of $7.2 million and $2.7 million, respectively. Loss from operations in 2016 included stock-based compensation expense and amortization of acquired intangible assets of $6.0 million and $3.1 million, respectively. We expect2020. Our ability to continue experiencing operating income to improvewill depend primarily on greater revenue from increased sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to grow and scale our operations.As of December 31, 2017, we had $26.1 million of unrestricted cash and cash equivalents, a decrease of $10.7 million from $36.8 million at December 31, 2016, due primarily to $6.4 million of cash used in operating activities, $3.0 million in capitalizedinternal-use software costs, and $1.1 million in capital expenditures. There were also cash outflows of $489,000 in payments under capital lease obligations, $307,000 for payments on equipment financing and $268,000 in payments of withholding tax on RSU vesting.
efficiencies. Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Revenue by Product Line | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Premium | | $ | 150,304 | | | | 96 | % | | $ | 142,840 | | | | 95 | % | | $ | 7,464 | | | | 5 | % | Volume | | | 5,609 | | | | 4 | | | | 7,426 | | | | 5 | | | | (1,817 | ) | | | (24 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 155,913 | | | | 100 | % | | $ | 150,266 | | | | 100 | % | | $ | 5,647 | | | | 4 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | (in thousands, except percentages) | | | | $ | 208,183 | | | | 99 | % | | $ | 193,695 | | | | 98 | % | | $ | 14,488 | | | | 7 | % | | | | 2,910 | | | | 1 | | | | 3,658 | | | | 2 | | | | (748 | ) | | | (20 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 211,093 | | | | 100 | % | | $ | 197,353 | | | | 100 | % | | $ | 13,740 | | | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2017,2021, revenue increased by $5.6$13.7 million, or 4%7%, compared to 2016,2020, primarily due to an increase in revenue from our premium offerings, which consist of subscription and support revenue, as well as professional services and other revenue. The increase in premium revenue of $7.5$14.5 million, or 5%7%, is partiallyprimarily the result of an 8%a 5% increase in the number ofaverage revenue per premium customers from 2,007 at December 31, 2016 to 2,167 at December 31, 2017, in addition to a $4.5 million, or 55%, increase in professional services revenue. The increases are offset by the loss of a major customer and a $1.5 million reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016.customer. During 2017,2021, volume revenue decreased by $1.8 million,$748,000, or 24%20%, compared to 2016,2020, driven by a decrease in customers as we continue to focus on the market for our premium solutions. | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Revenue by Type | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 143,159 | | | | 92 | % | | $ | 142,022 | | | | 95 | % | | $ | 1,137 | | | | 1 | % | Professional services and other | | | 12,754 | | | | 8 | | | | 8,244 | | | | 5 | | | | 4,510 | | | | 55 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 155,913 | | | | 100 | % | | $ | 150,266 | | | | 100 | % | | $ | 5,647 | | | | 4 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | (in thousands, except percentages) | | | | $ | 198,929 | | | | 94 | % | | $ | 187,341 | | | | 95 | % | | $ | 11,588 | | | | 6 | % | Professional services and other | | | 12,164 | | | | 6 | | | | 10,012 | | | | 5 | | | | 2,152 | | | | 21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 211,093 | | | | 100 | % | | $ | 197,353 | | | | 100 | % | | $ | 13,740 | | | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2017,2021, subscription and support revenue increased by $1.1$11.6 million, or 1%6%, compared to 2016.2020. The increase was primarily related to the continued growth of our customer base for oura 5% increase in average revenue per premium offerings, including sales to both new and existing customers during 2017. The increases are offset by the loss of a major customer during the first quarter of 2017.year ended December 31, 2021. In addition, professional services and other revenue increased by $4.5$2.2 million, or 55%21%, primarily related to the size and number of professional services engagements during 2017comparedcompared to the prior year. During 2017, the increase in professional services revenue was primarily related to an increase in OTT application development projects. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Revenue by Geography | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | North America | | $ | 91,358 | | | | 59 | % | | $ | 92,912 | | | | 62 | % | | $ | (1,554 | ) | | | (2 | )% | | | | | | | | | | | | | | | | | | | | | | | | | | Europe | | | 24,425 | | | | 16 | | | | 25,196 | | | | 17 | | | | (771 | ) | | | (3 | ) | Japan | | | 16,881 | | | | 11 | | | | 15,230 | | | | 10 | | | | 1,651 | | | | 11 | | Asia Pacific | | | 22,539 | | | | 14 | | | | 15,617 | | | | 10 | | | | 6,922 | | | | 44 | | Other | | | 710 | | | | 0 | | | | 1,311 | | | | 1 | | | | (601 | ) | | | (46 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | International subtotal | | | 64,555 | | | | 41 | | | | 57,354 | | | | 38 | | | | 7,201 | | | | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 155,913 | | | | 100 | % | | $ | 150,266 | | | | 100 | % | | $ | 5,647 | | | | 4 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | (in thousands, except percentages) | | | | $ | 119,079 | | | | 56 | % | | $ | 107,686 | | | | 55 | % | | $ | 11,393 | | | | 11 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 37,947 | | | | 18 | | | | 34,001 | | | | 17 | | | | 3,946 | | | | 12 | | | | | 25,272 | | | | 13 | | | | 25,745 | | | | 13 | | | | (473 | ) | | | (2 | ) | | | | 28,261 | | | | 13 | | | | 28,984 | | | | 15 | | | | (723 | ) | | | (2 | ) | | | | 534 | | | | — | | | | 937 | | | | — | | | | (403 | ) | | | (43 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 92,014 | | | | 44 | | | | 89,667 | | | | 45 | | | | 2,347 | | | | 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 211,093 | | | | 100 | % | | $ | 197,353 | | | | 100 | % | | $ | 13,740 | | | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
For purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprised of revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending on the timing of new customer contracts, revenue mix from a geographic region can vary from period to period. During 2017,2021, total revenue for North America decreased $1.6increased $11.4 million, or 2%11%, compared to 2016. The reduction in revenue for North America is primarily related to the loss of a major customer in the first quarter of 2017 partially offset by increases in sales to new and existing customers.2020. During 2017,2021, total revenue outside of North America increased $7.2$2.3 million, or 13%3%, compared to 2016.2020. The increase in revenue from international regions is primarily related to an increaseincreases in revenue in Asia Pacific and Japan. TheEurope. This increase in revenue from Asia Pacific and Japan is primarily relateddue to an increase in average revenue from professional services engagements related to OTT application development projects. These increases were partially offset by a $1.5 million reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016.per premium customer as discussed above. Cost of Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Cost of Revenue | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 50,664 | | | | 35 | % | | $ | 48,011 | | | | 34 | % | | $ | 2,653 | | | | 6 | % | Professional services and other | | | 13,954 | | | | 109 | | | | 7,836 | | | | 95 | | | | 6,118 | | | | 78 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 64,618 | | | | 41 | % | | $ | 55,847 | | | | 37 | % | | $ | 8,771 | | | | 16 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | (in thousands, except percentages) | | | | $ | 62,773 | | | | 32 | % | | $ | 67,124 | | | | 36 | % | | $ | (4,351 | ) | | | (6 | )% | Professional services and other | | | 10,255 | | | | 84 | | | | 8,973 | | | | 90 | | | | 1,282 | | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 73,028 | | | | 35 | % | | $ | 76,097 | | | | 39 | % | | $ | (3,069 | ) | | | (4 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2017,2021, cost of subscription and support revenue increased $2.7decreased $4.4 million, or 6%, compared to 2016. The increase resulted primarily from increases2020. This decrease corresponds to a decrease in our content delivery network, expenses, amortization of capitalizedinternal-use software development costs, partner commission expense and network hosting services of $1.2 million, $1.2 million, $799,000 and $791,000, respectively. Partner commission expense primarily relates to payments to third parties for the use of technology that is integrated with our Video Cloud product. There were also increases in maintenance expense, employee-related expense, costs associated with third-party software integrated withintegration, and partner commissions expenses of $3.1 million, $841,000 and $437,000, respectively. Our transition of acquired Ooyala customers to our service offering and stock-based compensation expense of $474,000, $316,000, $248,000 and $115,000, respectively. These increases were partially offset by decreasestechnology during 2020 also resulted in depreciation expense,reduced costs associated with in the closure of certain facilities, and bandwidth costs, of $1.2 million, $843,000 and $426,000, respectively.
current year. During 2017,2021, cost of professional services and other revenue increased $6.1$1.3 million, or 78%14%, compared to 2016.2020. This increase corresponds to the increase in professional services revenue and resulted primarily from increases in contractor and employee-related expenses of $4.4$1.2 million and $1.4 million, respectively. There was an increase in the mixdue to higher levels of contractor expenses versus internal expenses in order to support variousimplementation and professional services projects.provided, as well as increases in employee-related costs of $300,000. These increases were offset in part by decreases in computer and maintenance support expenses of $166,000.
Gross Profit | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Gross Profit | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 92,495 | | | | 65 | % | | $ | 94,011 | | | | 66 | % | | $ | (1,516 | ) | | | (2 | )% | Professional services and other | | | (1,200 | ) | | | (9 | ) | | | 408 | | | | 5 | | | | (1,608 | ) | | | nm | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 91,295 | | | | 59 | % | | $ | 94,419 | | | | 63 | % | | $ | (3,124 | ) | | | (3 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
nm – not meaningful
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| | | | | | | | | | (in thousands, except percentages) | | | | $ | 136,156 | | | | 68 | % | | $ | 120,217 | | | | 64 | % | | $ | 15,939 | | | | 13 | % | Professional services and other | | | 1,909 | | | | 16 | | | | 1,039 | | | | 10 | | | | 870 | | | | 84 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 138,065 | | | | 65 | % | | $ | 121,256 | | | | 61 | % | | $ | 16,809 | | | | 14 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
The overall gross profit percentage was 59%65% and 63%61% for the years ended December 31, 20172021 and 2016,2020, respectively. The decrease is primarily due to an increase in revenue from professional services engagements, which has a lower gross margin as compared to subscription and support revenue. Subscription and support gross profit decreased $1.5increased $15.9 million, or 2%13%, compared to 2016 due to additional content delivery network expenses and network hosting services incurred in order to support the launch of a major customer.2020. In addition, professional services and other gross profit decreased $1.6 million compared to 2016 due to the increase in contractor expenses in order to support various professional services projects.Operating Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Operating Expenses | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Research and development | | $ | 31,850 | | | | 20 | % | | $ | 30,171 | | | | 20 | % | | $ | 1,679 | | | | 6 | % | Sales and marketing | | | 57,294 | | | | 37 | | | | 54,038 | | | | 36 | | | | 3,256 | | | | 6 | | General and administrative | | | 21,847 | | | | 14 | | | | 19,167 | | | | 13 | | | | 2,680 | | | | 14 | | Merger-related | | | — | | | | — | | | | 21 | | | | — | | | | (21 | ) | | | (100 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 110,991 | | | | 71 | % | | $ | 103,397 | | | | 69 | % | | $ | 7,594 | | | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
Research and Development. During 2017, research and development expense increased by $1.7 million,$870,000, or 6%84%, compared to 2016 primarily due to increases in employee-related, computer maintenance and support, stock-based compensation and contractor expenses of $1.7 million, $465,000, $288,000 and $246,000, respectively. These increases were partially offset by decreases in recruiting and relocation expense, travel expense, and amortization of acquired intangible assets of $382,000, $299,000 and $116,000, respectively. In future periods, we expect that our research and development expense will increase in absolute dollars as we continue to add employees, develop new features and functionality for our products, introduce additional software solutions and expand our product and service offerings.
Sales and Marketing. During 2017, sales and marketing expense increased by $3.3 million, or 6%, compared to 2016 primarily due to employee-related expense, commission expense, marketing programs and stock-based compensation expense of $2.2 million, $825,000, $565,000 and $430,000, respectively. There were also increases in computer maintenance and support and rent expense of $361,000 and $168,000, respectively. These increases were partially offset by decreases in travel expense, amortization of acquired intangible assets, contractor expense, and recruiting and relocation expense of $508,000, $267,000, $258,000 and $244,000, respectively. We expect that our sales and marketing expense will increase in absolute dollars along with our revenue, as we continue to expand sales coverage and build brand awareness through what we believe are cost-effective channels. We expect that such increases may fluctuate from period to period, however, due to the timing of marketing programs.
General and Administrative. During 2017, general and administrative expense increased by $2.7 million, or 14%, compared to 2016 primarily due to increases in outside accounting and legal fees, employee-related expense, and stock-based compensation expense of $2.2 million, $929,000 and $364,000, respectively. There were also increases in commission and travel expenses of $209,000 and $109,000, respectively. These increases were offset by decreases in contractor and recruiting and relocation expenses of $241,000 and $182,000, respectively, and the reversal of a sales tax accrual of $635,000. In future periods, we expect general and administrative expense to remain relatively unchanged.
Merger-related. During 2017, merger-related expenses decreased $21,000, or 100%, when compared to 2016 due to a $21,000 decrease in costs associated with the retention of certain employees of Unicorn.
Other Expense, Net
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Other Expense | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Interest income, net | | $ | 124 | | | | — | % | | $ | 99 | | | | — | % | | $ | 25 | | | | 25 | % | Interest expense | | | (26 | ) | | | — | | | | (63 | ) | | | — | | | | 37 | | | | (59 | ) | Other expense, net | | | 449 | | | | — | | | | (634 | ) | | | — | | | | 1,083 | | | | (171 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 547 | | | | — | % | | $ | (598 | ) | | | — | % | | $ | 1,145 | | | | (191 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
The interest expense during 2017 is primarily comprised of interest paid on capital leases and an equipment financing. The increase in other expenses, net was primarily due to foreign currency exchange gains recorded during 2017 upon collection of foreign denominated accounts receivable, compared to losses recorded in the corresponding period of the prior year.
Provision for Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2017 | | | 2016 | | | Change | | Provision for Income Taxes | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Provision for income taxes | | $ | 370 | | | | — | % | | $ | 410 | | | | — | % | | $ | (40 | ) | | | (10 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2017 and 2016, the provision for income taxes was primarily comprised of income tax expenses related to foreign jurisdictions.
Overview of Results of Operations for the Years Ended December 31, 2016 and 2015
Total revenue increased by 12%, or $15.6 million, in 2016 compared to 2015 due to an increase in subscription and support revenue of 8%, or $11.0 million. The increase in professional services and other revenue of 123%, or $4.5 million primarily related to the size and number of professional services engagements, in 2016 compared to 2015. The increase in subscription and support revenue resulted primarily from an increase in revenue from new and existing customers. In addition, our revenue from premium offerings grew by $17.1million, or 14%, in 2016 compared to 2015. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.
Our gross profit increased by $6.2 million, or 7%, in 2016 compared to 2015, primarily due to an increase in revenue. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery. Loss from operations was $9.0 million in 2016 compared to $6.9 million in 2015. Loss from operations in 2016 included stock-based compensation expense and amortization of acquired intangible assets of $6.0 million and $3.1 million, respectively. Loss from operations in 2015 included stock-based compensation expense and amortization of acquired intangible assets of $6.0 million and $3.1 million, respectively. We expect operating income to improve from increased sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to grow and scale our operations.
As of December 31, 2016, we had $36.8 million of unrestricted cash and cash equivalents, an increase of $9.2 million from $27.6 million at December 31, 2015, due primarily to $11.1 million of cash provided by operating activities, $4.6 million in proceeds from exercises of stock options and $604,000 in proceeds from an equipment financing. These increases were offset in part by $3.9 million in capitalization ofinternal-use software costs, $1.3 million in capital expenditures and $850,000 in payments under capital lease obligations.
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2016 | | | 2015 | | | Change | | Revenue by Product Line | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Premium | | $ | 142,840 | | | | 95 | % | | $ | 125,767 | | | | 93 | % | | $ | 17,073 | | | | 14 | % | Volume | | | 7,426 | | | | 5 | | | | 8,939 | | | | 7 | | | | (1,513 | ) | | | (17 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 150,266 | | | | 100 | % | | $ | 134,706 | | | | 100 | % | | $ | 15,560 | | | | 12 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2016, revenue increased by $15.6 million, or 12%, compared to 2015, primarily due to an increase in revenue from our premium offerings, which consist of subscription and support revenue, as well as professional services and other revenue. The increase in premium revenue of $17.1million, or 14%, is partially the result of an 8% increase in the number of premium customers from 1,863 at December 31, 2015 to 2,007 at December 31, 2016 and a 6% increase in the average annual subscription revenue per premium customer during 2016. In addition, during 2016, professional services and other revenue increased by $4.5 million compared to 2015. During 2016, volume revenue decreased by $1.5 million, or 17%, compared to 2015, as we continue to focus on the market for our premium solutions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2016 | | | 2015 | | | Change | | Revenue by Type | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 142,022 | | | | 95 | % | | $ | 131,010 | | | | 97 | % | | $ | 11,012 | | | | 8 | % | Professional services and other | | | 8,244 | | | | 5 | | | | 3,696 | | | | 3 | | | | 4,548 | | | | 123 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 150,266 | | | | 100 | % | | $ | 134,706 | | | | 100 | % | | $ | 15,560 | | | | 12 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2016, subscription and support revenue increased by $11.0 million, or 8%, compared to 2015. The increase was primarily related to the continued growth of our customer base for our premium offerings, including sales to both new and existing customers, and a 6% increase in the average annual subscription revenue per premium customer during 2016. In addition, professional services and other revenue increased by $4.5 million, or 123%, primarily related to the size and number of professional services engagements during 2016 compared to the prior year. We engaged in several large professional services engagements in 2016 to support our various subscription sales, including $4.7 million of revenue recognized from customers in Japan compared to $1.4 million in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2016 | | | 2015 | | | Change | | Revenue by Geography | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | North America | | $ | 92,912 | | | | 62 | % | | $ | 86,106 | | | | 64 | % | | $ | 6,806 | | | | 8 | % | Europe | | | 25,196 | | | | 17 | | | | 25,380 | | | | 19 | | | | (184 | ) | | | (1 | ) | Japan | | | 15,230 | | | | 10 | | | | 9,061 | | | | 7 | | | | 6,169 | | | | 68 | | Asia Pacific | | | 15,617 | | | | 10 | | | | 12,380 | | | | 9 | | | | 3,237 | | | | 26 | | Other | | | 1,311 | | | | 1 | | | | 1,779 | | | | 1 | | | | (468 | ) | | | (26 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | International subtotal | | | 57,354 | | | | 38 | | | | 48,600 | | | | 36 | | | | 8,754 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 150,266 | | | | 100 | % | | $ | 134,706 | | | | 100 | % | | $ | 15,560 | | | | 12 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
For purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprised of revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending on the timing of new customer contracts, revenue mix from a geographic region can vary from period to period.
During 2016, total revenue for North America increased $6.8 million, or 8%, compared to 2015. The increase in revenue for North America resulted primarily from an increase in subscription and support revenue from our premium offerings. During 2016, total revenue outside of North America increased $8.8 million, or 18%, compared to 2015. The increase in revenue from international regions is primarily related to an increase in revenue in Japan and Asia Pacific. Revenue from customers in Japan increased by $6.2 million of which $3.3 million was from professional service arrangements. This increase is partially offset by a $1.1 million
reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2015.
Cost of Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Change | | | | 2016 | | | 2015 | | | | | | | | Cost of Revenue | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 48,011 | | | | 34 | % | | $ | 41,735 | | | | 32 | % | | $ | 6,276 | | | | 15 | % | Professional services and other | | | 7,836 | | | | 95 | | | | 4,742 | | | | 128 | | | | 3,094 | | | | 65 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 55,847 | | | | 37 | % | | $ | 46,477 | | | | 35 | % | | $ | 9,370 | | | | 20 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2016, cost of subscription and support revenue increased $6.3 million, or 15%, compared to 2015. The increase resulted primarily from increases in content delivery network expenses, network hosting service expenses, employee-related expenses, and costs associated with the closure of certain facilities of $3.2 million, $2.4 million, $738,000 and $696,000, respectively. There were also increases in bandwidth, third-party software integrated with our service offerings and stock-based compensation expenses of $239,000, $208,000 and $143,000, respectively. These increases were partially offset by a decrease in depreciation expense of $1.2 million.
During 2016, cost of professional services and other revenue increased $3.1 million, or 65%, compared to 2015. The increase resulted primarily from increases in contractor and employee-related expenses of $2.3 million and $605,000, respectively. The increase primarily related to an increase in professional services projects in 2016.
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Change | | | | 2016 | | | 2015 | | | | | | | | Gross Profit | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 94,011 | | | | 66 | % | | $ | 89,275 | | | | 68 | % | | $ | 4,736 | | | | 5 | % | Professional services and other | | | 408 | | | | 5 | | | | (1,046 | ) | | | (28 | ) | | | 1,454 | | | | 139 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 94,419 | | | | 63 | % | | $ | 88,229 | | | | 65 | % | | $ | 6,190 | | | | 7 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
The overall gross profit percentage was 63% and 65% for the years ended December 31, 2016 and 2015, respectively. Subscription and support gross profit increased $4.7 million, or 5%, compared to 2015. Professional services and other gross profit increased $1.5 million, or 139% compared to 2015. The increase in the number of professional service engagements has allowed for greater leverage of fixed costs, which has resulted in margin expansion for this revenue stream. The decrease in subscription and support gross margin is primarily related to additional costs incurred in delivering our subscription service in addition to the costs incurred to close certain facilities. During 2016 we moved certain operating activities to cloud-based services while maintaining existing data centers until the fourth quarter at which time we closed certain facilities and incurred an additional expense of $845,000. We expect to continue to seek opportunities to move operating activities to additional cloud-based services, and as a result, to achieve a moderate increase in subscription and support gross margin.2020. It is likely that gross profit, as a percentage of revenue, will fluctuate quarter by quarter due to the timing and mix of subscription and support revenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Change | | | | 2016 | | | 2015 | | | | | | | | Operating Expenses | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Research and development | | $ | 30,171 | | | | 20 | % | | $ | 29,302 | | | | 22 | % | | $ | 869 | | | | 3 | % | Sales and marketing | | | 54,038 | | | | 36 | | | | 45,795 | | | | 34 | | | | 8,243 | | | | 18 | | General and administrative | | | 19,167 | | | | 13 | | | | 19,862 | | | | 15 | | | | (695 | ) | | | (3 | ) | Merger-related | | | 21 | | | | — | | | | 201 | | | | — | | | | (180 | ) | | | (90 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 103,397 | | | | 69 | % | | $ | 95,160 | | | | 71 | % | | $ | 8,237 | | | | 9 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | | | | | | (in thousands, except percentages) | | | | $ | 31,718 | | | | 15 | % | | $ | 33,978 | | | | 17 | % | | $ | (2,260 | ) | | | (7 | )% | | | | 71,177 | | | | 34 | % | | | 59,812 | | | | 30 | % | | | 11,365 | | | | 19 | % | General and administrative | | | 29,261 | | | | 14 | % | | | 27,021 | | | | 14 | % | | | 2,240 | | | | 8 | % | | | | 300 | | | | — | | | | 5,768 | | | | 3 | % | | | (5,468 | ) | | | (95 | )% | | | | (1,965 | ) | | | (1 | )% | | | — | | | | — | | | | (1,965 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 130,491 | | | | 62 | % | | $ | 126,579 | | | | 64 | % | | $ | 3,912 | | | | 3 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2016,2021, research and development expense increaseddecreased by $869,000,$2.3 million, or 3%7%, compared to 20152020. This decrease was primarily due to decreases in employee-related, rent, contractor, and travel expenses of $1.7 million, $1.1 million, $156,000, and $196,000, respectively. These decreases were offset by increases in stock-based compensation expense and amortization of capitalized internal use software of $599,000 and $335,000, respectively. We expect our research and development expense, as percentage of revenue, to remain relatively unchanged in future periods.During 2021, sales and marketing expense increased by $11.4 million, or 19%, compared to 2020 primarily due to increases in employee-related, commissions, and contractormarketing program expenses of $1.1$5.1 million, $4.5 million, and $248,000$4.1 million, respectively. These increases were partially offset by decreases in rent, travelcontractor, and stock-based compensationintangible amortization expenses of $186,000, $149,000$1.2 million, $701,000, and $117,000,$256,000, respectively. In future periods, we expect that our research and development expense will increase in absolute dollars as we continue to add employees, develop new features and functionality for our products, introduce additional software solutions and expand our product and service offerings.Sales and Marketing. During 2016, sales and marketing expense increased by $8.2 million, or 18%, compared to 2015 primarily due to employee-related, commission and travel expenses of $4.5 million, $2.2 million and $652,000 respectively. There were also increases in computer maintenance and support, marketing programs and stock-based compensation expenses of $388,000, $364,000 and $165,000, respectively. These increases were partially offset by a decrease in contractor expense of $283,000. We expect that our sales and marketing expense will increase in absolute dollars along with our revenue, as we continue to expand sales coverage and build brand awareness through what we believe are cost-effective channels. We expect that such increases may fluctuate from period to period, however, due to the timing of marketing programs.
General and Administrative During 2016,2021, general and administrative expense decreasedincreased by 695,000,$2.2 million, or 3%8%, compared to 20152020 primarily due to decreasesincreases in outside accounting and legal fees,fee, employee-related, and stock-based compensation expense, bad debt expense,expenses of $1.2 million, $873,000, and rent expense of $1.3 million, $229,000, $179,000 and $109,000,$643,000, respectively. These decreasesincreases were offset by increasesdecreases in employee-related, recruiting and amortization ofinternal-use software developmentrent expenses of $700,000, $247,000 and $165,000, respectively. There were also increases in computer maintenance and support and commission expenses of $148,000 and $131,000, respectively.$266,000. In future periods, we expect general and administrative expense, will increase in absolute dollars as we add personnel and incur additional costs relateda percentage of revenue, to the growthremain relatively unchanged.
During 2016,2021, merger-related expensesexpense decreased $180,000,by $5.5 million, or 90%95%, when compared to 20152020 primarily due to an $182,000 decrease in costs associated with the retention of certain employees of Unicorn.Other Expense, Net
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2016 | | | 2015 | | | Change | | Other Expense | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Interest income, net | | $ | 99 | | | | — | % | | $ | 6 | | | | — | % | | $ | 93 | | | | nm | % | Interest expense | | | (63 | ) | | | — | | | | (96 | ) | | | — | | | | 33 | | | | (34 | ) | Other expense, net | | | (634 | ) | | | — | | | | (168 | ) | | | — | | | | (466 | ) | | | 277 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | (598 | ) | | | — | % | | $ | (258 | ) | | | — | % | | $ | (340 | ) | | | 132 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
nm – not meaningful
During 2016, interest income, net, increased by $93,000 compared to 2015. The increase is primarily due to a higher average cash balance as interest income is generated from the investment of our cash balances, less related bank fees.
The interest expense during 2016 is primarily comprised of interest paid on capital leases and an equipment financing. The increase in other expenses, net is primarily due to a gain of $871,000 in 2015 upon the return of shares from escrowincurred in connection with general merger and related activities in 2020 which did not recur in the current period.
On March 27, 2020, in response tothe COVID-19 pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act, which was amended by the Consolidated Appropriations Act in December of 2020 (the “CARES Act”). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain employee retention credits. In the first quarter of 2021, we recognized a business combination. This increase is offset in part by a decreasebenefit of $413,000 in foreign currency exchange losses that are recorded upon collection of foreign denominated accounts receivable.Provision for Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2016 | | | 2015 | | | Change | | Provision for Income Taxes | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Provision for income taxes | | $ | 410 | | | | — | % | | $ | 391 | | | | — | % | | $ | 19 | | | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2016 and 2015,$2.0 million from the provision for income taxes was primarily comprised of income tax expensesCARES Act related to foreign jurisdictions.
employee retention credits. The benefit was recorded as Other (benefit) expense. Overview of Results of Operations for the Years Ended December 31, 2020 and 2019 Please see our Form10-K for the year ended December 31, 2020 for an overview of results of operations for the years ended December 31, 2020 and 2019. Liquidity and Capital Resources In connection with our initial public offering in February 2012, we received aggregate proceeds of approximately $58.8 million, including the proceeds from the underwriters’ exercise of their overallotment option, net of underwriters’ discounts and commissions, but before deducting offering expenses of approximately $4.3 million. Prior to our initial public offering, we funded our operations primarily through private placements of preferred and common stock, as well as through borrowings of $7.0 million under our bank credit facilities. In February 2012, we repaid the $7.0 million balance under our bank credit facilities. All of the preferred stock was converted into shares of our common stock in connection with our initial public offering.
| | | | | | | | | | | | | | | Year Ended December 31, | | Condensed Consolidated Statements of Cash Flow Data | | 2017 | | | 2016 | | | 2015 | | | | (in thousands) | | Purchases of property and equipment | | $ | (1,102 | ) | | $ | (1,307 | ) | | $ | (1,390 | ) | Depreciation and amortization | | | 7,257 | | | | 7,796 | | | | 8,687 | | Cash flows (used in) provided by operating activities | | | (6,441 | ) | | | 11,077 | | | | 9,081 | | Cash flows used in investing activities | | | (4,112 | ) | | | (5,293 | ) | | | (2,846 | ) | Cash flows (used in) provided by financing activities | | | (544 | ) | | | 3,633 | | | | (1,412 | ) |
Cash and cash equivalents.
Our cash and cash equivalents at December 31, 20172021 were held for working capital purposes and were invested primarily in money market funds. We do not enter into investments for trading or speculative purposes. At December 31, 20172021 and 2016,2020, we had $7.8$13.8 million and $5.9$17.1 million, respectively, of cash and cash equivalents held by subsidiaries in international locations, including subsidiaries located in Japan and the United Kingdom. As a result of changes in tax law, these earnings can be repatriated to the United States tax-free but willcould still be subject to foreign withholding taxes. The Company is stillOn November 1, 2021, we completed the acquisition of video interactivity technology assets that were provided by a 3rd party partner for $2.0 million in the process of analyzing the impact of the Tax Cuts and Jobs Act on its indefinite reinvestment assertion.cash. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs over at least the next 12 months.
| | | | | | | | | | | | | | | | | Condensed Consolidated Statements of Cash Flow Data | | | | | | | | | | | | (in thousands) | | Cash flows provided by operating activities | | | 19,563 | | | | 21,312 | | | | 2,708 | | Cash flows used in investing activities | | | (10,842 | ) | | | (8,724 | ) | | | (12,618 | ) | Cash flows provided by financing activities | | | 702 | | | | 1,585 | | | | 3,177 | |
Accounts receivable, net. Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. The fluctuations vary depending on the timing of our billing activity, cash collections, and changes to our allowance for doubtful accounts. In many instances we receive cash payment from a customer prior to the time we are able to recognize revenue on a transaction. We record these payments as deferred revenue, which has a positive effect on our accounts receivable balances. We use days’ sales outstanding, or DSO, calculated on a quarterly basis, as a measurement of the quality and status of our receivables. We define DSO as (a) accounts receivable, net of allowance for doubtful accounts, divided by total revenue for the most recent quarter, multiplied by (b) the number of days in that quarter. DSO was 59 days at December 31, 2017 and 53 days at December 31, 2016.
Cash flows (used in) provided by operating activities. Cash used inprovided by operating activities consists primarily of net lossincome adjusted for certain non-cash items including depreciation and amortization, stock-based compensation expense, the provision for bad debts and the effect of changes in working capital and other activities. Cash used inprovided by operating activities during the year ended December 31, 20172021 was $6.4$19.6 million. The cash flows used inflow provided by operating activities primarily resulted fromnet losses non-cash charges of $19.5$18.4 million and net income of $5.4 million, partially offset by changes in our
operating assets and liabilities of $4.3 million.Net non-cash expenses consisted of $10.0 million for stock-based compensation, $8.3 million for depreciation and amortization, and $159,000 for provision for reserves on accounts receivable. Cash outflows from changes in our operating assets and liabilities consisted primarily of $1.6a decrease in accrued expenses of $5.2 million, partially offset by netnon-cash chargesan increase in other assets of $14.7 million. Uses of cash included increases$1.4 million, an increase in accounts receivable and prepaid expenses of $3.8 million and $1.5 million, respectively,$846,000, and a decrease in accrued expenseaccounts payable of $2.9 million.$683,000. These outflows were offset in part by increasesa decrease in deferred revenue and accounts payable of $4.7 million and $1.8 million, respectively. Netnon-cash expenses consisted primarily of $7.3 million for depreciation and amortization expense and $7.2 million for stock-based compensation expense.$3.2 million. Cash flows used in investing activities. Cash used in investing activities during the year ended December 31, 20172021 was $4.1$10.8 million, consisting primarily of $3.0$6.6 million for the capitalization of internal-use software costs, and $1.1$2.2 million in capital expenditures to support the business.business, and $2.0 million for the purchase of a technology asset of a company on November 1, 2021. Cash flows (used in) provided by financing activities. Cash used inprovided by financing activities for the year ended December 31, 20172021 was $545,000,$702,000, consisting of payments under capital lease obligation, equipment financing and withholding tax on RSU vesting of $489,000, $307,000 and $269,000, respectively, offset in part by the proceeds received on the exercise of common stock options of $520,000.$2.8 million, offset by other activity of $2.1 million. Credit facility borrowings.facility.
On November 19, 2015, weDecember 28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a $20.0$30.0 million asset basedasset-based line of credit (the “Line of Credit”). Under the Line of Credit, we can borrow up to $20.0 million. Borrowings under the Line of Credit are secured by substantially all of our assets, excluding our intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate equal to the prime rate or the LIBOR rate plus 2.5%. Under the Loan Agreement, we must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold basedon non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. We were in compliance with all covenants under the Line of Credit as of December 31, 2017.On December 31, 2015,2021. As we have not drawn on the Company entered into an equipment financing agreement with a lender (the “December 2015 Equipment Financing Agreement”) to finance the purchaseLine of $604,000 in computer equipment. In February 2016, the Company drew down $604,000 under the December 2015 Equipment Financing Agreement, and the liability was recorded at fair value using a market interest rate. The Company repaid its obligation over a two year period through January 2018, and the amountCredit, there are no amounts outstanding was $26,000 as of December 31, 2017.
2021. We assessed the effect webelieve COVID-19 might have on our liquidity and believe that our existing cash and cash equivalents and the capital available under our credit facility will be sufficient to meet our anticipated working capital and capital expenditure needs over at least the next 12 months. On March 25, 2020, we borrowed $10.0 million on our line of credit in anticipation of any operating cash needs in lightof COVID-19. The $10 million borrowed was fully repaid by December 31, 2020. The effective interest rate for the amounts borrowed during 2020 was 4%. Net operating loss carryforwards. As of December 31, 2017, we2021, the Company had federal and state net operating losses of approximately $161.9$199.4 million, and $66.7of which $161.8 million respectively, which are available to offset future taxable income, if any, through 2037. We2037 and $37.6 million which are available to offset future taxable income indefinitely. As of December 31, 2021, the Company had state net operating losses of approximately $92.3 million, of which $89.2 million are available to offset future taxable income, if any, through 2041 and $3.1 million which are available to offset future taxable income indefinitely. The Company also had federal and state research and development tax credits of $6.1$9.0 million and $3.9$5.5 million, respectively, which expire in various amounts through 2037. Our2041. The net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules ofunder the U.S. Internal Revenue Code of 1986, as amended. We completed an assessment to determine whether there may have been a Section 382 ownership change and determined that it is more likely than not that our net operating and tax credit amounts as disclosed are not subject to any material Section 382 limitations.In assessing our ability to utilize our net deferred tax assets, we considered whether it is more likely than not that some portion or all of our net deferred tax assets will not be realized. Based upon the level of our historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, we believe it is more likely than not that we will not realize the benefits of these deductible differences. Accordingly, we have provided a valuation allowance against our U.S. deferred tax assets as of December 31, 20172021 and 2016.Based upon the level2020.
Contractual Obligations and Commitments Our principal commitments consist primarily of obligations under our leases for our office space and contractual commitments for capital leases and equipment financing as well as content delivery network services, hosting and other support services. As of December 31, 2021, we had operating lease obligations of $25,401, with $2,425 payable within 12 months. As of December 31, 2021, we had outstanding purchase obligations of $16,006, with $15,775 payable within 12 months. Other than these lease obligations and contractual commitments, we do not have commercial commitments under lines of credit, standby repurchase obligations or other such debt arrangements. The following table summarizes these contractual obligations at December 31, 2017: | | | | | | | | | | | | | | | | | | | | | | | Payment Due by Period | | | | Total | | | Less than 1 Year | | | 1- 3 Years | | | 3 - 5 Years | | | More than 5 Years | | Operating lease obligations | | $ | 29,597 | | | $ | 8,384 | | | $ | 12,155 | | | $ | 6,964 | | | $ | 2,094 | | Capital lease obligations | | | 231 | | | | 231 | | | | — | | | | — | | | | — | | Outstanding purchase obligations | | | 23,829 | | | | 15,833 | | | | 7,996 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 53,657 | | | $ | 24,448 | | | $ | 20,151 | | | $ | 6,964 | | | $ | 2,094 | | | | | | | | | | | | | | | | | | | | | | |
2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating lease obligations | | $ | 25,401 | | | $ | 2,425 | | | $ | 22,976 | | Outstanding purchase obligations | | | 16,006 | | | | 15,775 | | | | 231 | | | | | | | | | | | | | | | | | $ | 41,407 | | | $ | 18,200 | | | $ | 23,207 | | | | | | | | | | | | | | |
We expect to incur significant operating costs, particularly related to services delivery costs, sales and marketing and research and development, for the foreseeable future in order to execute our business plan. We anticipate that such operating costs, as well as planned capital expenditures will constitute a material use of our cash resources. As a result, our net cash flows will depend heavily on the level of future sales, changes in deferred revenue and our ability to manage infrastructure costs. We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditures for at least the next 12 months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, our introduction of new products and enhancements, and our expansion of sales and marketing and product development activities. To the extent that our cash and cash equivalents, short and long-term investments and cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements or public or private equity or debt financings. We also may need to raise additional funds in the event we determine in the future to acquire businesses, technologies and products that will complement our existing operations. In the event funding is required, we may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to us or at all. Off-Balance Sheet Arrangements
We do not have any
On February 9, 2022, we announced that the Board of Directors appointed Marc DeBevoise as Chief Executive Officer of the Company and a Class II director of the Board of Directors, effective as of Mr. DeBevoise’s employment start date, expected to be on March 28, 2022. Mr. DeBevoise will fill the vacancy created by Mr. Ray’s resignation on the Board, effective as of Mr. DeBevoise’s employment start date. The term of the Company’s Class II directors, including Mr. DeBevoise, expires at the annual meeting of stockholders to be held in 2023 or upon the election and qualification of successor directors. Mr. DeBevoise, has served as Vice Chairman of the Board and President of Argus Capital Corporation, a tech-driven-media focused special purpose entities oroff-balance sheet arrangements.acquisition corporation (ARGU), as Chief Executive Officer and President of ViacomCBS Digital (previously known as CBS Interactive) and as Chief Digital Officer of ViacomCBS, and as President and Chief Operating Officer of CBS Interactive. Mr. DeBevoise has also served as a member of the board of directors at Limelight Networks (LLNW), a provider of edge cloud, content delivery and security computing services. Mr. DeBevoise earned his B.A. in Economics and Computer Science from Tufts University and earned his M.B.A. with distinction in Entertainment, Media & Technology and Finance from NYU’s Stern School of Business. Mr. DeBevoise was selected to serve on our Board of Directors due to the perspective and experience he brings as the appointed Chief Executive Officer and his prior experience as an executive in media, technology and digital and
streaming industries. Mr. DeBevoise’s employment agreement with the Company can be found in Exhibit 99.1 to the our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 9, 2022. Recent Accounting Pronouncements For information on recent accounting pronouncements, see Recently Issued and Adopted Accounting Standards in the notes to the condensed consolidated financial statements appearing elsewhere in this Annual Report on Form | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Quantitative and Qualitative Disclosures About Market Risk We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily foreign exchange risks, interest rate and inflation. Financial instruments meeting fair value disclosure requirements consist of cash equivalents, accounts receivable and accounts payable. The fair value of these financial instruments approximates their carrying amount.
Foreign currency exchange risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro, British pound, Australian dollar and Japanese yen. Except for revenue transactions in Japan, we enter into transactions directly with substantially all of our foreign customers. Percentage of revenues and expenses in foreign currency is as follows: | | | | | | | | | | | Twelve Months Ended December 31, | | | | 2017 | | | 2016 | | Revenues generated in locations outside the United States | | | 45 | % | | | 42 | % | Revenues in currencies other than the United States dollar (1) | | | 29 | % | | | 28 | % | Expenses in currencies other than the United States dollar (1) | | | 15 | % | | | 15 | % |
| | | | | | | | | | | Twelve Months Ended December 31, | | | | | | | | | Revenues generated in locations outside the United States | | | 47 | % | | | 50 | % | Revenues in currencies other than the United States dollar (1) | | | 29 | % | | | 30 | % | Expenses in currencies other than the United States dollar (1) | | | 17 | % | | | 15 | % |
(1) | Percentage of revenues and expenses denominated in foreign currency for the years ended December 31, 20172021 and 2016:2020: |
| | | | | | | | | | | Twelve Months Ended December 31, 2017 | | | | Revenues | | | Expenses | | Euro | | | 6 | % | | | 1 | % | British pound | | | 7 | | | | 6 | | Japanese Yen | | | 11 | | | | 4 | | Other | | | 5 | | | | 4 | | | | | | | | | | | Total | | | 29 | % | | | 15 | % |
| | | | | | | | | | | Twelve Months Ended December 31, 2016 | | | | Revenues | | | Expenses | | Euro | | | 7 | % | | | 2 | % | British pound | | | 7 | | | | 6 | | Japanese Yen | | | 10 | | | | 4 | | Other | | | 4 | | | | 3 | | | | | | | | | | | Total | | | 28 | % | | | 15 | % |
| | | | | | | | | | |
| | | | | | | | | | | | 8 | % | | | 1 | % | | | | 6 | % | | | 5 | % | | | | 12 | % | | | 3 | % | | | | 3 | % | | | 8 | % | | | | | | | | | | | | | 29 | % | | | 17 | % |
| | | | | | | | | | |
| | | | | | | | | | | | 8 | % | | | 1 | % | | | | 6 | % | | | 6 | % | | | | 13 | % | | | 2 | % | | | | 3 | % | | | 6 | % | | | | | | | | | | | | | 30 | % | | | 15 | % |
As of December 31, 20172021 and 2016,2020, we had $7.3$8.3 million and $5.6$9.0 million, respectively, of receivables denominated in currencies other than the U.S. dollar. We also maintain cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange rate movements. In addition, although our foreign subsidiaries have intercompany accounts that are eliminated upon consolidation, these accounts expose us to foreign currency exchange rate fluctuations. Exchange rate fluctuations on short-term intercompany accounts are recorded in our consolidated statements of operations under “other income (expense), net”, while exchange rate fluctuations on long-term intercompany accounts are recorded in our consolidated balance sheets under “accumulatedas a component of other comprehensive income” in stockholders’ equity,income (loss), as they are considered part of our net investment and hence do not give rise to gains or losses.investment. Currently, our largest foreign currency exposures are the euro and British pound primarily because our European operations have a higher proportion of our local currency denominated expenses.expenses, in addition to the Japanese Yen as result of our ongoing operations in Japan. Relative to foreign currency exposures existing at December 31, 2017,2021, a 10% unfavorable movement in foreign currency exchange rates would expose us to significant losses in earnings or cash flows or significantly diminish the fair value of our foreign currency financial instruments. For the year ended December 31, 2017,2021, we estimated that a 10% unfavorable movement in foreign currency exchange rates would have decreased revenues by $4.5$6.0 million, decreased expenses by $2.6$3.5 million and decreasedincreased operating incomelosses by $1.9$2.6 million. The estimates used assume that all currencies move in the same direction at the same time and the ratio ofnon-U.S. dollar denominated revenue and expenses to U.S. dollar denominated revenue and expenses does not change from current levels. Since a portion of our revenue is deferred revenue that is recorded at different foreign currency exchange rates, the impact to revenue of a change in foreign currency exchange rates is recognized over time, and the impact to expenses is more immediate, as expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred. All of the potential changes noted above are based on sensitivity analyses performed on our financial results as of December 31, 2017 and 2016. 2021. We had unrestricted cash and cash equivalents totaling $26.1$45.7 million at December 31, 2017.2021. Cash and cash equivalents were invested primarily in money market funds and are held for working capital purposes. We do not use derivative financial instruments in our investment portfolio. Declines in interest rates, however, would reduce future interest income. We incurred $26,000 and $63,000 of interest expense during the years ended December 31, 2017 and 2016, respectively, related to interest paid on capital leases and an equipment financing. While we continue to incur interest expense in connection with our capital leases and equipment financing, the interest expense is fixed and not subject to changes in market interest rates. In the event that we borrow under our line of credit, which bears interest at the prime rate or the LIBOR rate plus the LIBOR rate margin, the related interest expense recorded would be subject to changes in the rate of interest. Inflation risk
We do not believe that inflation has had a material effect on our business, financial condition or results
| Financial Statements and Supplementary Data |
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm To the ShareholdersStockholders and the Board of Directors of Brightcove Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Brightcove Inc. (the Company) as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss,income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 201818, 2022 expressed an unqualified opinion thereon. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. | | | | | Revenue Recognition – Variable Consideration | | | Description of the Matter | | As described in Note 2 and Note 4 to the consolidated financial statements, the Company’s contracts contain transaction prices with variable amounts of consideration related to usage-based fees. The Company estimates the revenue pertaining to a customer’s usage that is expected to exceed the annual entitlement allowance, after consideration of any constraints, which is recognized ratably over the service period. |
| | | | | Auditing the Company’s measurement of variable consideration is especially challenging and subjective because estimating customers usage involves assessing a large volume of contracts and subjective management assumptions related to estimated future usage. Changes in assumptions of estimated future usage can have a material effect on the amount of revenue recognized in the period. | | | How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over the assessment and recording of variable consideration including the Company’s evaluation of potential estimated future usage at the contract level including the impacts of any constraints. We identified and tested controls used for the accumulation of the actual usage to date as well as the assessment of the estimated forecasted usage and related impacts of any constraints. To test variable consideration, our audit procedures included, amongst others, testing the completeness and accuracy of the underlying data used in the Company’s calculation. This included, for a sample of contracts, agreeing the entitlement allowances to the underlying contracts and agreeing the actual usage to the underlying revenue systems. To assess management’s variable consideration assumptions, for a sample of contracts, we tested management’s estimated usage over the annual entitlement allowance by comparing the entitlement and usage rates to actual customer experience, interviewed sales representatives to understand the actual and expected usage, and evaluated the impacts of any related constraints. We also tested the Company’s historical lookback analysis on a sample basis. Lastly, we performed sensitivity analyses to evaluate how the changes in management’s assumptions of future usage based on historical trends could affect revenue recognized. |
We have served as the Company’s auditor since 2010. February 28, 201818, 2022
Consolidated Balance Sheets | | | | | | | | | | | December 31, | | | | 2017 | | | 2016 | | | | (in thousands, except share and per share data) | | Assets | | | | | | | | | Current assets: | | | | | | | | | Cash and cash equivalents | | $ | 26,132 | | | $ | 36,813 | | Accounts receivable, net of allowance of $146 and $154 at December 31, 2017 and December 31, 2016, respectively | | | 25,236 | | | | 21,575 | | Prepaid expenses | | | 3,991 | | | | 3,729 | | Other current assets | | | 3,045 | | | | 2,168 | | | | | | | | | | | Total current assets | | | 58,404 | | | | 64,285 | | Property and equipment, net | | | 9,143 | | | | 9,264 | | Intangible assets, net | | | 8,236 | | | | 10,970 | | Goodwill | | | 50,776 | | | | 50,776 | | Deferred tax asset | | | 87 | | | | 121 | | Other assets | | | 969 | | | | 1,008 | | | | | | | | | | | Total assets | | $ | 127,615 | | | $ | 136,424 | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable | | $ | 6,142 | | | $ | 5,327 | | Accrued expenses | | | 13,621 | | | | 15,705 | | Capital lease liability | | | 228 | | | | 489 | | Equipment financing | | | 26 | | | | 307 | | Deferred revenue | | | 39,370 | | | | 34,665 | | | | | | | | | | | Total current liabilities | | | 59,387 | | | | 56,493 | | Deferred revenue, net of current portion | | | 244 | | | | 91 | | Other liabilities | | | 1,228 | | | | 1,644 | | | | | | | | | | | Total liabilities | | | 60,859 | | | | 58,228 | | Commitments and contingencies(Note 5) | | | | | | | | | Stockholders’ equity: | | | | | | | | | Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued | | | — | | | | — | | Common stock, $0.001 par value; 100,000,000 shares authorized; 34,933,408 and 34,143,148 shares issued at December 31, 2017 and 2016, respectively | | | 35 | | | | 34 | | Additionalpaid-in capital | | | 238,700 | | | | 230,788 | | Treasury stock, at cost; 135,000 shares | | | (871 | ) | | | (871 | ) | Accumulated other comprehensive loss | | | (809 | ) | | | (1,172 | ) | Accumulated deficit | | | (170,299 | ) | | | (150,583 | ) | | | | | | | | | | Total stockholders’ equity | | | 66,756 | | | | 78,196 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 127,615 | | | $ | 136,424 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | (in thousands, except share | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 45,739 | | | $ | 37,472 | | Accounts receivable, net of allowance of $353 and $648 at December 31, 2021 and December 31, 2020, respectively | | | 29,866 | | | | 29,305 | | | | | 7,792 | | | | 5,760 | | | | | 10,833 | | | | 12,978 | | | | | | | | | | | | | | 94,230 | | | | 85,515 | | Property and equipment, net | | | 20,514 | | | | 15,968 | | | | | 24,891 | | | | 8,699 | | | | | 9,276 | | | | 10,465 | | | | | 60,902 | | | | 60,902 | | | | | 6,655 | | | | 5,254 | | | | | | | | | | | | | $ | 216,468 | | | $ | 186,803 | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | | | | | $ | 11,039 | | | $ | 10,456 | | | | | 20,925 | | | | 25,397 | | Operating lease liability | | | 2,600 | | | | 4,346 | | | | | 62,057 | | | | 58,741 | | | | | | | | | | | Total current liabilities | | | 96,621 | | | | 98,940 | | Operating lease liability, net of current portion | | | 22,801 | | | | 5,498 | | | | | 786 | | | | 2,763 | | | | | | | | | | | | | | 120,208 | | | | 107,201 | | Commitments and contingencies | | | 0 | | | | 0 | | | | | | | | | | | Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0shares issued | | | 0— | | | | 0— | | Common stock, $0.001 par value; 100,000,000 shares authorized; 41,384,643 and 40,152,021 shares issued at December 31, 2021 and 2020, respectively | | | 41 | | | | 40 | | | | | 298,793 | | | | 287,059 | | Treasury stock, at cost; 135,000 shares | | | (871 | ) | | | (871 | ) | Accumulated other comprehensive loss | | | (662 | ) | | | (188 | ) | | | | (201,041 | ) | | | (206,438 | ) | | | | | | | | | | Total stockholders’ equity | | | 96,260 | | | | 79,602 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 216,468 | | | $ | 186,803 | | | | | | | | | | |
Consolidated Statements of Operations | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | | | (in thousands, except per share data) | | Revenue: | | | | | | | | | | | | | Subscription and support revenue | | $ | 143,159 | | | $ | 142,022 | | | $ | 131,010 | | Professional services and other revenue | | | 12,754 | | | | 8,244 | | | | 3,696 | | | | | | | | | | | | | | | Total revenue | | | 155,913 | | | | 150,266 | | | | 134,706 | | Cost of revenue:(1) (2) | | | | | | | | | | | | | Cost of subscription and support revenue | | | 50,664 | | | | 48,011 | | | | 41,735 | | Cost of professional services and other revenue | | | 13,954 | | | | 7,836 | | | | 4,742 | | | | | | | | | | | | | | | Total cost of revenue | | | 64,618 | | | | 55,847 | | | | 46,477 | | | | | | | | | | | | | | | Gross profit | | | 91,295 | | | | 94,419 | | | | 88,229 | | Operating expenses:(1) (2) | | | | | | | | | | | | | Research and development | | | 31,850 | | | | 30,171 | | | | 29,302 | | Sales and marketing | | | 57,294 | | | | 54,038 | | | | 45,795 | | General and administrative | | | 21,847 | | | | 19,167 | | | | 19,862 | | Merger-related | | | — | | | | 21 | | | | 201 | | | | | | | | | | | | | | | Total operating expenses | | | 110,991 | | | | 103,397 | | | | 95,160 | | | | | | | | | | | | | | | Loss from operations | | | (19,696 | ) | | | (8,978 | ) | | | (6,931 | ) | Other income (expense): | | | | | | | | | | | | | Interest income | | | 124 | | | | 99 | | | | 6 | | Interest expense | | | (26 | ) | | | (63 | ) | | | (96 | ) | Other income (expense), net | | | 449 | | | | (634 | ) | | | (168 | ) | | | | | | | | | | | | | | Total other income (expense), net | | | 547 | | | | (598 | ) | | | (258 | ) | | | | | | | | | | | | | | Loss before income taxes | | | (19,149 | ) | | | (9,576 | ) | | | (7,189 | ) | Provision for income taxes | | | 370 | | | | 410 | | | | 391 | | | | | | | | | | | | | | | Net loss | | $ | (19,519 | ) | | $ | (9,986 | ) | | $ | (7,580 | ) | | | | | | | | | | | | | | Net loss per share — basic and diluted | | $ | (0.57 | ) | | $ | (0.30 | ) | | $ | (0.23 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net loss per share — basic and diluted | | | 34,376 | | | | 33,189 | | | | 32,598 | | | | | | | | | | | | | | | (1) Stock-based compensation included in above line items: | | | | | | | | | | | | | Cost of subscription and support revenue | | $ | 439 | | | $ | 324 | | | $ | 181 | | Cost of professional services and other revenue | | | 251 | | | | 217 | | | | 181 | | Research and development | | | 1,563 | | | | 1,275 | | | | 1,392 | | Sales and marketing | | | 2,750 | | | | 2,320 | | | | 2,155 | | General and administrative | | | 2,240 | | | | 1,876 | | | | 2,105 | | (2) Amortization of acquired intangible assets included in above line items: | | | | | | | | | | | | | Cost of subscription and support revenue | | $ | 2,031 | | | $ | 2,031 | | | $ | 2,031 | | Research and development | | | 11 | | | | 126 | | | | 126 | | Sales and marketing | | | 692 | | | | 959 | | | | 955 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except per share data) | | | | | | | | | | | | | | | Subscription and support revenue | | $ | 198,929 | | | $ | 187,341 | | | $ | 173,818 | | Professional services and other revenue | | $ | 12,164 | | | $ | 10,012 | | | | 10,637 | | | | | | | | | | | | | | | | | | 211,093 | | | | 197,353 | | | | 184,455 | | | | | | | | | | | | | | | Cost of subscription and support revenue | | | 62,773 | | | | 67,124 | | | | 67,064 | | Cost of professional services and other revenue | | | 10,255 | | | | 8,973 | | | | 8,405 | | | | | | | | | | | | | | | | | | 73,028 | | | | 76,097 | | | | 75,469 | | | | | | | | | | | | | | | | | | 138,065 | | | | 121,256 | | | | 108,986 | | | | | | | | | | | | | | | | | | 31,718 | | | | 33,978 | | | | 32,535 | | | | | 71,177 | | | | 59,812 | | | | 60,375 | | General and administrative | | | 29,261 | | | | 27,021 | | | | 25,692 | | | | | 300 | | | | 5,768 | | | | 11,447 | | | | | (1,965 | ) | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | 130,491 | | | | 126,579 | | | | 130,049 | | | | | | | | | | | | | | | Income ( l oss) from operations | | | 7,574 | | | | (5,323 | ) | | | (21,063 | ) | Other (expense) income, net | | | | | | | | | | | | | | | | 5 | | | | 28 | | | | 143 | | | | | 0 | | | | (205 | ) | | | (7 | ) | Other (expense) income, net | | | (1,380 | ) | | | 305 | | | | (416 | ) | | | | | | | | | | | | | | Total other (expense) income, net | | | (1,375 | ) | | | 128 | | | | (280 | ) | | | | | | | | | | | | | | Income (loss) before income taxes | | | 6,199 | | | | (5,195 | ) | | | (21,343 | ) | Provision for income taxes | | | 802 | | | | 618 | | | | 560 | | | | | | | | | | | | | | | | | $ | 5,397 | | | $ | (5,813 | ) | | $ | (21,903 | ) | | | | | | | | | | | | | | Net income (loss) per share | | | | | | | | | | | | | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) | | | | | | | | | | | | | | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net income (loss) per share | | | | | | | | | | | | | | | | 40,717 | | | | 39,473 | | | | 38,028 | | | | | | | | | | | | | | | | | | 42,200 | | | | 39,473 | | | | 38,028 | | | | | | | | | | | | | | |
Consolidated Statements of Comprehensive Loss | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | | | (in thousands) | | Net loss | | $ | (19,519 | ) | | $ | (9,986 | ) | | $ | (7,580 | ) | Other comprehensive (loss) income: | | | | | | | | | | | | | Foreign currency translation adjustments | | | 363 | | | | (284 | ) | | | (112 | ) | | | | | | | | | | | | | | Comprehensive loss | | $ | (19,156 | ) | | $ | (10,270 | ) | | $ | (7,692 | ) | | | | | | | | | | | | | |
Income (Loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 5,397 | | | $ | (5,813 | ) | | $ | (21,903 | ) | Other comprehensive (loss) income: | | | | | | | | | | | | | Foreign currency translation adjustments | | | (474 | ) | | | 597 | | | | 167 | | | | | | | | | | | | | | | Comprehensive Income (loss) | | $ | 4,923 | | | $ | (5,216 | ) | | $ | (21,736 | ) | | | | | | | | | | | | | |
See accompanyingaccompa nying notes.
Consolidated Statements of Stockholders’ Equity (in thousands, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additional Paid-in Capital | | | | | | Accumulated Other Comprehensive Income | | | Accumulated Deficit | | | Total Stockholders’ Equity | | | | | | | | | | | | | | | Common Stock | | | | Treasury Stock | | | | | | Shares | | | Par Value | | | | | | Shares | | | Value | | | | | | | | | | | Balance at December 31, 2014 | | | 32,424,554 | | | $ | 32 | | | $ | 214,524 | | | | — | | | $ | — | | | $ | (776 | ) | | $ | (133,017 | ) | | $ | 80,763 | | Issuance of common stock upon exercise of stock options | | | 58,449 | | | | — | | | | 129 | | | | — | | | | — | | | | — | | | | — | | | | 129 | | Issuance of common stock pursuant to restricted stock units | | | 327,628 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | | Return of common stock issued pursuant to settlement agreement | | | — | | | | — | | | | | | | | (135,000 | ) | | | (871 | ) | | | — | | | | — | | | | (871 | ) | Withholding tax on restricted stock units vesting | | | — | | | | — | | | | (209 | ) | | | — | | | | — | | | | — | | | | — | | | | (209 | ) | Stock-based compensation expense | | | — | | | | — | | | | 6,014 | | | | — | | | | — | | | | — | | | | — | | | | 6,014 | | Foreign currency translation adjustment | | | — | | | | — | | | | — | | | | — | | | | — | | | | (112 | ) | | | — | | | | (112 | ) | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (7,580 | ) | | | (7,580 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2015 | | | 32,810,631 | | | | 33 | | | | 220,458 | | | | (135,000 | ) | | | (871 | ) | | | (888 | ) | | | (140,597 | ) | | | 78,135 | | Issuance of common stock upon exercise of stock options | | | 886,085 | | | | 1 | | | | 4,554 | | | | — | | | | — | | | | — | | | | — | | | | 4,555 | | Issuance of common stock pursuant to restricted stock units | | | 425,904 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Withholding tax on restricted stock units vesting | | | — | | | | — | | | | (405 | ) | | | — | | | | — | | | | — | | | | — | | | | (405 | ) | Stock-based compensation expense | | | — | | | | — | | | | 6,181 | | | | — | | | | — | | | | — | | | | — | | | | 6,181 | | Issuance of common stock upon net exercise of stock warrants | | | 20,528 | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | Foreign currency translation adjustment | | | — | | | | — | | | | — | | | | — | | | | — | | | | (284 | ) | | | — | | | | (284 | ) | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (9,986 | ) | | | (9,986 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2016 | | | 34,143,148 | | | | 34 | | | | 230,788 | | | | (135,000 | ) | | | (871 | ) | | | (1,172 | ) | | | (150,583 | ) | | | 78,196 | | Issuance of common stock upon exercise of stock options | | | 229,127 | | | | — | | | | 520 | | | | — | | | | — | | | | — | | | | — | | | | 520 | | Issuance of common stock pursuant to restricted stock units | | | 561,133 | | | | 1 | | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Withholding tax on restricted stock units vesting | | | — | | | | — | | | | (268 | ) | | | — | | | | — | | | | — | | | | — | | | | (268 | ) | Stock-based compensation expense | | | — | | | | — | | | | 7,464 | | | | — | | | | — | | | | — | | | | — | | | | 7,464 | | Impact of adoption of ASU2016-09 as of January 1, 2017 | | | — | | | | — | | | | 197 | | | | — | | | | — | | | | — | | | | (197 | ) | | | — | | Foreign currency translation adjustment | | | — | | | | — | | | | — | | | | — | | | | — | | | | 363 | | | | — | | | | 363 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (19,519 | ) | | | (19,519 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2017 | | | 34,933,408 | | | $ | 35 | | | $ | 238,700 | | | | (135,000 | ) | | $ | (871 | ) | | $ | (809 | ) | | $ | (170,299 | ) | | $ | 66,756 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except share data) | | Shares of common stock issued | | | | | | | | | | | | | Balance, beginning of period | | | 40,152,021 | | | | 39,042,787 | | | | 36,752,469 | | Common stock issued upon acquisition | | | — | | | | 0 | | | | 1,286,846 | | Issuance of common stock upon exercise of stock options and pursuant to restricted stock units | | | 1,232,622 | | | | 1,109,234 | | | | 1,003,472 | | | | | | | | | | | | | | | | | | 41,384,643 | | | | 40,152,021 | | | | 39,042,787 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, beginning of period | | | (135,000 | ) | | | (135,000 | ) | | | (135,000 | ) | | | | | | | | | | | | | | | | | (135,000 | ) | | | (135,000 | ) | | | (135,000 | ) | | | | | | | | | | | | | | Par value of common stock issued | | | | | | | | | | | | | Balance, beginning of period | | $ | 40 | | | $ | 39 | | | $ | 37 | | Common stock issued upon acquisition | | | | | | | 0 | | | | 1 | | Issuance of common stock upon exercise of stock options and pursuant to restricted stock units | | | 1 | | | | 1 | | | | 1 | | | | | | | | | | | | | | | | | $ | 41 | | | $ | 40 | | | $ | 39 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, beginning of period | | $ | (871 | ) | | $ | (871 | ) | | $ | (871 | ) | | | | | | | | | | | | | | | | $ | (871 | ) | | $ | (871 | ) | | $ | (871 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, beginning of period | | $ | 287,059 | | | $ | 276,365 | | | $ | 251,122 | | Common stock issued upon acquisition | | | — | | | | 0 | | | | 12,248 | | Issuance of common stock upon exercise of stock options and pursuant to restricted stock units, net of tax | | | 1,175 | | | | 1,617 | | | | 3,413 | | Stock-based compensation expense | | | 10,559 | | | | 9,077 | | | | 9,582 | | | | | | | | | | | | | | | | | $ | 298,793 | | | $ | 287,059 | | | $ | 276,365 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, beginning of period | | $ | (206,438 | ) | | $ | (200,625 | ) | | $ | (178,722 | ) | | | | 5,397 | | | | (5,813 | ) | | | (21,903 | ) | | | | | | | | | | | | | | | | $ | (201,041 | ) | | $ | (206,438 | ) | | $ | (200,625 | ) | | | | | | | | | | | | | | Accumulated other comprehensive loss | | | | | | | | | | | | | Balance, beginning of period | | $ | (188 | ) | | $ | (785 | ) | | $ | (952 | ) | Foreign currency translation adjustment | | | (474 | ) | | | 597 | | | | 167 | | | | | | | | | | | | | | | | | $ | (662 | ) | | $ | (188 | ) | | $ | (785 | ) | | | | | | | | | | | | | | Total stockholders’ equity | | $ | 96,260 | | | $ | 79,602 | | | $ | 74,123 | | | | | | | | | | | | | | |
Consolidated Statements of Cash Flows | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | | | (in thousands) | | Operating activities | | | | | | | | | | | | | Net loss | | $ | (19,519 | ) | | $ | (9,986 | ) | | $ | (7,580 | ) | Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | 7,257 | | | | 7,796 | | | | 8,687 | | Stock-based compensation | | | 7,243 | | | | 6,012 | | | | 6,014 | | Deferred income taxes | | | 38 | | | | (47 | ) | | | (27 | ) | Provision for reserves on accounts receivable | | | 203 | | | | 230 | | | | 408 | | Loss on disposal of equipment | | | — | | | | 155 | | | | 68 | | Gain from settlement of escrow claim | | | — | | | | — | | | | (871 | ) | Changes in assets and liabilities: | | | | | | | | | | | | | Accounts receivable | | | (3,811 | ) | | | (559 | ) | | | (157 | ) | Prepaid expenses and other current assets | | | (1,484 | ) | | | (894 | ) | | | 680 | | Other assets | | | 56 | | | | (299 | ) | | | (256 | ) | Accounts payable | | | 1,758 | | | | 733 | | | | 1,751 | | Accrued expenses | | | (2,930 | ) | | | 3,172 | | | | 137 | | Deferred revenue | | | 4,748 | | | | 4,764 | | | | 227 | | | | | | | | | | | | | | | Net cash (used in) provided by operating activities | | | (6,441 | ) | | | 11,077 | | | | 9,081 | | Investing activities | | | | | | | | | | | | | Cash paid for purchase of intangible asset | | | — | | | | (300 | ) | | | — | | Purchases of property and equipment, net of returns(Note 2) | | | (1,102 | ) | | | (1,307 | ) | | | (1,390 | ) | Capitalizedinternal-use software costs | | | (3,010 | ) | | | (3,887 | ) | | | (1,456 | ) | Decrease in restricted cash | | | — | | | | 201 | | | | — | | | | | | | | | | | | | | | Net cash used in investing activities | | | (4,112 | ) | | | (5,293 | ) | | | (2,846 | ) | Financing activities | | | | | | | | | | | | | Proceeds from exercise of stock options | | | 520 | | | | 4,555 | | | | 129 | | Payments of withholding tax on RSU vesting | | | (268 | ) | | | (405 | ) | | | (209 | ) | Proceeds from equipment financing | | | — | | | | 604 | | | | 1,704 | | Payments on equipment financing(Note 8) | | | (307 | ) | | | (271 | ) | | | (1,704 | ) | Payments under capital lease obligation | | | (489 | ) | | | (850 | ) | | | (1,332 | ) | | | | | | | | | | | | | | Net cash (used in) provided by financing activities | | | (544 | ) | | | 3,633 | | | | (1,412 | ) | Effect of exchange rate changes on cash and cash equivalents | | | 416 | | | | (241 | ) | | | (102 | ) | | | | | | | | | | | | | | Net (decrease) increase in cash and cash equivalents | | | (10,681 | ) | | | 9,176 | | | | 4,721 | | Cash and cash equivalents at beginning of period | | | 36,813 | | | | 27,637 | | | | 22,916 | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 26,132 | | | $ | 36,813 | | | $ | 27,637 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | | | Cash paid for income taxes | | $ | 500 | | | $ | 351 | | | $ | 263 | | | | | | | | | | | | | | | Cash paid for interest | | $ | 26 | | | $ | 63 | | | $ | 96 | | | | | | | | | | | | | | | Supplemental disclosure ofnon-cash operating activities | | | | | | | | | | | | | Capitalization of stock-based compensation related to internal use software | | $ | 221 | | | $ | 169 | | | $ | — | | | | | | | | | | | | | | | Supplemental disclosure ofnon-cash investing and financing activities | | | | | | | | | | | | | Unpaidinternal-use software costs | | $ | 28 | | | $ | 20 | | | $ | 38 | | | | | | | | | | | | | | | Unpaid purchases of property and equipment | | $ | 138 | | | $ | 83 | | | $ | 1,177 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 5,397 | | | $ | (5,813 | ) | | $ | (21,903 | ) | Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | 8,322 | | | | 8,695 | | | | 8,422 | | | | | 9,968 | | | | 8,785 | | | | 9,259 | | Provision for reserves on accounts receivable | | | 159 | | | | 648 | | | | 1,137 | | Changes in assets and liabilities: | | | | | | | | | | | | | | | | (846 | ) | | | 1,358 | | | | (5,537 | ) | Prepaid expenses and other current assets | | | 1,281 | | | | (6,918 | ) | | | 1,213 | | | | | (1,437 | ) | | | (1,937 | ) | | | (758 | ) | | | | (683 | ) | | | 1,014 | | | | 1,682 | | | | | (5,209 | ) | | | 5,600 | | | | 6,749 | | | | | (634 | ) | | | 182 | | | | (302 | ) | | | | 3,245 | | | | 9,698 | | | | 2,746 | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 19,563 | | | | 21,312 | | | | 2,708 | | | | | | | | | | | | | | | Cash paid for acquisition, net of cash acquired | | | (2,000 | ) | | | 0 | | | | (5,339 | ) | Purchases of property and equipment | | | (2,205 | ) | | | (2,362 | ) | | | (1,047 | ) | Capitalized internal-use software costs | | | (6,637 | ) | | | (6,362 | ) | | | (6,232 | ) | | | | | | | | | | | | | | Net cash used in investing activities | | | (10,842 | ) | | | (8,724 | ) | | | (12,618 | ) | | | | | | | | | | | | | | Proceeds from exercise of stock options | | | 2,846 | | | | 2,216 | | | | 3,473 | | Deferred acquisitions payments | | | (475 | ) | | | 0 | | | | 0 | | | | | 0 | | | | 10,000 | | | | 0 | | | | | 0 | | | | (10,000 | ) | | | 0 | | Other financing activities | | | (1,669 | ) | | | (631 | ) | | | (296 | ) | | | | | | | | | | | | | | Net cash provided by financing activities | | | 702 | | | | 1,585 | | | | 3,177 | | Effect of exchange rate changes on cash and cash equivalents | | | (1,156 | ) | | | 540 | | | | 186 | | | | | | | | | | | | | | | Net increase in cash and cash equivalents | | | 8,267 | | | | 14,713 | | | | (6,547 | ) | Cash and cash equivalents at beginning of period | | | 37,472 | | | | 22,759 | | | | 29,306 | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 45,739 | | | $ | 37,472 | | | $ | 22,759 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | | | Cash paid for operating lease liabilities | | $ | 4,277 | | | $ | 6,326 | | | $ | 7,382 | | Cash paid for income taxes | | $ | 737 | | | $ | 1,190 | | | $ | 555 | | | | | 0 | | | $ | 205 | | | $ | 6 | | Supplemental disclosure of non-cash operating activities | | | | | | | | | | | | | Capitalization of stock-based compensation related to internal use software | | $ | 593 | | | $ | 267 | | | $ | 322 | | Supplemental disclosure of non-cash investing and financing activities | | | | | | | | | | | | | Unpaid internal-use software costs | | $ | 446 | | | $ | 49 | | | $ | 20 | | Fair value of shares issued for acquisition of a business | | $ | 0 | | | $ | 0 | | | $ | 12,250 | | Unpaid purchases of property and equipment | | $ | 25 | | | $ | 160 | | | $ | 138 | | | | | | | | | | | | | | |
See accompanyingaccompa nying notes.
Notes to Consolidated Financial Statements Years Ended December 31, 2017, 20162021, 2020 and 20152019 (in thousands, except share and per share data, unless otherwise noted) Brightcove Inc. (the Company) is a leading global provider of cloud services for video which enable its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. The Company is headquartered in Boston, Massachusetts and was incorporated in the state of Delaware on August 24, 2004. At December 31, 2017, the Company had nine wholly-owned subsidiaries: Brightcove UK Ltd, Brightcove Singapore Pte. Ltd., Brightcove Korea, Brightcove Australia Pty Ltd, Brightcove Holdings, Inc., Brightcove Kabushiki Kaisha (Brightcove KK), Zencoder Inc. (Zencoder), BrightcoveFZ-LLC, and Cacti Acquisition LLC.2. Summary of Significant Accounting Policies The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the consolidated financial statements. The Company believes that a significant accounting policy is one that is both important to the portrayal of the Company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as the result of the need to make estimates about the effect of matters that are inherently uncertain. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). Use of Estimates and Uncertainties The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts expensed during the reporting period. Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition and revenue reserves, allowances for doubtful accounts,variable consideration, contingent liabilities, the expensing and capitalization of research and development costs forinternal-use software, intangible asset valuations, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets, the determination of the fair value of stock awards issued, stock-based compensation expense, and the recoverabilityrealizability of the Company’s net deferred tax assets and related valuation allowance.assets. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customers switching toin-house solutions, customer concentration, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Subsequent Events Considerations
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events.
Foreign Currency Translation The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency of each subsidiary. All assets and liabilities in the balance sheets of entities whose functional currency is a currency other than the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (1) asset and liability accounts at period-end rates, (2) income statement accounts at weighted-average exchange rates for the period, and (3) stockholders’ equity accounts at historical exchange rates. The resulting translation adjustments are excluded from income (loss) and reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are included in net loss for the period. The Company may periodically have certain intercompany foreign currency transactions that are deemed to be of a long-term investment nature; exchange adjustments related to those transactions are made directly to a separate component of stockholders’ equity.Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Management determines the appropriate classification of investments at the time of purchase, and re-evaluates such determination at each balance sheet date. The Company did not0t have any short-term or long-term investments at December 31, 20172021 or 2016.2020. Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value. Cash
Property and cash equivalents as of December 31, 2017Equipment Property and 2016 consistequipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the following: | | | | | | | | | | | | | | | | | | | December 31, 2017 | | Description | | Contracted Maturity | | | Amortized Cost | | | Fair Market Value | | | Balance Per Balance Sheet | | Cash | | | Demand | | | $ | 17,972 | | | $ | 17,972 | | | $ | 17,972 | | Money market funds | | | Demand | | | | 8,160 | | | | 8,160 | | | | 8,160 | | | | | | | | | | | | | | | | | | | Total cash and cash equivalents | | | | | | $ | 26,132 | | | $ | 26,132 | | | $ | 26,132 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | December 31, 2016 | | Description | | Contracted Maturity | | | Amortized Cost | | | Fair Market Value | | | Balance Per Balance Sheet | | Cash | | | Demand | | | $ | 23,942 | | | $ | 23,942 | | | $ | 23,942 | | Money market funds | | | Demand | | | | 12,871 | | | | 12,871 | | | | 12,871 | | | | | | | | | | | | | | | | | | | Total cash and cash equivalents | | | | | | $ | 36,813 | | | $ | 36,813 | | | $ | 36,813 | | | | | | | | | | | | | | | | | | |
Disclosurelease term or the estimated useful life of the related asset. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation, are removed from the accounts, and any resulting gain or loss is included in the determination of net income or loss in the period of retirement. Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions to property and equipment.
The Company estimates the useful life of property and equipment as follows: | | | | |
| | | 3 | | | 3 - 6 | | | 5 | | | Shorter of lease term or the estimated useful life |
Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures , establishes a three-level valuation hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows: Observable inputs, such as quoted prices for identical assets or liabilities in active markets; Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly, such as quoted prices for similar assets or liabilities, or market-corroborated inputs; and Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities. The valuation techniques that may be used to measure fair value are as follows: A.— Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. B.— Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models, and excess earnings method. C.— Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities, and did not elect the fair value option for any financial assets and liabilities transacted in the years ended December 31, 2021 or 2020. Realized gains and losses from sales of the Company’s investments are included in “Other income (expense), net”. The carrying amounts of the Company’s financial instruments, which include cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses, capital lease liabilities and equipment financing, approximated their fair values at December 31, 20172021 and 2016,2020, due to the short-term nature of these instruments. The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant impact on the estimated fair value amounts. See Note 4 The Company’s financial instruments carried at fair value were less than $0.1 million as of December 31, 2021 and 2020. ASC 606 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for further discussion.Revenue Recognition
those goods or services. | | Identify the contract with a customer |
| | Identify the performance obligations in the contract |
| | Determine the transaction price |
| | Allocate the transaction price to performance obligations in the contract |
| | Recognize revenue when or as the Company satisfies a performance obligation |
The Company primarily derives revenuesatisfies performance obligations as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer. The transaction price is the total amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to the customer. The Company has elected to exclude from the sale of its online video platform, which enables its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from three primary sources: (1) the subscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which include initiation,set-up and customization services.The Company recognizes revenue when allmeasurement of the following conditionstransaction price all taxes assessed by a governmental authority that are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the collection of fees is probable;both imposed on and (4) the amount of fees to be paidconcurrent with a specific revenue-producing transaction and collected by the Company from a customer is fixed or determinable.
(e.g. sales and use tax). Disaggregation of Revenue The Company’s subscription arrangements provide customers the right to access its hosted software applications. Customers do not have the right to take possession of the Company’s software during the hosting arrangement. Accordingly, the Company recognizes revenue in accordance with ASC 605,Revenue Recognition. Contracts for premium customers generally have a term of one year and are non-cancellable. These contracts generally provide the customer with a maximum annual level of usage,entitlement, and provide the rate at which the customer must pay for actual usage above the annual allowable usage. Forentitlement allowance. These subscription arrangements are considered stand ready obligations that are providing a series of distinct services that are substantially the same and are transferred with the same pattern to the customer. As such, these services,subscription arrangements are treated as a single performance obligation and the related fees are recognized as revenue ratably over the term of the underlying arrangement.When the transaction price includes a variable amount of consideration, an entity is required to estimate the consideration that is expected to be received for a particular customer arrangement. The Company evaluates variable consideration for usage-based fees atcontract inception and re-evaluates quarterly over the course of the contract. Specifically, the Company recognizesestimates the annual fee ratably as revenue each month. Shouldpertaining to a customer’s usage of the Company’s servicesthat is expected to exceed the annual allowable level,entitlement allowance and allocates such revenue to the distinct service within the related contract that gives rise to the variable payment. Estimates of variable consideration include analyzing customer usage against the applicable entitlement limit at the end of each reporting period and estimating the amount and timing of additional amounts to be invoiced in connection with projected usage. Estimates of variable consideration relating to customer usage do not include amounts for which it is recognized for such excess inprobable that a significant reversal will occur. Determining the periodamount of variable consideration to recognize as revenue involves significant judgment on the usage. part of management and it is possible that actual revenue will deviate from estimates over the course of a customer’s committed contract term. Contracts for volumewith customers that are generallymonth-to-month arrangements (volume customers) have a maximum monthly level of usage and provide the rate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage fees are recognized as revenue during the related period inof performance. Contracts with customers that are invoicedon a pay-as-you-go basis, where there is no monthly or annual commitment for usage, provide the rate at which the related cash is collected.customer must pay for actual usage for a particular period. Fees that are invoicedon a pay-as-you-go basis are recognized as revenue during the period of performance.Professional Services and Other Revenue recognition commences Professional services and other revenue consist of services such as implementation, software customizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the later ofremainder due when the application is placed in a production environment, or when all revenue recognition criteriarelated services have been met.completed, or on a time and materials basis. Professional services and other revenue sold on a stand-alone basis are recognized as the services are performed, subject to any refund or other obligation. Deferred revenue includes amounts billed to customers for which revenue has not been recognized, and primarily consists
Contracts with Multiple Performance Obligations The Company periodically enters into multiple-element service arrangements that include platform subscription fees, support fees, and, in certain cases, other professional services. These contracts include multiple promises that the Company evaluates to determine if the promises are separate performance obligations. Performance obligations are identified based on services to be transferred to a customer that are both capable of being distinct and are distinct within the context of the contract. Once the Company determines the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company assesses arrangements with multiple deliverables under ASUNo. 2009-13,Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements — a Consensus ofthen allocates the FASB Emerging Issues Task Force, which amendedtransaction price to each performance obligation in the previous multiple-element arrangements accounting guidance. Pursuant to ASU2009-13, objective and reliable evidence of fair value of the undelivered elements is no longer required in order to account for deliverables in a multiple-element arrangement separately. Instead, arrangement consideration is allocated to deliverables based on their relative selling price. The guidance also eliminated the use of the residual method. In order to treat deliverables in a multiple-element arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. If the deliverables have stand-alone value upon delivery, the Company accounts for each deliverable separately. Subscription services have stand-alone value as such services are often sold separately. In determining whether professional services have stand-alone value, the Company considers the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the professional services work. To date, the Company has concluded that all of the professional services included in multiple-element arrangements executed have stand-alone value.
When multiple deliverables included in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units based on a relative stand-alone selling price hierarchy.method. The transaction price post allocation is recognized as revenue as the related performance obligation is satisfied.
Costs to Obtain a Contract Commissions are paid to internal sales representatives as compensation for obtaining contracts. Under the new guidance, the Company determinescapitalizes commissions that are incremental, as a result of costs incurred to obtain a customer contract, if those costs are not within the relative selling pricescope of another topic within the accounting literature and meet the specified criteria. Assets recognized for costs to obtain a deliverable basedcontract are amortized over the period of performance for the underlying customer contracts. The commission expense on its vendor-specific objective evidencecontracts with new customers is recorded over the average life of fair value (VSOE), if available, or its best estimate of selling price (BESP), if VSOEa customer given the commission amount associated with sales to new customers is not available.commensurate with the commission amount associated with the contract renewal for those same customers. The Company has determined that third-party evidencecommission amount associated with the renewal of selling price (TPE) is not a practical alternative duecontract in addition to differences in its service offerings comparedany commission amount related to other parties andincremental sales are recorded as expense over the availability of relevant third-party pricing information. The amount of revenue allocated to delivered items is limited by contingent revenue, if any.The Company has not established VSOE for its offerings due to the lack of pricing consistency, the introduction of new services and other factors. Accordingly, the Company uses its BESP to determine the relative selling price. The Company determines BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volumeterm of the Company’s transactions, the geographic area where servicesrenewed contract. These assets are sold, price lists, historical contractually stated prices and prior relationships and future subscription service sales with certain classes of customers. periodically assessed for impairment. The determination of BESP is made through consultation with and approval by the Company’s management, taking into consideration thego-to-market strategy. As the Company’sgo-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in selling prices, including both VSOE and BESP. The Company analyzes the selling prices used in its allocation of arrangement consideration, at a minimum, on an annual basis. Selling prices are analyzed on a more frequent basis if a significant change in the Company’s business necessitates a more timely analysis or if the Company experiences significant variances in its selling prices.
Cost of revenue primarily consists of costs related to supporting and hosting the Company’s product offerings and delivering professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of the Company’s data centers, customer support team and the Company’s professional services staff, in addition to third-party service provider costs such as data center and networking expenses, allocated overhead, amortization of capitalized internal-use software development costs and intangible assets and depreciation expense.Allowance for Doubtful Accounts The Company offsets gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable and is based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions for allowances for doubtful accounts are recorded in general and administrative expense. Effective January 1, 2020, the Company adopted ASC 326, which requires measurement and recognition of expected credit losses for financial assets held. Estimating credit losses based on risk characteristics requires significant judgment by the Company. Significant judgments include, but are not limited to: assessing current economic conditions and the extent to which they would be relevant to the existing characteristics of the Company’s financial assets, the estimated life of financial assets, and the level of reliance on historical experience in light of economic conditions. The Company reviews and updates, when necessary, its historical risk characteristics that are meaningful to estimating credit losses, any new risk characteristics that arise in the natural course of business, and the estimated life of its financial assets.
The Company uses the aging method to estimate its expected credit losses on trade accounts receivable (“AR”) and unbilled trade accounts receivable (“UAR”). In order to estimate expected credit losses, the Company assesses recent historical experience, current economic conditions and any reasonable and supportable forecasts to identify risk characteristics that are shared within the financial asset. These risk characteristics are then used to bifurcate the aging method into risk pools. Historical credit loss for each risk pool is then applied to the current period aging as presented in the identified risk pools to determine the needed reserve allowance. In the absence of current economic conditions and/or forecasts that may affect future credit losses, the Company has determined that recent historical experience provides the best basis for estimating credit losses. As of December 31, 2021 Company estimates the typical life of its ARas 50-60 days. This estimate is based on the Company’s historical experience for days sales outstanding (“DSO”). Under ASC 326, the Company changed its policy for assessing credit losses to include consideration of a broader range of information to estimate credit losses over the life of its financial assets. As of December 31, 2021, the financial assets of the Company within the scope of the assessment comprised AR and UAR. UAR is reflected in Other current assets on the Company’s Consolidated Balance Sheets and was $2.4 million and $2.1 million as of December 31, 2021 and December 31, 2020, respectively. Estimated credit losses for UAR were not material. The information obtained from assessing historical experience, current economic conditions and reasonable and supportable forecasts were used to identify risk characteristics that can affect future credit loss experience. The historical analysis yielded one material risk factor, the geographical location of the customer. Specifically, historical experience showed that AR that was due from customers in the Asia Pacific region had experienced more credit losses than the other geographic areas listed in Note 15. Europe and Japan had significantly less credit loss experience when compared to Asia Pacific while North America’s credit loss experience was commensurate with the proportion of total AR that North America’s AR comprised. There were no other significant risk characteristics identified in the review of historical experience. The Company’s assessment of current economic conditions and reasonable and supportable forecasts included an assessment of customer industries affectedby COVID-19. Based on available information, the Company identified the following customer industries as being significantly affectedby COVID-19, in no particular order: restaurants, hospitality, tourism, sports, travel and consumer goods. The Company assessed the relevant and supportable information available and estimated and recorded approximately $0.2 million increase in the provision for credit losses dueto COVID-19 in 2020. The Company will continue to assessthe COVID-19 risk to its AR for the duration of the pandemic.
Below is a summary of the changes in the Company’s allowance for doubtful accounts for the years ended December 31, 2017, 20162021, 2020 and 2015: | | | | | | | | | | | | | | | | | | | Balance at Beginning of Period | | | Provision | | | Write-offs | | | Balance at End of Period | | Year ended December 31, 2017 | | $ | 154 | | | $ | 203 | | | $ | (211 | ) | | $ | 146 | | Year ended December 31, 2016 | | | 332 | | | | 230 | | | | (408 | ) | | | 154 | | Year ended December 31, 2015 | | | 181 | | | | 408 | | | | (257 | ) | | | 332 | |
2019: | | | | | | | | | | | | | | | | | | | Balance at Beginning of Period | | | | | | | | | | | Year ended December 31, 2021 | | $ | 648 | | | $ | 159 | | | $ | (454 | ) | | $ | 353 | | Year ended December 31, 2020 | | | 904 | | | | 648 | | | | (904 | ) | | | 648 | | Year ended December 31, 2019 | | | 190 | | | | 1,137 | | | | (423 | ) | | | 904 | |
Off-Balance Sheet Risk and Concentration of Credit Risk The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and trade accounts receivable. The Company maintains its cash and cash equivalents principally with accredited financial institutions of high credit standing. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. The Company routinely assesses the creditworthiness
limits. The Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. For the years ended December 31, 2017, 20162021, 2020 and 2015, no2019, 0 individual customer accounted for more than 10% of total revenue. As of December 31, 20172021 and 2016, no2020, 0 individual customer accounted for more than 10% of net accounts receivable. receivable, net. Concentration of Other Risks The Company is dependent on certain content delivery network providers who provide digital media delivery functionality enabling the Company’s on-demand application service to function as intended for the Company’s customers and ultimateend-users. The disruption of these services could have a material adverse effect on the Company’s business, financial position, and results of operations.Software Development Costs Costs incurred to develop software applications used in the Company’s on-demand application services consist of (a) certain external direct costs of materials and services incurred in developing or obtaininginternal-use computer software, and (b) payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management, with the relevant authority, authorizes and commits to the funding of the software project, it is probable the project will be completed, the software will be used to perform the functions intended and certain functional and quality standards have been met. Qualified costs incurred during the operating stage of the Company’s software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades and enhancements to,internal-use software are expensed as incurred. These capitalized costs are amortized on a straight-line basis over the expected useful life of the software, which is estimated to be three years. Capitalizedinternal-use software development costs are classified as “Software” within “Property and Equipment, net” in the accompanying consolidatedbalance sheets.
During the years ended December 31, 2017, 20162021, 2020 and 2015,2019, the Company capitalized $3,239, $4,038$7,658, $6,659 and $1,488,$6,574, respectively, of internal-usesoftware development costs. The Company recorded amortization expense associated with its capitalized internal-use software development costs of $1,867, $690$3,649, $4,044 and $469$3,784 for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.Property
Under ASC 842, aasset and EquipmentPropertylease liability is recorded for all leases and equipment are recordedthe statement of operations reflects the lease expense for operating leases and amortization/interest expense for financing leases.
The Company does not apply the recognition requirements in the standard to a lease that at costcommencement date has a lease term of twelve months or less and depreciated over their estimated useful lives usingdoes not contain a purchase option that it is reasonably certain to exercise and to not separate lease and relatednon-lease components. The Company leases its facilities undernon-cancelable operating leases.assets represent the straight-line method. Leasehold improvements are amortized over the shorter ofright to use an underlying asset for the lease term, orand lease liabilities represent the estimated useful lifeobligation to make lease payments arising from the lease.assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the related asset. Upon retirement or sale,Company’s leases do not provide an implicit rate, the costCompany uses its incremental borrowing rate based on the information available at
commencement date in determining the present value of andlease payments. Many of the related accumulated depreciation,Company’s lessee agreements include options to extend the lease, which are removed from the accounts, and any resulting gain or loss isnot included in the determination of net income or loss in the period of retirement. Property and equipment consists of the following:
| | | | | | | | | | | | | | | Estimated Useful Life (in Years) | | | December 31, | | | | | | | 2017 | | | 2016 | | Computer equipment | | | 3 | | | | 17,157 | | | $ | 18,750 | | Software | | | 3 - 6 | | | | 17,996 | | | | 14,648 | | Furniture and fixtures | | | 5 | | | | 2,396 | | | | 1,995 | | Leasehold improvements | |
| Shorter of lease term or the estimated useful life | | | | 1,366 | | | | 1,202 | | | | | | | | | | | | | | | | | | | | | | 38,915 | | | | 36,595 | | Less accumulated depreciation and amortization | | | | | | | 29,772 | | | | 27,331 | | | | | | | | | | | | | | | | | | | | | $ | 9,143 | | | $ | 9,264 | | | | | | | | | | | | | | |
Depreciation and amortization expense, which includes amortization expense associated with capitalizedinternal-use software development costs, for the years ended December 31, 2017, 2016 and 2015 was $4,523, $4,860 and $5,575, respectively.
Expenditures for maintenance and repairsminimum lease terms unless they are chargedreasonably certain to expense as incurred, whereas major improvements are capitalized as additions to property and equipment.
On December 31, 2015, the Company entered into an equipment financing agreement with a lender (the “December 2015 Equipment Financing Agreement”) to finance the purchase of $604 in computer equipment. In February 2016, the Company drew down $604 under the December 2015 Equipment Financing Agreement. Refer to Note 8 for a discussion of the equipment financing.
On December 31, 2016, the Company disposed of a cost value of $1.9 million in computer equipment in connection with the closure of certain facilities for the purpose of consolidating its data centers. The Company recorded cost of revenue of $845, of which $695 represented the settlement amount due upon signing a termination agreement relating to the facilities and $150 represented a loss on disposal of assets in connection with the closure of the facilities.
be exercised. The Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During this review, the Company re-evaluates the significant assumptions used in determining the original cost and estimated lives of long-lived assets. Although the assumptions may vary from asset to asset, they generally include operating results, changes in the use of the asset, cash flows, and other indicators of value. Management then determines whether the remaining useful life continues to be appropriate, or whether there has been an impairment of long-lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the assets’ recovery. If impairment exists, the Company adjusts the carrying value of the asset to fair value, generally determined by a discounted cash flow analysis.For the years ended December 31, 2017, 20162021, 2020 and 2015,2019, the Company has not identified any impairment of its long-lived assets. The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets based on detailed valuations that use information and assumptions provided by management. Any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed is allocated to goodwill. If the fair value of the assets acquired exceeds the purchase price, the excess is recognized as a gain. Significant management judgments and assumptions are required in determining the fair value of acquired assets and liabilities, particularly acquired intangible assets. The valuation of purchased intangible assets is based upon estimates of the future performance and cash flows from the acquired business. Each asset is measured at fair value from the perspective of a market participant. If different assumptions are used, it could materially impact the purchase price allocation and adversely affect our results of operations, financial condition and cash flows. For further discussion of the Company’s accounting policies related to business combinations, see Note 3. Intangible Assets and Goodwill Intangible assets that have finite lives are amortized over their estimated useful lives based on the pattern of consumption of the economic benefit or, if that pattern cannot be readily determined, on a straight-line basis and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, as discussed above. Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of goodwill, the Company must make assumptions regarding the estimated future cash flows, and other factors, Conditions that could trigger a more frequent impairment assessment include, but are not limited to, determine the fair value of these assets. If these estimates or their related assumptionsa significant adverse change in certain agreements, significant underperformance relative to historical or projected future operating results, an economic downturn in customers’ industries, increased competition, a significant reduction in our stock price for a sustained period or a reduction of our market capitalization relative to net book value. If there is an impairment, the future, the Company may be required to record impairment charges against these assets in the reporting period in whichamount of the impairment is determined. on the excess of a reporting unit’s carrying amount over its fair value.
The Company has determined, based on its organizational structure, that it had one reporting unit as of December 31 2017 , 20212020. The Company evaluates impairment by comparing the impairment evaluation includes a comparison of the carryingestimated fair value of theits reporting unit to theits carrying value. The Company estimates fair value ofprimarily utilizing the reporting unit. If the reporting unit’s estimated fair value exceeds the reporting unit’s carrying value, no impairmentmarket approach and 0impairments of goodwill exists. If the fair value of the reporting unit does not exceed its carrying value, then further analysis would be required to determine the amount of the impairment, if any.In accordance with ASUNo. 2011-08,Intangibles — Goodwill and Other (Topic 350) Testing Goodwill for Impairment, the Company has the option to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount to determine whether further impairment testing is necessary. Based on the results of the qualitative review of goodwill performed as of December 31, 2017 and 2016, the Company did not identify any indicators of impairment. As such, thetwo-phase process described above was not necessary.
have been identified. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Accumulated other comprehensive loss is presented separately on the consolidated balance sheets and consists entirely of cumulative foreign translation adjustments as of December 31, 20172021 and 2016.2020. Net LossIncome (Loss) per Share The Company calculates basic and diluted net lossearnings (loss) per common share by dividing the net lossearnings (loss) amount by the weighted-average number of common shares outstanding during the period. The Company has excluded (a) all unvested restricted shares that are subject to repurchase and (b)calculation of diluted earnings per common share includes the Company’s other potentially dilutive shares, which include warrants to purchase common stock andeffects of the assumed exercise of any outstanding common stock options and unvestedthe assumed vesting of shares of restricted stock units, from the weighted-average number of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred.
awards, where dilutive. The following potentially dilutivetable set forth the computations of basic and diluted earnings (loss) per share: | | | | | | | | | | | | | | | | | (in thousands, except per share data) | | | | | | | | | | | | $ | 5,397 | | | $ | (5,813 | ) | | $ | (21,903 | ) | | | | | | | | | | | | | | Weighted average shares used in computing basic earnings per share | | | 40,717 | | | | 39,473 | | | | 38,028 | | Effect of weighted average dilutive stock-based awards | | | 1,483 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | Weighted average shares used in computing diluted earnings per share | | | 42,200 | | | | 39,473 | | | | 38,028 | | Net income (loss) per share—basic and diluted | | | | | | | | | | | | | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) | | | $ | 0.13 | | | $ | (0.15 | ) | | $ | (0.58 | ) |
The following outstanding common shares have been excluded from the computation of dilutive net loss(loss) earnings per share as of December 31, 2017, 2016 and 2015, as their effect would have been antidilutive: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Options outstanding | | | 4,127 | | | | 4,291 | | | | 4,139 | | Restricted stock units outstanding | | | 2,050 | | | | 1,668 | | | | 1,043 | | Warrants | | | — | | | | 19 | | | | 28 | |
the periods indicated because such securities are anti-dilutive: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,681 | | | | 2,110 | | | | 2,479 | | Restricted stock units outstanding | | | 3,937 | | | | 3,588 | | | | 3,626 | |
The Company accounts for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interest and penalties, if applicable, related to uncertain tax positions would be recognized as a component of income tax expense. The Company has no0 recorded liabilities for uncertain tax positions as of December 31, 20172021 or 2016.2020.
At December 31, 2017,2021, the Company had four6 stock-based compensation plans, which are more fully described in Note 6.1 0 .The Company values its shares of common stock in connection with the issuance of stock-based equity awards using the closing price of the Company’s shares of common stock on the NASDAQ Global Market on the date of the grant. Accounting guidance requires stock-based payments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods. For stock options issued under the Company’s stock-based compensation plans, the fair value of each option grant is estimated on the date of grant. For service-based options, the Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. For restricted stock units issued under the Company’s stock-based compensation plans, the fair value of each grant is calculated based on the Company’s stock price on the date of grant.The fair value of each option grant issued under the Company’s stock-based compensation plans was estimated using the Black-Scholes option-pricing model. The expected volatility of options granted has been determined using a weighted-average of the historical volatility measures of a peer group of companies that issued options with substantially similar terms as well as the historical volatility of the Company’s own common stock. The expected life of options has been determined utilizing the “simplified method”. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. The weighted-average fair value of options granted during the years ended December 31, 2017, 2016 and 2015, was $3.08, $4.01 and $3.10 per share, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table:
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Risk-free interest rate | | | 2.08 | % | | | 1.75 | % | | | 1.96 | % | Expected volatility | | | 42 | % | | | 45 | % | | | 46 | % | Expected life (in years) | | | 6.1 | | | | 6.2 | | | | 6.2 | | Expected dividend yield | | | — | | | | — | | | | — | |
For the years ended December 31, 2017, 2016 and 2015, total stock-based compensation expense was $7,243, $6,012 and $6,014, respectively. As of December 31, 2017, there was $18,232 of total unrecognized stock-based compensation expense related to stock based awards that is expected to be recognized over a weighted-average period of 2.06 years.In July 2017, the Company entered into a separation agreement with its former Chief Executive Officer (“CEO”), which accelerated the vesting schedule of certain existing stock-based awards held by the CEO. The incremental stock-based compensation expense as a result of the modification of these stock-based awards was $186 for the year ended December 31, 2017. Further, the vesting schedule of certain other stock-based awards held by the CEO accelerates upon a change in control of the Company on or prior to December 31, 2017, which would result in an additional $220 of stock-based compensation expense upon such change in control. As there was not a change in control of the Company, the additional stock-based compensation was not recognized.
On January 1, 2017, the Company adoptedASU 2016-09. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share based payments, including income tax consequences, classification of awards as either equity or liabilities, an option to make a policy election to recognize gross share based compensation expense with actual forfeitures recognized as they occur as well as certain classification changes on the statement of cash flows. In connection with the adoption of this standard, the Company changed its accounting policy to record actual forfeitures as they occur, rather than estimating forfeitures by applying a forfeiture rate. As this policy change was applied prospectively, prior periods have not been adjusted. The Company recorded a cumulative effect adjustment in the three months ended March 31, 2017, which increased accumulated deficit andadditional paid-in-capital by $197.
Prior to the adoption of ASU2016-09 on January 1, 2017, the Company estimated forfeitures at the time of grant and revised those estimates in subsequent periods if actual forfeitures differed from estimates. The Company used historical data to estimatepre-vesting option forfeitures to the extent that actual forfeitures differed from our estimates, and the difference was recorded as a cumulative adjustment in the period the estimates were revised. Stock-based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest. For the years ended December 31, 2016 and 2015, the Company applied an estimated forfeiture rate of approximately 17%, and 17%, respectively.
The Company accounts for transactions in which services are received fromnon-employees in exchange for equity instruments based on the fair value of such services received, or of the equity instruments issued, whichever is more reliably measured. The Company determines the total stock-based compensation expense related tonon-employee awards using the Black-Scholes option-pricing model. Additionally, in accordance with ASC 505,Equity-Based Payments toNon-Employees, the Company accounts for awards tonon-employees prospectively, such that the fair value of the awards is remeasured at each reporting date until the earlier of (a) the performance commitment date or (b) the date the services required under the arrangement have been completed.
For the years ended December 31, 2017, 2016 and 2015, stock-based compensation expense for stock options granted tonon-employees in the accompanying consolidated statements of operations was not material.
See Note 6 for a summary of the stock option and restricted stock activityunits issued under the Company’s stock-based compensation plans, for the year ended December 31, 2017.
fair value of each grant is calculated based on the Company’s stock price on the date of grant. For performance-based awards with service-based vesting conditions, the Company recognizes compensation expense based upon a review of the Company’s expected achievement against the specified targets. Forfeitures are recognized as they occur. Advertising costs are charged to operations as incurred. The Company incurred advertising costs of $2,485, $2,137$5,970, $2,584 and $2,081$2,658 for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. Merger-related costs consist of expenses related to mergers and acquisitions, integration costs and general corporate development activities. In 2021, merger-related costs incurred were primarily related to general merger and related activities. In 2020, merger-related costs incurred were primarily related to the transition of Ooyala, Inc. customers to the Company’s technology and, to a lesser extent, general merger and related activities. Recent Accounting Pronouncements Revenue Recognition
and Standards Recently Adopted Accounting Pronouncements In May 2014,June 2016, the Financial Accounting Standards Board (FASB) FASBissuedASU No. 2014-09,2016-13, which requires measurement and recognition of expected credit losses for financial assets held. Effective January 1, 2020, the Company adopted ASC 326 using the transition methodintroduced by ASU 2016-13. The adoption of ASC 326 did not result in an adjustment to the estimated allowance as of December 31, 2019.
In August 2018, the FASB issued ASUNo. 2018-15, Intangibles-Goodwill andOther-Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements. The Company adopted this standard effective January 1, 2020, using a prospective approach. The adoption of this new standard did not have a material impact on our consolidated financial statements. Subsequent impacts on our consolidated financial statements will depend on the magnitude of implementation costs to be incurred. Implementation costs capitalized subsequent to adoption are recognized in operating expenses on the consolidated statements of operations over the noncancelable period of the hosting arrangement plus any renewal periods reasonably certain to be taken. In December 2019, the FASB issued ASUNo. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies accounting guidance for certain tax matters including franchise taxes, certain transactions that result in astep-up in tax basis of goodwill, and enacted changes in tax laws in interim periods. In addition, it eliminates a company’s need to evaluate certain exceptions relating to the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments, and interim period income tax accounting forlosses that exceed anticipated losses. The Company adopted this standard prospectively effective January 1, 2020. The adoption of this new standard did not have a material impact on the consolidated financial statements. 3 . Cash and Cash EquivalentsCash and cash equivalents as of December 31, 2021 and 2020 consist of the following: | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | Demand | | | $ | 45,698 | | | $ | 45,698 | | | | | Demand | | | | 41 | | | | 41 | | | | | | | | | | | | | | | Total cash and cash equivalents | | | | | | $ | 45,739 | | | $ | 45,739 | | | | | | | | | | | | | | |
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| | | | | Demand | | | $ | 37,431 | | | $ | 37,431 | | | | | Demand | | | | 41 | | | | 41 | | | | | | | | | | | | | | | Total cash and cash equivalents | | | | | | $ | 37,472 | | | $ | 37,472 | | | | | | | | | | | | | | |
4 . Property and EquipmentProperty and equipment consist of the following: | | | | | | | | | | | | | | | | | | | | | | $ | 13,827 | | | $ | 13,561 | | | | | 43,598 | | | | 34,739 | | | | | 3,163 | | | | 3,196 | | | | | 2,710 | | | | 2,439 | | | | | | | | | | | | | | 63,298 | | | | 53,935 | | Less accumulated depreciation and amortization | | | 42,784 | | | | 37,967 | | | | | | | | | | | | | $ | 20,514 | | | $ | 15,968 | | | | | | | | | | |
Depreciation and amortization expense, which includes amortization expense associated with capitalizedinternal-use software development costs, for the years ended December 31, 2021, 2020 and 2019 was $5,250, $5,284 and $5,217, respectively. 5 . Revenue from Contracts with Customers (Topic 606),The Company primarily derives revenue from the sale of its online video platform, which modifies how all entities recognize revenue,enables its customers to publish and consolidates into one ASC Topic (ASC Topic 606,distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from Contractsthree primary sources: (1) the subscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which includeinitiation, set-up and customization services.
The following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with Customers) (“ASC 606”),customers. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred Revenue (non-current) | | | | | Balance at December 31, 2021 | | | 29,866 | | | | 2,375 | | | | 62,057 | | | | 114 | | | | 62,171 | | Balance at December 31, 2020 | | | 29,305 | | | | 2,078 | | | | 58,741 | | | | 811 | | | | 59,552 | | Balance at December 31, 2019 | | | 31,181 | | | | 1,871 | | | | 49,260 | | | | 299 | | | | 49,559 | | Balance at December 31, 2018 | | | 23,264 | | | | 1,640 | | | | 39,846 | | | | 146 | | | | 39,992 | |
Revenue recognized during the current guidance found in ASC Topic 605, and various other revenue accounting standards for specialized transactions and industries. ASC 606 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 may be applied using either a full retrospective approach, under which all yearsyear ended December 31, 2021 from amounts included in deferred revenue at the financial statements will be presented underbeginning of the revised guidance, or a modified retrospective approach, under which financial statements will be prepared under the revised guidance forperiod was approximately $58.1million. During the year of adoption, but not for prior years. Under the latter method, entities will recognize acumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity at the date of adoption. In August 2015, the FASB issuedASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which defers the effective date of ASC 606 by one year. ASC 606 is now effective for annual reporting periods beginning afterended December 15, 2017, including interim periods within those annual reporting periods.The Company will adopt ASC 606 on January 1, 2018. The Company has elected to apply the modified retrospective method of adoption. The adoption of ASC 606 is expected to have a material effect on the Company’s consolidated financial statements. In addition to the enhanced footnote disclosures related to customer contracts,31, 2021, the Company anticipates that the most significant impact of the new standard will relate to variable consideration and costs to obtain a contract. In order to complete this assessment, the Company is continuing to update and enhance its internal accounting systems and internal controls over financial reporting.
Variable Consideration
Contracts for premium customers generally provide the customer with a maximum annual level of entitlements and provide the rate at which the customer must pay for actual usage above the annual entitlement allowance. Under ASC 605, if usage exceeds the annual allowance level for a particular customer arrangement, the associateddid not recognize any material revenue is recognizedfrom performance obligations satisfied or partially satisfied in the period that the additional usage occurs. Under ASC 606, when the transaction price includes a variable amount, an entity is required to estimate the consideration that is expected to be received for a particular customer arrangement. previous periods.
The Company will evaluate variable consideration for usage based fees at contract inception andre-evaluate quarterly over the course of the contract. Specifically, the Company will estimate the revenue pertaining to a customer’s usage that is expected to exceed the annual entitlement allowance and allocate such revenue to the distinct service within the related contract that gives rise to the variable payment. Estimates of variable consideration relating to customer usage should not include amounts for which it is probable that a significant reversal will occur. Determining the amount of variable consideration to recognize as revenue involves significant judgment on the part of management and it is possible that actual revenue will deviate from estimates over the course of a customer’s committed contract term. The Company has not yet completed its assessment of variable consideration relating to customer usage under ASC 606 and is still evaluating the impact on its results of operations. However, the Company’s preliminary assessment is that there will be a material impact to retained earnings upon adoption. Costs to Obtain a Contract
Commissions are paid to internal sales representatives as compensation for obtaining contracts. Under ASC 606, the Company will capitalize commissions that are incremental as a result of costs incurred to obtain a customer contract if those costs are not within the scope of another topic within the accounting literature and meet the specified criteria. Assetsassets recognized for costs to obtain a contract will be amortized over the periodwere $12.2 million and $13.3 million as of performanceDecember 31, 2021 and December 31, 2020, respectively. Amortization expense recognized for the underlying customer contracts. The commission expense on contracts with new customers was previously recorded over the respective contract term. Under ASC 606, the commission expense on contracts with new customers will be recorded over the average life of a customer given the commission amount associated with sales to new customers is not commensurate with the commission amount associated with the contract renewal for those same customers. The commission amount associated with the renewal of a contract in addition to any related incremental sale was previously recorded as expense in the quarter the commission was earned; however, under ASC 606 these commission amounts will be recorded as expense over the term of the renewed contract. These assets will be periodically assessed for impairment. The Company has not yet completed its assessment of costs to obtain a contract under ASC 606was $12.7 million, $8.3 million and is still evaluating$7.3 million during the impact on its results of operations. However, the Company’s preliminary assessment is that there will be a material impactyears ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively.
Transaction Price Allocated to retained earnings upon adoption.Other Recent Accounting Pronouncements
In February 2016, the FASB issuedASU 2016-02, Leases (Topic 842), Amendments to the FASB Accounting Standards Codification, which replaces the existing guidance for leases.ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, lease arrangements exceeding a twelve month term must now be recognized as assets and liabilities on the balance sheet of the lessee. UnderASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption ofASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition,ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. This guidance is effective for annual and interim periods beginning after December 15, 2018 and requires retrospective application. The Company is currently assessing the impact that adoptingASU 2016-02 will have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issuedASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which reduces the diversity in how certain transactions are classified in the statement of cash flows.ASU 2016-15 is effective for public companies for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The guidance requires application using a retrospective transition method. The adoption ofASU 2016-15 is not expected to have a material effect on the Company’s consolidated financial statements or disclosures.
In November 2016, the FASB issuedASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statement of cash flows.ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments inASU 2016-18 using a full retrospective approach. The adoption ofASU 2016-18 is not expected to have a material effect on the Company’s consolidated financial statements or disclosures.
In January 2017, the FASB issued ASU2017-04,Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over Future Performance Obligations its fair value, determined in Step 1. ASU2017-04 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not plan to early adopt ASU2017-04, and the Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements and related disclosures.
In May 2017, the FASB issued ASU2017-09,Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. ASU2017-09 will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU2017-09, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company has adopted this guidance effective January 1, 2018 and does not expect this new guidance to have a material impact on the Company’s consolidated financial statements.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act reduces the U.S. federal corporate tax rate from 34% to 21%, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In December 2017, the Securities and Exchange Commission (“SEC”) issued guidance under Staff Accounting Bulletin No. 118,Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.
As of December 31, 2017,2021, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $156.2 million, of which approximately $121.2 million is expected to be recognized over the next 12 months. The Company had not yet completed its accounting forexpects to recognize substantially all of the tax effectsremaining unsatisfied performance obligations by June 2024.
6. Intangible Assets and Goodwill Finite-lived intangible assets consist of the following as of December 31, 2017: | | | | | | | | | | | | | | | | | Description | | Weighted Average Estimated Useful Life (in years) | | | Gross Carrying Value | | | Accumulated Amortization | | | Net Carrying Value | | Developed technology | | | 7 | | | $ | 14,223 | | | $ | 9,431 | | | $ | 4,792 | | Customer relationships | | | 11 | | | | 6,257 | | | | 2,813 | | | | 3,444 | | Non-compete agreements | | | 3 | | | | 1,912 | | | | 1,912 | | | | — | | Tradename | | | 3 | | | | 368 | | | | 368 | | | | — | | | | | | | | | | | | | | | | | | | Total | | | | | | $ | 22,760 | | | $ | 14,524 | | | $ | 8,236 | | | | | | | | | | | | | | | | | | |
2021: | | | | | | | | | | | | | | | | | | | Weighted Average Estimated Useful Life (in years) | | | | | | | | | | | | | | 7 | | | $ | 18,038 | | | $ | 15,636 | | | $ | 2,402 | | | | | 9 | | | | 15,487 | | | | 8,613 | | | | 6,874 | | | | | 3 | | | | 1,912 | | | | 1,912 | | | | — | | | | | 3 | | | | 368 | | | | 368 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | $ | 35,805 | | | $ | 26,529 | | | $ | 9,276 | | | | | | | | | | | | | | | | | | |
Finite-lived intangible assets consist of the following as of December 31, 2016: | | | | | | | | | | | | | | | | | Description | | Weighted Average Estimated Useful Life (in years) | | | Gross Carrying Value | | | Accumulated Amortization | | | Net Carrying Value | | Developed technology | | | 7 | | | $ | 14,223 | | | $ | 7,400 | | | $ | 6,823 | | Customer relationships | | | 11 | | | | 6,257 | | | | 2,147 | | | | 4,110 | | Non-compete agreements | | | 3 | | | | 1,912 | | | | 1,875 | | | | 37 | | Tradename | | | 3 | | | | 368 | | | | 368 | | | | — | | | | | | | | | | | | | | | | | | | Total | | | | | | $ | 22,760 | | | $ | 11,790 | | | $ | 10,970 | | | | | | | | | | | | | | | | | | |
Amortization2020:
| | | | | | | | | | | | | | | | | | | Weighted Average Estimated Useful Life (in years) | | | | | | | | | | | | | | 7 | | | $ | 16,154 | | | $ | 14,215 | | | $ | 1,939 | | | | | 9 | | | | 15,487 | | | | 6,961 | | | | 8,526 | | | | | 3 | | | | 1,912 | | | | 1,912 | | | | — | | | | | 3 | | | | 368 | | | | 368 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | $ | 33,921 | | | $ | 23,456 | | | $ | 10,465 | | | | | | | | | | | | | | | | | | |
The following table summarizes amortization expense related to intangible assets for the years ended December 31, 2017, 20162021, 2020 and 2015 was $2,734, $3,116 and $3,112, respectively.2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost of subscription and support revenue | | $ | 1,420 | | | $ | 1,501 | | | $ | 1,621 | | | | | 1,652 | | | | 1,909 | | | | 1,584 | | | | | | | | | | | | | | | | | $ | 3,072 | | | $ | 3,410 | | | $ | 3,205 | | | | | | | | | | | | | | |
The estimated remaining amortization expense for each of the five succeeding years and thereafter is as follows: | | | | | Year Ending December 31, | | Amount | | 2018 | | $ | 2,317 | | 2019 | | | 1,603 | | 2020 | | | 1,585 | | 2021 | | | 1,327 | | 2022 | | | 370 | | 2023 and thereafter | | | 1,034 | | | | | | | Total | | $ | 8,236 | | | | | | |
The
| | | | | | | | | | | $ | 2,508 | | | | | 2,264 | | | | | 2,041 | | | | | 1,963 | | | | | 500 | | | | | 0 | | | | | | | | | $ | 9,276 | | | | | | |
Goodwill was $60,902 at December 31, 2021 and 2020. There were 0 changes in the carrying amount of goodwill was $50,776 as offor the year ended December 31, 2017 and 2016.4. Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, establishes2021.
On November 1, 2021, the Company purchased video interactivity technology from a three-level valuation hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.ASC 820 identifies fair value as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.3
rd party partner. The Company uses valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows: | • | | Level 1: Observable inputs, such as quoted prices for identical assets or liabilities in active markets; |
| • | | Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly, such as quoted prices for similar assets or liabilities, or market-corroborated inputs; and |
| • | | Level 3: Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities. |
The valuation techniques that may be used to measure fair value are as follows:
A.Market approach — Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
B.Income approach — Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models, and excess earnings method.
C.Cost approach — Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input as of December 31, 2017 and 2016:
| | | | | | | | | | | | | | | | | | | December 31, 2017 | | | | Quoted Prices in Active Markets for Identical Items (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | Assets: | | | | | | | | | | | | | | | | | Money market funds | | $ | 8,160 | | | $ | — | | | $ | — | | | $ | 8,160 | | | | | | | | | | | | | | | | | | | Total assets | | $ | 8,160 | | | $ | — | | | $ | — | | | $ | 8,160 | | | | | | | | | | | | | | | | | | | | | | | December 31, 2016 | | | | Quoted Prices in Active Markets for Identical Items (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | Assets: | | | | | | | | | | | | | | | | | Money market funds | | $ | 12,871 | | | $ | — | | | $ | — | | | $ | 12,871 | | | | | | | | | | | | | | | | | | | Total assets | | $ | 12,871 | | | $ | — | | | $ | — | | | $ | 12,871 | | | | | | | | | | | | | | | | | | |
Realized gains and losses from sales of the Company’s investments are included in “Other income (expense), net”.
The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities, and did not electestimated the fair value option for any financial assets and liabilities transacted in the years ended December 31, 2017 or 2016.
5. Commitments and Contingencies
Operating Lease Commitments
The Company leases its facilities undernon-cancelable operating leases. These operating leases expireof this technology at various dates through January 2024. Future minimum rental commitments under operating leases at December 31, 2017 are as follows:
| | | | | Year Ending December 31, | | Operating Lease Commitments | | 2018 | | $ | 8,384 | | 2019 | | | 6,990 | | 2020 | | | 5,165 | | 2021 | | | 4,952 | | 2022 | | | 2,013 | | 2023 and thereafter | | | 2,094 | | | | | | | | | $ | 29,598 | | | | | | |
Certain amounts included in the table above relating toco-location leases for the Company’s servers include usage based charges in addition to base rent.
$1.9 million with a useful life of four years. The Company’s primary officecorporate headquarters are located in Boston, Massachusetts, pursuant to a lease has the option to renew the lease for two successive periods of five years each.40,753 square feet that terminates March 31, 2022. In connection with the office lease, the Company entered into a letter of credit in the amount of $2,404.Certain$2.4 million.
On November 23, 2021, the Company entered into a new office lease agreement relocating our corporate headquarters to 281 Summer Street in Boston, Massachusetts. Under the terms of the Company’s operating leases include escalating payment amounts andnew office lease incentives.agreement, the Company will occupy approximately 40,000 square feet. The Company is recognizing the related rent expense on a straight-line basis over theinitial term of the lease.lease is for ten years. The lease incentives are considered an inseparable part ofCompany has the option to extend the lease agreement,for two successive five-year terms and are recognizedhas a right of first offer to lease additional office space that becomes available within the 281 Summer Street premises. In connection with the office lease, the Company provided a security deposit, in the form of a letter of credit, in the amount of $0.8 million in January 2022. This letter of credit will be auto-renewed annually, unless a 60 day notice is received from the landlord. An automatic extension can only be implemented through November 30, 2032. This letter of credit is irrevocable and does not have a cash requirement other than the amount already set forth. In the event of a default, the landlord must provide written notice of default before drawing from the letter of credit as a reduction ofsecurity deposit, or to remedy the amount owed The Company leases offices in Tokyo, Japan; Sydney, Australia; Seoul, South Korea; Singapore; London, England; Guadalajara, Mexico; Funchal, Portugal and Covilha, Portugal. The Company’s rent expense on a straight-line basis over the term of the lease. As of December 31, 2017 and 2016, the Company had deferred rent and rent incentives of $1,464 and $1,579, respectively, of which $1,102 and $1,320, respectively, is classified as a long-term liability in the accompanying consolidated balance sheets. Rent expensewas $4.3million, $7.4 million, $7.9 million for the years ended December 31, 2017, 20162021, 2020 and 2015 was $6,608, $6,3342019, respectively. The Company entered into two operating lease agreements in the current year, resulting in the recording of an initial liability and $6,831, respectively. Income from sublease rental activity amountedcorrespondingasset of $20.3 million, of which $19.4 million related to $285, $219 and $185, respectively,the Company’s new corporate headquarters. The weighted-average remaining non-cancelable lease term for the Company’s operating leases was 8.81 years endedat December 31, 2017, 20162021. The weighted-average discount rate was 5.7% at December 31, 2021.
The Company’s operating leases expire at various dates through 2032. The following shows the undiscounted cash flows for the remaining years under operating leases at December 31, 2021: | | | | | | | Operating Lease Commitments | | | | $ | 3,223 | | | | | 4,481 | | | | | 4,328 | | | | | 2,879 | | | | | 2,637 | | | | | 16,211 | | | | | | | Total operating lease commitments | | | 33,759 | | | | | (8,358 | ) | | | | | | | | $ | 25,401 | | | | | | |
The Company’s discounted current operating lease liability and 2015.discounted non-current lease liability at December 31, 2021 were $2.6 million and $22.8 million, respectively. The Company terminated its Scottsdale, Arizona lease in 2020 for termination costsof $340, which are reflected in General and administrative.
In addition to the operating obligations noted infourth quarter of 2020 the table above, duringCompany subleased 100% of its London office through the remaining lease term. For the year ended December 31, 2017,2021, the Company recorded costrecognized rent income of revenue of $845, $695 of$901from the sublease which represented the settlement amount due upon signing a termination agreementis included in Other income (expense). Lease income relating to variable lease payments was immaterial. The Company’s London sublease expires in December of 2024. The following table shows the facilities and $150 represented a loss on disposal of assets in connection withundiscounted cash inflows from the closure of the facilitiesLondon sublease for the purpose of consolidating data centers.Capital Lease Commitments
The Company leases certain computer equipment and support undernon-cancelable capital leases. The lease arrangements expire at various dates through September 2018. Future minimum rental commitments under capital leasesremaining years at December 31, 2017 are as follows:
| | | | | Year Ending December 31, | | Capital Lease Commitments | | 2018 | | $ | 231 | | Less – interest on capital leases | | | 3 | | | | | | | | | $ | 228 | | | | | | |
2021: At December 31, 2017, total assets under capital leases were $1.2 million
| | | | | | | | | | | $ | 985 | | | | | 1,048 | | | | | 989 | | | | | 0 | | | | | | | Total operating sublease cash inflows | | $ | 3,022 | |
8 . Commitments and related accumulated amortization was $940,000.In addition to the operating lease and capital lease commitments discussed above, as of December 31, 2017, the Company hadnon-cancelable commitments of $15,833, $7,823 and $173 payable in 2018, 2019 and 2020, respectively, primarily for content delivery network services, hosting and other support services.
Contingencies The Company, from time to time, is party to litigation arising in the ordinary course of business. Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company based on the status of proceedings at this time. On May 22, 2017, a lawsuit was filed against Brightcove and two individuals by Ooyala, Inc. (“Ooyala”) and Ooyala Mexico S. de R.L. de C.V. (“Ooyala Mexico”). The lawsuit, which was filed in the United States District Court for the District of Massachusetts, concerns allegations that the two individuals, who are former employees of Ooyala Mexico, misappropriated customer information and other trade secrets and used that information in working for Brightcove. The complaint was amended on June 1, 2017 to remove claims against the two former employees of Ooyala Mexico. The remaining claims against Brightcove are for violation of the Defend Trade Secrets Act of 2016 (18 U.S.C. §1836), violation of the Massachusetts trade secret statute (M.G.L. c. 93, §42), violation of Massachusetts Chapter 93A (M.G.L. c. 93A, §11), and tortious interference with advantageous business relationships. Ooyala and Ooyala Mexico also filed a motion for preliminary injunction (amended at the same time the complaint was amended), seeking to enjoin Brightcove from using any of the allegedly misappropriated information or communicating with customers whose information was allegedly taken, and seeking the return of any information that was taken. On June 16, 2017, Brightcove filed an opposition to the motion for preliminary injunction, and also moved to dismiss the lawsuit. Brightcove’s motion to dismiss was denied on September 6, 2017. The court has not ruled on Ooyala’s motion for preliminary injunction. The Company expects the court to issue a schedule order in the near term. The Company cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Company reasonably estimate the potential loss, if any.
On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against Brightcove and Brightcove’s subsidiary Brightcove Holdings, Inc. (collectively, in this paragraph, “Brightcove”) in the United States District Court for the District of Delaware. The complaint alleges that Brightcove infringed five patents related to file compression technology. The complaint seeks monetary damages and injunctive relief. On December 1, 2017, Realtime filed an amended complaint, adding two additional patents to its claims. Brightcove filed a motion to dismiss on January 26, 2018. Realtime filed an opposition to the motion to dismiss on February 9, 2018 and Brightcove filed a reply on February 16, 2018. A ruling on the motion to dismiss has not yet been issued by the court. We cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Company reasonably estimate the potential loss, if any.
Guarantees and Indemnification Obligations The Company typically enters into indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses and costs incurred by the indemnified party, generally the Company’s customers, in connection with patent, copyright, trade secret, or other intellectual property or personal right infringement claimclaims by third parties with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual after execution of the agreement. Based on when customers first subscribe for the Company’s service, the maximum potential amount of future payments the Company could be required to make under certain of these indemnification agreements is unlimited, however, more recently the Company has typically limited the maximum potential value of such potential future payments in relation to the value of the contract. Based on historical experience and information known as of December 31, 2017,2021, the Company has not incurred any costs for the above guarantees and indemnities. The Company has received requests for indemnification from customers in connection with patent infringement suits brought against the customer by a third party. To date, the Company has not agreed that the requested indemnification is required by the Company’s contract with any such customer. In certain circumstances, the Company warrants that its products and services will perform in all material respects in accordance with its standard published specification documentation in effect at the time of delivery of the licensed products and services to the customer for the warranty period of the product or service. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial. 6.
Common stockholders are entitled to one vote per share. Holders of common stock are entitled to receive dividends, when and if declared by the Board. The Company has recorded 135,000 shares as treasury stock as of December 31, 20172021 and 2016.Equity Incentive Plans
2020.
Common Stock Reserved for Future Issuance At December 31, 2017,2021, the Company has reserved the following shares of common stock for future issuance: | | | | | | | | | Common stock options outstanding | | | 1,681,477 | | Restricted stock unit awards outstanding | | | 3,936,892 | | Shares available for issuance under all stock-based compensation plans | | | 4,537,258 | | | | | | | Total shares of authorized common stock reserved for future issuance | | | 10,155,627 | | | | | | |
10 . Stock-Based CompensationStock-Based Compensation Plans
At December 31, 2021, the Company had four stock-based6stock-based compensation plans, theplans: The Amended and Restated 2004 Stock Option and Incentive Plan (the 2004 Plan) ,. The 2004 Plan and the 2012 Stock Incentive Plan (the 2012 Plan), the Brightcove Inc. 2012 RSU Inducement Plan (the RSU Plan), and the Brightcove Inc. 2014 Stock Option Inducement Plan (the 2014 Stock Inducement Plan).The 2004 Plan provided for the issuance of incentive andnon-qualified stock options, restricted stock, and other equity awards to the Company’s employees, officers, directors, consultants and advisors, up to an aggregate of 7,397,843 shares of the Company’s common stock. The Company also established a UKSub-Plan of the 2004 Plan under which the Company was permitted to make grants of options to employees subject to tax in the United Kingdom.advisors. In conjunction with the effectiveness of the 2012 Plan, the Board voted that no further stock options or other equity-based awards may be granted under the 2004 Plan.
The 2012 Stock Incentive Plan (the 2012 Plan). In 2012, the Board and stockholdersCompany adopted the 2012RSU Plan which became effective on February 16, 2012. The 2012 Plan provides for the issuance of incentive andnon-qualified stock options, restricted stock and other stock-based awards to the Company’s officers, employees,non-employee directors and certain other key persons of the Company as are selected by the Board or the compensation committee thereof. Inin connection with the approvalacquisition of Zencoder. The restricted stock units were settled in shares of the 2012 Plan, the Company reserved 1,700,000 shares ofCompany’s common stock for issuance under theupon vesting. The Brightcove Inc. 2012 RSU Inducement Plan and 124,703 shares were transferred from the 2004 Plan.(the RSU Plan). The number of shares reserved and available for issuance under the 2012 Plan automatically increases each January 1, beginning in 2013, by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee subject to an overall overhang limit of 30%. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. In 2012, the Company adopted the RSU
The Brightcove Inc. 2014 Stock Option Inducement Plan and made awards of restricted stock units pursuant to the RSU Plan to 15 new employees in connection with the acquisition of Zencoder. The awards of restricted stock units cover an aggregate of 77,100 shares of the Company’s common stock and were made as a material inducement to the employees entering into employment with the Company in connection with the acquisition of Zencoder. The restricted stock units were settled in shares of the Company’s common stock upon vesting. (the 2014 Stock Inducement Plan). In 2014, the Company adopted the 2014 Stock Inducement Plan and made awards of options pursuant to the 2014 Stock Inducement Plan to 61 new employees in connection with the Unicorn asset purchase agreement. The awards2018 Inducement Plan (the 2018 plan). Effective April 11, 2018, the Company adopted the 2018 Plan. The 2018 Plan provides for the issuance of stock options cover an aggregateand restricted stock units to the Company’s Chief Executive Officer (“CEO”). On March 25, 2021, the Board adopted, the Brightcove Inc. 2021 Stock Incentive Plan (the “2021 Plan”) which was approved by the shareholders on May 11, 2021. The maximum number of 578,350 shares of the Company’s common stock in the form of options to purchase shares of the Company’s common stock as an inducement to the employees entering into employment with the Company in connection with the asset purchase agreement.At December 31, 2017, 1,429,022 shares werereserved and available for issuance under allthe 2021 Plan is 6,200,000 shares.
The following table summarizes stock-based compensation plans.expense as included in the consolidated statement of operations for the years ended December 31, 2021, 2020 and 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost of subscription and support revenue | | $ | 627 | | | $ | 592 | | | $ | 683 | | Cost of professional services and other revenue | | | 401 | | | | 314 | | | | 289 | | | | | 1,677 | | | | 1,078 | | | | 1,444 | | | | | 2,957 | | | | 3,139 | | | | 2,713 | | General and administrative | | | 4,306 | | | | 3,662 | | | | 4,130 | | | | | | | | | | | | | | | | | $ | 9,968 | | | $ | 8,785 | | | $ | 9,259 | | | | | | | | | | | | | | |
of December 31, 2021, there was $30.6million of total unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.46 years. The following is a summary of the stock option activity for all stock option plans during the yearyears ended December 31, 2017: | | | | | | | | | | | | | | | | | | | Number of Shares | | | Weighted-Average Exercise Price | | | Weighted-Average Remaining Contractual Term (In Years) | | | Aggregate Intrinsic Value(1) | | Outstanding at December 31, 2016 | | | 4,150,584 | | | $ | 7.17 | | | | | | | | | | Granted | | | 483,727 | | | | 7.03 | | | | | | | | | | Exercised | | | (229,127 | ) | | | 2.27 | | | | | | | $ | 1,243 | | Cancelled | | | (480,871 | ) | | | 8.05 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2017 | | | 3,924,313 | | | $ | 7.33 | | | | 6.30 | | | $ | 3,783 | | | | | | | | | | | | | | | | | | | Exercisable at December 31, 2017 | | | 2,430,839 | | | $ | 7.23 | | | | 5.37 | | | $ | 3,052 | | | | | | | | | | | | | | | | | | |
2021, 2020 and 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2018 | | | 2,737,655 | | | $ | 8.57 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 770,038 | | | | 9.89 | | | | | | | | | | | | | (466,110 | ) | | | 7.45 | | | | | | | $ | 1,286 | | | | | (562,160 | ) | | | 9.57 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2019 | | | 2,479,423 | | | $ | 8.96 | | | | 7.24 | | | $ | 1,558 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 178,584 | | | | 10.60 | | | | | | | | | | | | | (272,692 | ) | | | 8.13 | | | | | | | $ | 1,041 | | | | | (274,829 | ) | | | 9.13 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2020 | | | 2,110,486 | | | $ | 9.19 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 114,973 | | | | 14.88 | | | | | | | | | | | | | (333,190 | ) | | | 8.53 | | | | | | | $ | 2,999 | | | | | (210,792 | ) | | | 10.26 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2021 | | | 1,681,477 | | | $ | 9.59 | | | | 5.93 | | | $ | 1,938 | | | | | | | | | | | | | | | | | | | Exercisable at December 31, 2021 | | | 1,230,837 | | | $ | 9.06 | | | | 5.27 | | | $ | 1,747 | | | | | | | | | | | | | | | | | | |
(1) | The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock on December 31, 20172021, December 31, 2020, and December 31, 2019 of $7.10 $10.22, $18.40, and $8.69 per share, respectively, or the date of exercise, as appropriate, and the exercise price of the underlying options. |
The aggregate intrinsicweighted-average fair value forof options exercised duringgranted and assumptions utilized to determine such values are presented in the years ended December 31, 2016 and 2015 was $5,159 and $281, respectively.following table: | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted-average fair value of options granted during the year | | $ | 6.98 | | | $ | 4.72 | | | $ | 4.49 | | | | | | | | | | | | | | | | | | 1.22% | | | | 0.72% | | | | 2.25% | | | | | 48% | | | | 46% | | | | 44% | | | | | 6.2 | | | | 6.2 | | | | 6.2 | | | | | 0— | | | | 0— | | | | 0— | |
The Company has entered into restricted stock unit (RSU) agreements with certain of its employees pursuant to the 2012 Plan and the RSU2021 Plan. Vesting occurs periodically at specified time intervals, ranging from three months to four years, and in specified percentages. Upon vesting, the holder will receive one share of the Company’s common stock for each unit vested. The Company granted restricted stock units, respectively, to certain key executives, which contain both performance-based (“P-RSU”) and service-based vesting conditions (“S-RSU”). The Company measures compensation expense for these performance-based awards based upon a review of the Company’s expected achievement against specified financial performance targets. Compensation cost is recognized on a ratable basis over the requisite service period for each series of grants to the extent management has deemed that such awards are probable of vesting based upon the expected achievement against the specified targets. On a periodic basis, management reviews the Company’s expected performance and adjusts the compensation cost, if needed, at such time. The Company determined that the conditions for a portion of the performance-based restricted stock units were achieved in the first quarter of 2020. As such, the Company recognized $233,000 and$ 1.3 million of stock-based compensation expense relating to performance-based awards for the years ended December 31, 2021, 2020, respectively.
The following table summarizes the RSU P-RSU andS-RSU activity during the year ended December 31, 2017: | | | | | | | | | | | Shares | | | Weighted Average Grant Date Fair Value | | Unvested by December 31, 2016 | | | 1,902,577 | | | $ | 7.84 | | Granted | | | 1,189,973 | | | | 6.95 | | Vested and issued | | | (561,133 | ) | | | 7.47 | | Cancelled | | | (312,713 | ) | | | 7.80 | | | | | | | | | | | Unvested by December 31, 2017 | | | 2,218,704 | | | $ | 7.44 | | | | | | | | | | |
Warrants
In September 2006, the Company issued fully vested warrants to purchase an aggregate of 46,713 shares of Series B Preferred Stock, at a purchase price of $3.21 per share, to two lenders in connection with a line of credit 2021, 2020, and2019:agreement. The warrants were exercisable at any time up until the expiration date of August 31, 2016. The fair value of the warrants was recorded as a discount on the related debt, and was amortized to interest expense over the life of the debt. The debt was fully repaid in March 2007. The warrant liability was reported at fair value until completion of the Company’s IPO in February 2012, whereupon the warrants automatically converted into warrants to purchase shares of the Company’s common stock. At the time of conversion of the warrants in connection with the Company’s IPO, the fair value of the warrants was $395, which was reclassified as a component of additionalpaid-in capital.
During 2012, 18,685 shares exercisable under the warrants were exercised pursuant to a net exercise provision, which resulted in the issuance of 15,781 common shares. In August 2016, the remaining 28,028 shares exercisable under the warrants were exercised pursuant to a net exercise provision, which resulted in the issuance of 20,528 common shares.
Common Stock Reserved for Future Issuance
At December 31, 2017, the Company has reserved the following shares of common stock for future issuance:
| | | | | | | December 31,
2017 | | Common stock options outstanding
| | | 3,924,313 | | Restricted stock unit awards outstanding
| | | 2,218,704 | | Shares available for issuance under all stock-based compensation plans
| | | 1,429,022 | | | | | | | Total shares of authorized common stock reserved for future issuance
| | | 7,572,039 | | | | | | |
7.
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| | Unvested by December 31, 2018 | | | 1,864,582 | | | $ | 9.03 | | | | 1,169,000 | | | $ | 9.03 | | | | 3,033,582 | | | $ | 8.07 | | | | | 1,391,072 | | | | 10.37 | | | | 641,000 | | | | 8.91 | | | | 2,032,072 | | | | 10.59 | | | | | (537,362 | ) | | | 7.91 | | | | — | | | | — | | | | (537,362 | ) | | | 7.91 | | | | | (734,928 | ) | | | 6.97 | | | | (167,000 | ) | | | 1.48 | | | | (901,928 | ) | | | 8.45 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested by December 31, 2019 | | | 1,983,364 | | | $ | 9.03 | | | | 1,643,000 | | | $ | 9.03 | | | | 3,626,364 | | | $ | 9.03 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Unvested by December 31, 2019 | | | 1,983,364 | | | $ | 9.03 | | | | 1,643,000 | | | $ | 9.03 | | | | 3,626,364 | | | $ | 9.03 | | | | | 1,139,209 | | | | 10.74 | | | | 386,551 | | | | 15.78 | | | | 1,525,760 | | | | 12.02 | | | | | (611,428 | ) | | | 9.23 | | | | (219,605 | ) | | | 8.81 | | | | (831,033 | ) | | | 9.10 | | | | | (510,729 | ) | | | 9.00 | | | | (222,145 | ) | | | 7.65 | | | | (732,874 | ) | | | 8.64 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested by December 31, 2020 | | | 2,000,416 | | | $ | 10.30 | | | | 1,587,801 | | | $ | 10.40 | | | | 3,588,217 | | | $ | 10.35 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Unvested by December 31, 2020 | | | 2,000,416 | | | $ | 10.30 | | | | 1,587,801 | | | $ | 10.40 | | | | 3,588,217 | | | $ | 10.35 | | | | | 2,269,341 | | | | 12.24 | | | | 64,011 | | | | 12.65 | | | | 2,333,352 | | | | 12.25 | | | | | (680,769 | ) | | | 9.85 | | | | (181,910 | ) | | | 8.74 | | | | (862,679 | ) | | | 9.62 | | | | | (673,268 | ) | | | 11.67 | | | | (448,730 | ) | | | 9.59 | | | | (1,121,998 | ) | | | 10.84 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested by December 31, 2021 | | | 2,915,720 | | | $ | 11.66 | | | | 1,021,172 | | | $ | 11.04 | | | | 3,936,892 | | | $ | 11.50 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss before the provision for income taxes consists of the following: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Domestic | | $ | (20,528 | ) | | $ | (10,756 | ) | | $ | (8,028 | ) | Foreign | | | 1,379 | | | | 1,180 | | | | 839 | | | | | | | | | | | | | | | Total | | $ | (19,149 | ) | | $ | (9,576 | ) | | $ | (7,189 | ) | | | | | | | | | | | | | |
following jurisdictional (loss) income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (7,489 | ) | | $ | (23,388 | ) | | | | | | | | 2,294 | | | | 2,045 | | | | | | | | | | | | | | | | | | | | | $ | (5,195 | ) | | $ | (21,343 | ) | | | | | | | | | | | | | |
The provision for income taxes in the accompanying consolidated financial statements consists of the following: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Current provision: | | | | | | | | | | | | | Federal | | $ | — | | | $ | — | | | $ | — | | State | | | 21 | | | | 33 | | | | 29 | | Foreign | | | 311 | | | | 424 | | | | 389 | | | | | | | | | | | | | | | Total current | | | 332 | | | | 457 | | | | 418 | | | | | | | | | | | | | | | Deferred (benefit): | | | | | | | | | | | | | Federal | | | — | | | | — | | | | — | | State | | | — | | | | — | | | | — | | Foreign | | | 38 | | | | (47 | ) | | | (27 | ) | | | | | | | | | | | | | | Total deferred | | | 38 | | | | (47 | ) | | | (27 | ) | | | | | | | | | | | | | | Total provision | | $ | 370 | | | $ | 410 | | | $ | 391 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 0 | | | $ | 0 | | | | | | | | | 8 | | | | 18 | | | | | | | | | 815 | | | | 626 | | | | | | | | | | | | | | | | | | | | | | 823 | | | | 644 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (5 | ) | | | 7 | | | | | | | | | (5 | ) | | | 8 | | | | | | ) | | | (195 | ) | | | (99 | ) | | | | | | | | | | | | | | | | | | ) | | | (205 | ) | | | (84 | ) | | | | | | | | | | | | | | | | | | | | $ | 618 | | | $ | 560 | | | | | | | | | | | | | | |
A reconciliation of the U.S. federalfe deral statutory rate to the Company’s effective tax rate is as follows: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Tax at statutory rates | | | (34.0 | )% | | | (34.0 | )% | | | (34.0 | )% | State income taxes | | | (4.1 | ) | | | (6.1 | ) | | | 3.4 | | Change in tax rate | | | 103.9 | | | | 0.1 | | | | 3.0 | | Permanent differences | | | 7.1 | | | | 11.7 | | | | 34.7 | | Foreign rate differential | | | (0.7 | ) | | | (1.1 | ) | | | (1.2 | ) | Research and development credits | | | (3.7 | ) | | | (6.7 | ) | | | (9.6 | ) | Change in valuation allowance | | | (66.3 | ) | | | 40.8 | | | | 7.7 | | Other, net | | | (0.3 | ) | | | (0.4 | ) | | | 1.4 | | | | | | | | | | | | | | | Effective tax rate | | | 1.9 | % | | | 4.3 | % | | | 5.4 | % | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 21 | | | | 21 | | | | | | | | | 9 | | | | 4.2 | | | | | | | | | 3.9 | | | | 0.1 | | | | | | | | | (11.6 | | | | (5 | | Foreign rate differential | | | | | | | (3.4 | | | | (0.7 | | Research and development credits | | | | | | | 13.7 | | | | 4.4 | | Change in valuation allowance | | | | | | | (44.2 | | | | (26.8 | | | | | | | | | (0.2 | | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | (11.8 | %) | | | (2.6 | %) | | | | | | | | | | | | | |
income tax effect of each type of temporary difference and carryforward as of December 31 2017 , 2021and 2016 2020is as follows: | | | | | | | | | | | As of December 31, | | | | 2017 | | | 2016 | | Deferred tax assets: | | | | | | | | | Net operating loss carry-forwards | | $ | 37,964 | | | $ | 45,850 | | Tax credit carry-forwards | | | 9,173 | | | | 7,654 | | Stock-based compensation | | | 1,856 | | | | 2,236 | | Fixed Assets | | | 267 | | | | 154 | | Account receivable reserves | | | 189 | | | | 219 | | Accrued compensation | | | 851 | | | | 2,232 | | Capitalizedstart-up costs | | | 138 | | | | 279 | | Other temporary differences | | | 371 | | | | 761 | | | | | | | | | | | Total deferred tax assets | | | 50,809 | | | | 59,385 | | Deferred tax liabilities: | | | | | | | | | Intangible assets | | | (3,611 | ) | | | (5,962 | ) | | | | | | | | | | Total deferred tax liabilities | | | (3,611 | ) | | | (5,962 | ) | | | | | | | | | | Valuation allowance | | | (47,111 | ) | | | (53,302 | ) | | | | | | | | | | Net deferred tax assets | | $ | 87 | | | $ | 121 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net operating loss carry-forwards | | | | | | $ | 46,865 | | Tax credit carry-forwards | | | | | | | 12,647 | | | | | | | | | 1,231 | | | | | | | | | 203 | | Account receivable reserves | | | | | | | 304 | | | | | | | | | 2,086 | | Lease Liability | | | | | | | 2,254 | | Other temporary differences | | | | | | | 1,458 | | | | | | | | | | | Total deferred tax assets | | | | | | | 67,048 | | Deferred tax liabilities: | | | | | | | | | Other deferred tax liabilities | | | | | | | (3,137 | ) | | | | | | | | (2,044 | ) | | | | | | | | (3,218 | ) | | | | | | | | | | Total deferred tax liabilities | | | | | | | (8,399 | ) | | | | | | | | | | | | | | | | | (58,718 | ) | | | | | | | | | | Net deferred tax asset (liability) | | | | | | $ | (69 | ) | | | | | | | | | |
The Company is required to compute income tax expense in each jurisdiction in which it operates. This process requires the Company to project its current tax liability and estimate its deferred tax assetsasse ts and liabilities, including net operating loss (NOL) and tax credit carry-forwards. In assessing the ability to realize the net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Company has provided a valuation allowance against substantially all of its remaining U.S. net deferred tax assets as of December 31, 20172021 and 2016,December 31, 2020, as based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences. The decreaseCompany has provided a valuation allowance against the net deferred tax assets of its subsidiaries in Australia, United Kingdom, and Mexico as of December 31, 2021 and December 31, 2020 largely based on the significant weight of negative evidence given to the consolidated worldwide cumulative loss position for the current year and the prior two years. The increase in the valuation allowance from 20162020 to 20172021 of $6.2 $ 0.2million principally relates to the reduction in federal deferred tax rate offset by the current year U.S taxable loss. Based upon the level of historical income in Japan and future projections, the The Company believes it is probable it will realize the benefits of its future deductible differences. As such, the Company has not recorded a valuation allowance against itsmaintains net deferred tax assets in Japan as of December 31, 2017liabilities for temporary differences related to its Japanese and 2016.
Portuguese subsidiaries. As of December 31, 2017,2021, the Company had federal and state net operating losses of approximately $161.9$199.4 million, and $66.7of which $161.8 million respectively, which are available to offset future taxable income, if any, through 2037.2037 and $37.6 million which are available to offset future taxable income indefinitely. As of December 31, 2021, the Company had state net operating losses of approximately $92.3 million, of which $89.2 million are available to offset future taxable income, if any, through 2041 and $3.1 million which are available to offset future taxable income indefinitely. The Company also had federal and state research and development tax credits of $6.1$9.0 million and $3.9 $5.5 million, respectively, which expire in various amounts through 2037. 2041.The net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules under the U.S. Internal Revenue Code of 1986, as amended. Through June 30, 2014,This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the
value of the Company completedimmediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not conducted an assessment to determine whether there may have been a Section 382 ownership change from June 30, 2014, the date of the most recent completed study, through December 31, 2021. If a change in ownership were to have occurred during that period, and determined that it ismore-likely-than-not thatresulted in the Company’srestriction of net operating loss and tax credit amounts as disclosed are not subject to any material Section 382 limitations.On January 1, 2009,carryforwards, the reduction in the related deferred tax asset would be offset with a corresponding reduction in the valuation allowance.
At December 31, 2021and 2020, the Company adopted the provision for uncertain tax positions under ASC 740,Income Taxes. The adoption did not have an impact on the Company’s retained earnings balance. At December 31, 2017 and 2016, the Company had no 0recorded liabilities for uncertain tax positions.At December 31, 2017 and 2016, the Company had nopositions, nor any accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal tax jurisdiction, various state and various foreign jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 20142018 through 2017.2021. Since the Company is in a U.S. loss carryforward position, carryforward tax attributes generated in prior years may still be adjusted upon future examination if they have or will be used in a future period. Additionally, certain non-U.S. jurisdictions are no longer subject for income tax examinations by authorities for tax years before 2012.On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act reduces the U.S. federal corporate tax rate from 34% to 21%, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In December 2017, the SEC issued SAB 118, which directs taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.
As of December 31, 2017, the Company had not yet completed its accounting for all of the tax effects of the enactment of the Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and theone-time transition tax. The Company will continue to refine its calculations as additional analysis is completed. The Company expects that any additional changes will be offset by an increase or decrease in the Company’s valuation allowance as any transition tax will result in use of the net operating loss deferred tax asset, which is fully offset by a valuation allowance along with all other net deferred tax assets.
2016. No additional U.S. income taxes or foreign withholding taxes have been provided for any additional outside basis differences inherent in the Company’s foreign entities as these amounts continue to be indefinitely reinvested in foreign operations based on management’s current intentions. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable. The Company is still in the process of analyzing the impact of the Act on its indefinite reinvestment assertion.On November 19, 2015,December 28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a $20.0$30.0 million asset basedasset-based line of credit (the “Line of Credit”). Under the Line of Credit, the Company can borrow up to $20.0 million. Borrowings under the Line of Credit are secured by substantially all of the Company’s assets, excluding its intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate equal toas follows: (i) for prime rate advances, the greater of (A) the prime rate orand (B) 4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 2.5%225 basis points and (B) 4%. Under the Loan Agreement, the Company must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold based on non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the lenderlenders under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. The Line of Credit agreement will expire on December 28, 2023. The Company was in compliance withall applicable covenants under the Line of Credit as of December 31, 2017. As the Company has not drawn on the Line of Credit,2021 and there are no amountswere 0 borrowings outstanding as of December 31, 2017.On2021.
In 2020, under the loan and security agreement prior to the December 31, 2015,28, 2020 amendment, the Company entered into an equipmentobtained $10 million of financing agreement with a lender (the “December 2015 Equipment Financing Agreement”)in early 2020, which it subsequently paid back prior to finance the purchaseamendment.
Accrued expenses consist of the following: | | | | | | | | | | | December 31, | | | | 2017 | | | 2016 | | Accrued payroll and related benefits | | $ | 4,436 | | | $ | 7,089 | | Accrued sales and other taxes | | | 1,363 | | | | 2,275 | | Accrued professional fees and outside contractors | | | 2,021 | | | | 1,082 | | Accrued content delivery | | | 2,390 | | | | 2,013 | | Accrued other liabilities | | | 3,411 | | | | 3,246 | | | | | | | | | | | Total | | $ | 13,621 | | | $ | 15,705 | | | | | | | | | | |
10.
| | | | | | | | | | | | | | | | | | | | Accrued payroll and related benefits | | $ | 8,536 | | | $ | 10,260 | | Accrued sales and other taxes | | | 2,950 | | | | 3,722 | | Accrued professional fees and outside contractors | | | 2,233 | | | | 2,901 | | | | | 4,190 | | | | 3,822 | | Accrued other liabilities | | | 3,016 | | | | 4,692 | | | | | | | | | | | | | $ | 20,925 | | | $ | 25,397 | | | | | | | | | | |
Disclosure requirements about segments of an enterprise and related information establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial reports issued to stockholders. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief decision maker is its chief executive officer. The Company and the chief decision maker view the Company’s operations and manage its business as one operating1operating segment. Total revenue to unaffiliated customers by geographic area, based on the location of the customer, was as follows: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2017 | | | 2016 | | | 2015 | | Revenue: | | | | | | | | | | | | | North America | | $ | 91,358 | | | $ | 92,912 | | | $ | 86,106 | | Europe | | | 24,425 | | | | 25,196 | | | | 25,380 | | Japan | | | 16,881 | | | | 15,230 | | | | 9,061 | | Asia Pacific | | | 22,539 | | | | 15,617 | | | | 12,380 | | Other | | | 710 | | | | 1,311 | | | | 1,779 | | | | | | | | | | | | | | | Total revenue | | $ | 155,913 | | | $ | 150,266 | | | $ | 134,706 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 107,686 | | | $ | 97,309 | | | | | | | | | 34,001 | | | | 31,587 | | | | | | | | | 25,745 | | | | 22,150 | | | | | | | | | 28,984 | | | | 32,391 | | | | | | | | | 937 | | | | 1,018 | | | | | | | | | | | | | | | | | $ | 211,093 | | | $ | 197,353 | | | $ | 184,455 | | | | | | | | | | | | | | |
North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was $85,459, $87,302$111.5, $99.6 and $80,455 $90.5million during the years ended December 31, 2017, 20162021, 2020 and 2015, respectively. Revenue from customers located in Japan was $16,881, $15,230 and $9,061 during the years ended December 31, 2017, 2016 and 2015,2019, respectively. Other than the United States and Japan, no other country contributed more than 10% of the Company’s total revenue during the years ended December 31, 20172021 and 2016.2020. As of December 31, 20172021 and December 31, 2016,2020, property and equipment at locations outside the U.S. was not material. 11.
The Company maintains a defined contribution savings plan covering all eligible U.S. employees under Section 401(k) of the Internal Revenue Code. Company contributions to the plan may be made at the discretion of the Board. During the years ended December 31, 2017, 20162021, 2020 and 2015,2019, the Company has made contributions to the plan of $425, $336$412, $434 and $276,$392, respectively. 12. Quarterly Financial Data (unaudited)
The following table presents certain unaudited quarterly financial information for the eight quarters in the period ended December 31, 2017. This information has been prepared on the same basis as the audited financial statements and includes all adjustments (consisting only
On February 1, 2022, the Company acquired 100% of the outstanding shares of Wicket Labs, Inc., a provider of subscriber and content insights, in exchange for common stock of the Company and cash (the “Acquisition”). At the closing, the Company issued 212,507 unregistered shares of common stock of the Company valued at $2.0 million and paid approximately $13.2 million in cash. Pursuant to the Merger Agreement (“the Agreement”), approximately $1.8 million of the cash consideration was held back to secure payment of any claims of indemnification for breaches or inaccuracies in the Sellers’ representations and warranties, covenants and agreements. The acquisition will be consolidated with the Company beginning on the closing date of the acquisition. |
Table of operations set forth herein. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the three months ended: | | | | Dec. 31, 2017 | | | Sep. 30, 2017 | | | Jun. 30, 2017 | | | Mar. 31, 2017 | | | Dec. 31, 2016 | | | Sep. 30, 2016 | | | Jun. 30, 2016 | | | Mar. 31, 2016 | | Revenue | | $ | 40,101 | | | $ | 39,487 | | | $ | 38,753 | | | $ | 37,572 | | | $ | 38,625 | | | $ | 38,389 | | | $ | 36,960 | | | $ | 36,292 | | Gross profit | | | 23,783 | | | | 22,983 | | | | 22,175 | | | | 22,354 | | | | 23,272 | | | | 24,612 | | | | 23,507 | | | | 23,028 | | Loss from operations | | | (1,331 | ) | | | (5,349 | ) | | | (7,884 | ) | | | (5,132 | ) | | | (3,684 | ) | | | (1,552 | ) | | | (2,211 | ) | | | (1,531 | ) | Net loss | | | (1,372 | ) | | | (5,396 | ) | | | (7,678 | ) | | | (5,073 | ) | | | (4,363 | ) | | | (1,618 | ) | | | (2,398 | ) | | | (1,607 | ) | | | | | | | | | | Basic net loss per share | | | (0.04 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.15 | ) | | | (0.13 | ) | | | (0.05 | ) | | | (0.07 | ) | | | (0.05 | ) | Diluted net loss per share | | | (0.04 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.15 | ) | | | (0.13 | ) | | | (0.05 | ) | | | (0.07 | ) | | | (0.05 | ) |
Contents | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Annual Report on Form10-K. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 20172021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework (2013). Based on this assessment and those criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2017.2021. The effectiveness of our internal control over financial reporting as of December 31, 20172021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm To the ShareholdersStockholders and the Board of Directors of Opinion on Internal Control Over Financial Reporting We have audited Brightcove Inc.’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Brightcove Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss,income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017,2021, and the related notes and our report dated February 28, 201818, 2022 expressed an unqualified opinion thereon. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. February 28, 201818, 2022
| Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
| Directors, Executive Officers, and Corporate Governance |
Incorporated by reference from the information in our Proxy Statement for our 20182022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.Incorporated by reference from the information in our Proxy Statement for our 20182022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Incorporated by reference from the information in our Proxy Statement for our 20182022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. | Certain Relationships and Related Transactions and Director Independence |
Incorporated by reference from the information in our Proxy Statement for our 20182022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. | Principal Accountant Fees and Services |
Incorporated by reference from the information in our Proxy Statement for our 20182022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. | Exhibits, Financial Statements and Schedules |
(a)(1) Financial Statements. The response to this portion of Item 15 is set forth under Item 8 above. (a)(2) Financial Statement Schedules.
All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth under Item 8 above. The exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form | | | | | | | | 2.1* (1) | | Agreement and Plan of Merger, dated as of July 26, 2012, by and among the Registrant, Zebra Acquisition Corporation, Zencoder Inc. and the Securityholders’ Representative named therein. | | | 2.2* (2) | | Asset Purchase Agreement and Plan of Reorganization, dated as of January 6, 2014, by and among the Registrant, Cacti Acquisition LLC, Unicorn Media, Inc., Unicorn Media of Arizona, Inc., U Media Limited and the Securityholders’ Representative named therein. | | | 3.1* (3) | | Eleventh Amended and Restated Certificate of Incorporation. | | | 3.2* (4) | | Amended and RestatedBy-Laws. | | | 4.1* (5) | | Form of Common Stock certificate of the Registrant. | | | 4.2* (6) | | Second Amended and Restated Investor Rights Agreement dated January 17, 2007, by and among the Registrant, the investors listed therein, and Jeremy Allaire, as amended. | | | 4.3* (7) | | Warrant to Purchase Stock dated August 31, 2006 issued by the Registrant to TriplePoint Capital LLC. | | | 4.4* (8) | | Brightcove Inc. RSU Inducement Plan. | | | 4.5* (9) | | Form of Restricted Stock Unit Award Agreement under the Brightcove Inc. 2012 RSU Inducement Plan. | | | 4.6* (10) | | Brightcove Inc. 2018 Inducement Plan. | | | 4.7* (11) | | Form of Stock Option Agreement under the Brightcove Inc. 2018 Inducement Plan. | | | 4.8* (12) | | Form of Performance-Based Restricted Stock Unit Agreement under the Brightcove Inc. 2018 Inducement Plan. | | | 4.9* (13) | | Description of Capital Stock. | | | 10.1* (10)(14) | | Form of Indemnification Agreement between the Registrant and its directors and executive officers. | | | 10.2†* (11)(15) | | Amended and Restated 2004 Stock Option and Incentive Plan of the Registrant, together with forms of award agreement. | | | 10.3†* (12)(16) | | 2012 Stock Incentive Plan of the Registrant. | | | 10.4†* (13)(17) | | Form of Incentive Stock Option Agreement under the 2012 Stock Incentive Plan. | | | 10.5†* (14) (18) | | Form ofNon-Qualified Stock Option Agreement for Company Employees under the 2012 Stock Incentive Plan. | | | 10.6* (15)(19) | | Lease dated February 28, 2007 between Mortimer B. Zuckerman, Edward H. Linde and Michael A. Cantalupa, as Trustees of One Cambridge Center Trust and Brightcove Inc., as amended. | | | 10.7* (16)(20) | | Lease dated June 15, 2011 between BP Russia Wharf LLC and Brightcove Inc. | | | 10.8* (17)(21) | | Loan and Security Agreement dated March 30, 2011 between Silicon Valley Bank and Brightcove Inc., as amended. |
| | | Exhibits
| | | | | 10.14†* (23)(27) | | Employment Agreement dated August 8, 2011 between the Registrant and Edward Godin. | | | 10.15†* (24)(28) | | Employment Agreement dated August 8, 2011 between the Registrant and Andrew Feinberg. | | | 10.16* (25)(29) | | Employment Separation Agreement dated January 2, 2013 between the Registrant and Edward Godin. | | | 10.17†* (26)(30) | | Amended and Restated Employment Agreement dated July 25, 2013 between Brightcove Inc. and Jeremy Allaire | | | 10.18†* (27)(31) | | Letter Agreement dated August 25, 2014 between the Registrant and Christopher Menard related to Mr. Menard’s resignation and separation from employment with the Registrant. | | | 10.19†* (28)(32) | | Employment Agreement dated October 1, 2014 between the Registrant and Jon Corley. | | | 10.20†* (29)(33) | | Employment Agreement dated October 1, 2014 between the Registrant and Paul Goetz. | | | 10.21†* (30)(34) | | Employment Agreement dated November 3, 2014 between the Registrant and Kevin R. Rhodes. | | | 10.22†* (31)(35) | | Non-Employee Director Compensation Policy. | | | 10.23†* (32)(36) | | Senior Executive Incentive Bonus Plan. | | | 10.24†* (33)(37) | | Form of Restricted Stock Unit Award Agreement under the 2012 Stock Incentive Plan. | | | 10.25†* (34)(38) | | Form of Restricted Stock Unit Award Agreement for Company Employees under the 2012 Stock Incentive Plan. | | | 10.26†* (35)(39) | | Form of Restricted Stock Unit Award Agreement forNon-Employee Directors under the 2012 Stock Incentive Plan. | | | 10.27* (36)(40) | | Form ofNon-Qualified Stock Option Agreement forNon-Employee Directors under the 2012 Stock Incentive Plan. | | | 10.28†* (37)(41) | | Separation Agreement dated July 24, 2017 between the Registrant and David Mendels. | | | 10.29†* (38)(42) | | Amendment to Employment Agreement dated July 24, 2017 between the Registrant and Andrew Feinberg. | | | 10.30†* (39)(43) | | Employment Agreement dated September 20, 2017 between the Registrant and David Plotkin. | | | 10.31*† (44) | | Amendment to Employment Agreement dated April 11, 2018 between the Registrant and Andrew Feinberg. | | | 10.32*† (45) | | Employment Agreement dated April 11, 2018 between the Registrant and Jeff Ray. | | | 10.34†* (46) | | Non-Employee Director Compensation Policy, as amended and restated on April 11, 2018. | | | 10.35†* (47) | | Employment Agreement dated May 3, 2018 between the Registrant and Robert Noreck. | | | 10.36* (48) | | Second Amended and Restated Loan and Security Agreement dated December 14, 2018 between the Registrant and Silicon Valley Bank. |
| | | | | | | | 10.37* (49) | | First Loan Modification Agreement dated March 29, 2019 between the Registrant and Silicon Valley Bank. | | | 10.38* (50) | | Third Loan Modification Agreement dated December 28, 2020 between the Registrant and Silicon Valley Bank. | | | 10.39†* (51) | | Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.40†* (52) | | Form of Incentive Stock Option Agreement under the Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.41†* (53) | | Form of Non-Qualified Stock Option Agreement for Brightcove Employees under the Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.42†* (54) | | Form of Non-Qualified Stock Option Agreement for Non-U.S. Employees under the Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.43†* (55) | | Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.44†* (56) | | Form of Restricted Stock Unit Agreement for Brightcove Employees under the Brightcove Inc. 2021 Stock Incentive Plan. | | | 10.45†* (57) | | Form of Restricted Stock Unit Agreement for Non-U.S. Employees under the Brightcove Inc. 2021 Stock Incentive Plan | | | 10.46†* (58) | | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Brightcove Inc. 2021 Stock Incentive Plan | | | 10.47†* (59) | | Employment Agreement, dated February 8, 2022 by and between the Company and Marc DeBevoise | | | 10.48**+ | | Lease dated November 23, 2021, between 281 Summer Street, LLC and Brightcove Inc | | | 10.49†** | | Transition Agreement, dated October 26, 2021, between Jeff Ray and Brightcove Inc. | | | 21.1** | | Subsidiaries of the Registrant. | | | 23.1** | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. | | | 24.1** | | Power of Attorney (included on signature page). | | | 31.1** | | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | 31.2** | | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | 32.1**• | | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | 101.INS** | | Inline XBRL Instance Document. | | | 101.SCH** | | Inline XBRL Taxonomy Extension Schema Document. | | | 101.CAL** | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | | 101.DEF** | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | | Exhibits
| | | | | 101.LAB** | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | | 101.PRE** | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | | 104* | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
(1) | Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on July 26, 2012. |
(2) | Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2014. |
(3) | Filed as Exhibit 3.2 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(4) | Filed as Exhibit 3.3 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(5) | Filed as Exhibit 4.1 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(6) | Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(7) | Filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(8) | Filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 14, 2012. |
(9) | Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 14, 2012. |
(10) | Filed as Exhibit 4.4 to Registrant’s Registration Statement on FormS-8 filed with the Commission on May 1, 2018. |
(11) | Filed as Exhibit 4.5 to Registrant’s Registration Statement on FormS-8 filed with the Commission on May 1, 2018. |
(12) | Filed as Exhibit 4.6 to Registrant’s Registration Statement on FormS-8 filed with the Commission on May 1, 2018. |
(13) | Filed as Exhibit 4.9 to Registrant’s Annual Report on Form10-K filed with the Commission on February 27, 2020. |
(14) | Filed as Exhibit 10.1 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(11)(15) | Filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(12)(16) | Filed as Exhibit 10.3 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(13)(17) | Filed as Exhibit 10.4 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(14)(18) | Filed as Exhibit 10.5 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(15)(19) | Filed as Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(16)(20) | Filed as Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(17)(21) | Filed as Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(18)(22) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2013. |
(19)(23) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2014. |
(20)(24) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015. |
(21)(25) | Filed as Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(22)(26) | Filed as Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(23)(27) | Filed as Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(24)(28) | Filed as Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24, 2011. |
(25)(29) | Filed as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2013. |
(26)(30) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2013. |
(27)(31) | Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2014. |
(28)(32) | Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2014. |
(29)(33) | Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2014. |
(30)(34) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 10, 2014. |
(31)(35) | Filed as Exhibit 10.14 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(32)(36) | Filed as Exhibit 10.15 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(33)(37) | Filed as Exhibit 10.16 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(34)(38) | Filed as Exhibit 10.17 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(35)(39) | Filed as Exhibit 10.18 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(36)(40) | Filed as Exhibit 10.19 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012. |
(37)(41) | Filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange commissionCommission on July 26, 2017. |
(38)(42) | Filed as Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange commissionCommission on July 26, 2017. |
(39)(43) | Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on October 26, 2017. |
(44) | Filed as Exhibit 99.1 to the Registrant’s Current Report on Form8-K filed with the Commission on April 11, 2018. |
(45) | Filed as Exhibit 99.2 to the Registrant’s Current Report on Form8-K filed with the Commission on April 11, 2018. |
(46) | Filed as Exhibit 99.5 to Registrant’s Current Report on Form8-K filed with the Commission on April 11, 2018. |
(47) | Filed as Exhibit 99.1 to the Registrant’s Current Report on Form8-K filed with the Commission on May 4, 2018. |
(48) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form8-K filed with the Commission on December 14, 2018. |
(49) | Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on April 24, 2019. |
(50) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form8-K filed with the Commission on December 29, 2020. |
(51) | Filed as Exhibit 99.1 to Registrant’s Registration Statement on FormS-8 filed with the Securities and Exchange Commission on October 26, 2017.May 17, 2021. |
(52) | Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(53) | Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(54) | Filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(55) | Filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(56) | Filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(57) | Filed as Exhibit 10.7 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(58) | Filed as Exhibit 10.8 to the Registrant’s Quarterly Report on Form10-Q filed with the Commission on July 28, 2021. |
(59) | Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 9, 2022. |
* | Incorporated herein by reference. |
The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.† | Indicates a management contract or any compensatory plan, contract or arrangement. |
+ | Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 28th18th day of February, 2018.2022. | | | | | | | | By: | | /s/ Andrew Feinberg Jeff Ray | | | | | Andrew Feinberg Jeff Ray | | | Chief Executive Officer |
Each person whose individual signature appears below hereby constitutes and appoints Kevin R. RhodesRobert Noreck and David Plotkin, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto saidand agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that saidand agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | | | | | | | /s/ Andrew FeinbergAndrew Feinberg Jeff Ray | | (Principal Executive Officer) and Director | | February 28, 201818, 2022 | | | | /s/ Kevin R. RhodesKevin R. Rhodes Robert Noreck | | (Principal Financial Officer and Principal Accounting Officer) | | February 28, 201818, 2022 | | | | /s/ Christopher StagnoChristopher Stagno Deborah Besemer | | Chief Accounting Officer
(Principal Accounting Officer)
| | February 28, 2018 | | | | /s/ Gary Haroian
Gary Haroian
| | ChairmanChairperson of the Board of Directors | | February 28, 201818, 2022 | | | | /s/ Deborah BesemerDeborah Besemer Kristin Frank | | Director | | February 28, 201818, 2022 | | | | /s/ Derek HarrarDerek Harrar Gary Haroian | | Director | | February 28, 201818, 2022 | | | | | | Director | | February 28, 201818, 2022 | | | | | | Director | | February 28, 201818, 2022 | | | | /s/ David OrfaoDavid Orfao Tsedal Neeley | | Director | | February 28, 201818, 2022 | | | | | | Director | | February 18, 2022 | | | | | | Director | | February 18, 2022 |
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