| • | | Recurring Dollar Retention Rate. We assess our ability to retain customers using a metric we refer to as our recurring dollar
Net 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, 2018 and 2017, the recurring dollar retention rate was 94% and 89%, respectively.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. 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. |
| • | | Backlog. 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. As of
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| December 31, 2018, the total backlog for subscription and support contracts was approximately $109.4 million, of which approximately $90.7 million is expected to be recognized over the next 12 months. As of December 31, 2017, the total backlog for subscription and support contracts was approximately $101.0 million, of which approximately $79.2 million was expected to be recognized over the next 12 months.
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The following table includes our key metrics for the periods presented:
| | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | Customers (at period end) | | | | | | | | | Volume | | | 1,557 | | | | 2,001 | | Premium | | | 2,226 | | | | 2,167 | | | | | | | | | | | Total customers (at period end) | | | 3,783 | | | | 4,168 | | | | | | | | | | | Recurring dollar retention rate | | | 94 | % | | | 89 | % | Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands) | | $ | 74.9 | | | $ | 70.1 | | Average annual subscription revenue per premium customer for Starter edition customers only (in thousands) | | $ | 4.7 | | | $ | 4.3 | | Total backlog, excluding professional services engagements | | $ | 109.4 | | | $ | 101.0 | |
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 a pre-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. The second product line is comprised of our volume product edition. Our volume editions targetsmall and medium-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 generallyenter into month-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 entitlementsBrightcove 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, 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.
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 20172020 to 2018.2021. 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 number of our professional services engagements 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 expand the sale of our product offerings within our existing customer base, build brand awareness and sponsor additional marketing events. Accordingly, we expect sales and marketing expense to continue to be our most significant operating 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 from small, 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. General and administrative expenses also include the costs associated with professional fees, insurance premiums, other corporate expenses and allocated overhead. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.
. Merger-related costs consistedconsist of expenses of $716,000 incurred as part of the anticipated acquisition of the online video player related assets from the assets of Ooyala, Inc. (“Ooyala”) and certain of its subsidiaries, and the acquisition of 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. 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, 2018.2021. We maintain net deferred tax liabilities for temporary differences related to our foreignJapanese and 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, 2018, 2017,2021, 2020 and 2016,2019, we recorded stock-based compensation expense of $6.6$10.0 million, $7.2$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, 2018, 2017 and 2016, 49%, 45% and 42%, respectively, of our revenue was generated in locations outside the United States. During the same periods, 31%, 29% and 28%, 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 the percentage of total 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. In May 2014, the Financial Accounting Standards Board(FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which modifies how all entities recognize revenue, and consolidates revenue recognition guidance into one ASC Topic (ASC Topic 606, Revenue from Contracts with Customers) (“ASC 606”). We adopted ASC 606 on January 1, 2018. 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.
| 1) | Identify the contract with a customer
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| 2) | Identify the performance obligations in the contract
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| 3) | Determine the transaction price
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| 4) | Allocate the transaction price to performance obligations in the contract
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| 5) | Recognize revenue when or as the Company satisfies a performance obligation
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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. Contracts for premium customers generally have a term of one yearand are non-cancellable. These contracts generally provide the customer with a maximum annual level of entitlement and provide the rate at which the customer must pay for actual usage above the annual entitlement 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 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.
Under ASC 605, if usage exceeded the annual allowance level for a particular customer arrangement, the associated revenue was recognized in the period that the additional usage occurred.
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 evaluate variable consideration for usage-based fees at contract inception and re-evaluate quarterly over the course of the contract. Specifically, we 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 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 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.Contracts with customers thatare month-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 of performance. Contracts with customers that are invoiced ona pay-as-you-go basis, where there is no monthly or annual commitment for usage, provide the rate at which the customer must pay for actual
usage for a particular period. Fees that are invoiced ona pay-as-you-go basis are recognized as revenue during the period of performance.
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 remainder due when the related services have been 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 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.
We periodically enter 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 we evaluate 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 we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method. The transaction price post allocation is recognized as revenue as the related performance obligation is satisfied.
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, 2018.2021. 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 liabilities for temporary differences related to our foreignJapanese 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, 20182021 and 2017,2020, 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 ASU2017-04 during the year ended December 31, 2018, prior to our annual testing of 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 its fair value, determined in Step 1. For the year ended December 31, 2018, we have not identified any impairment of our goodwill. Contents 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, | | | | 2018 | | | 2017 | | | 2016 | | | | (in thousands, except share and per share data) | | Revenue: | | | | | | | | | | | | | Subscription and support revenue | | $ | 150,941 | | | $ | 143,159 | | | $ | 142,022 | | Professional services and other revenue | | | 13,892 | | | | 12,754 | | | | 8,244 | | | | | | | | | | | | | | | Total revenue | | | 164,833 | | | | 155,913 | | | | 150,266 | | Cost of revenue: | | | | | | | | | | | | | Cost of subscription and support revenue | | | 53,311 | | | | 50,664 | | | | 48,011 | | Cost of professional services and other revenue | | | 13,313 | | | | 13,954 | | | | 7,836 | | | | | | | | | | | | | | | Total cost of revenue | | | 66,624 | | | | 64,618 | | | | 55,847 | | | | | | | | | | | | | | | Gross profit | | | 98,209 | | | | 91,295 | | | | 94,419 | | Operating expenses: | | | | | | | | | | | | | Research and development | | | 31,716 | | | | 31,850 | | | | 30,171 | | Sales and marketing | | | 55,775 | | | | 57,294 | | | | 54,038 | | General and administrative | | | 23,103 | | | | 21,847 | | | | 19,167 | | Merger-related | | | 716 | | | | — | | | | 21 | | | | | | | | | | | | | | | Total operating expenses | | | 111,310 | | | | 110,991 | | | | 103,397 | | | | | | | | | | | | | | | Loss from operations | | | (13,101 | ) | | | (19,696 | ) | | | (8,978 | ) | Other income (expense), net | | | (326 | ) | | | 547 | | | | (598 | ) | | | | | | | | | | | | | | Loss before income taxes | | | (13,427 | ) | | | (19,149 | ) | | | (9,576 | ) | Provision for income taxes | | | 601 | | | | 370 | | | | 410 | | | | | | | | | | | | | | | Net loss | | $ | (14,028 | ) | | $ | (19,519 | ) | | $ | (9,986 | ) | | | | | | | | | | | | | | Net loss per share - basic and diluted | | $ | (0.39 | ) | | $ | (0.57 | ) | | $ | (0.30 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net loss per share - basic and diluted | | | 35,808 | | | | 34,376 | | | | 33,189 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (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, 20182021 and 20172020 Total revenue increased by 6%7%, or $8.9$13.7 million, in 20182021 compared to 20172020 due to an increase in subscription and support revenue of 5%6%, or $7.8$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 9%21%, or $1.1$2.2 million, was primarily related to the size and number of professional services engagements in 20182021 compared to 2017.2020. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. In addition, our revenue from premium offerings grew by $10.0$14.5 million, or 7%, in 20182021 compared to 2017.2020. 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 increased by $6.9$16.8 million, or 8%14%, in 20182021 compared to 2017,2020, primarily due to an increasea decrease in revenue.the cost of subscription and support revenue and our transition of acquired Ooyala customers to our technology during 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 $13.1$7.6 million in 20182021 compared to $19.7a loss from operations of $5.3 million in 2017. We expect2020. Our ability to continue experiencing operating loss to decreaseincome will depend primarily on greater revenue from greater sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to grow and scale our operations.efficiencies. As of December 31, 2018, we had $29.3 million of unrestricted cash and cash equivalents, an increase of $3.2 million from $26.1 million at December 31, 2017, due primarily to $5.8 million of proceeds from exercises of stock options and $2.6 million of cash provided by operating activities. These increases were offset by cash outflows of $3.0 million in capitalizedinternal-use software costs, and $1.5 million in capital expenditures. There were also cash outflows of $311,000 in payments under capital lease obligations, $170,000 in payments of withholding tax on RSU vesting and $26,000 for payments on equipment financing.
Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Revenue by Product Line | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Premium | | $ | 160,285 | | | | 97 | % | | $ | 150,304 | | | | 96 | % | | $ | 9,981 | | | | 7 | % | Volume | | | 4,548 | | | | 3 | | | | 5,609 | | | | 4 | | | | (1,061 | ) | | | (19 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 164,833 | | | | 100 | % | | $ | 155,913 | | | | 100 | % | | $ | 8,920 | | | | 6 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 2018,2021, revenue increased by $8.9$13.7 million, or 6%7%, compared to 2017,2020, 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 $10.0$14.5 million, or 7%, is partiallyprimarily the result of a 3%5% increase in the number ofaverage revenue per premium customers from 2,167 at December 31, 2017 to 2,226 at December 31, 2018, and a $1.1 million, or 9%, increase in professional services revenue.customer. During 2018,2021, volume revenue decreased by $1.1 million,$748,000, or 19%20%, compared to 2017,2020, driven by a decrease in customers as we continue to focus on the market for our premium solutions. | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Revenue by Type | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 150,941 | | | | 92 | % | | $ | 143,159 | | | | 92 | % | | $ | 7,782 | | | | 5 | % | Professional services and other | | | 13,892 | | | | 8 | | | | 12,754 | | | | 8 | | | | 1,138 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 164,833 | | | | 100 | % | | $ | 155,913 | | | | 100 | % | | $ | 8,920 | | | | 6 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 2018,2021, subscription and support revenue increased by $7.8$11.6 million, or 5%6%, compared to 2017.2020. The increase was primarily related to a 3%5% increase in the number of premium customers from 2,167 at December 31, 2017 to 2,226 at December 31, 2018 and a 6% increase in the average annual subscription revenue per premium customer during the year ended December 31, 2018.2021. In addition, professional services and other revenue increased by $1.1$2.2 million, or 9%21%, primarily related to the size and number of professional services engagements during 2018 compared to 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, | | | | | | | 2018 | | | 2017 | | | Change | | Revenue by Geography | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | North America | | $ | 88,778 | | | | 54 | % | | $ | 91,358 | | | | 59 | % | | $ | (2,580 | ) | | | (3 | )% | | | | | | | | | | | | | | | | | | | | | | | | | | Europe | | | 27,754 | | | | 17 | | | | 24,425 | | | | 16 | | | | 3,329 | | | | 14 | | Japan | | | 21,960 | | | | 13 | | | | 16,881 | | | | 11 | | | | 5,079 | | | | 30 | | Asia Pacific | | | 25,766 | | | | 16 | | | | 22,539 | | | | 14 | | | | 3,227 | | | | 14 | | Other | | | 575 | | | | — | �� | | | 710 | | | | — | | | | (135 | ) | | | (19 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | International subtotal | | | 76,055 | | | | 46 | | | | 64,555 | | | | 41 | | | | 11,500 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 164,833 | | | | 100 | % | | $ | 155,913 | | | | 100 | % | | $ | 8,920 | | | | 6 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 2018,2021, total revenue for North America decreased $2.6increased $11.4 million, or 3%11%, compared to 2017.2020. During 2018,2021, total revenue outside of North America increased $11.5$2.3 million, or 18%3%, compared to 2017.2020. The increase in revenue from international regions is primarily related to increases in revenue in Japan, Europe and Asia Pacific.Europe. This increase is primarily due to an increase in average revenue per premium customer as discussed above. Cost of Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Cost of Revenue | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 53,311 | | | | 35 | % | | $ | 50,664 | | | | 35 | % | | $ | 2,647 | | | | 5 | % | Professional services and other | | | 13,313 | | | | 96 | | | | 13,954 | | | | 109 | | | | (641 | ) | | | (5 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 66,624 | | | | 40 | % | | $ | 64,618 | | | | 41 | % | | $ | 2,006 | | | | 3 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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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 2018,2021, cost of subscription and support revenue increased $2.6decreased $4.4 million, or 5%6%, compared to 2017. The2020. This decrease corresponds to a decrease in our content delivery network, third-party software integration, and partner commissions expenses of $3.1 million, $841,000 and $437,000, respectively. Our transition of acquired Ooyala customers to our technology during 2020 also resulted in reduced costs in the current year. During 2021, cost of professional services and other revenue increased $1.3 million, or 14%, compared to 2020. This increase resulted primarily fromcorresponds to increases in network hosting, amortization and partner commissioncontractor expenses of $1.9$1.2 million $1.1 million,due to higher levels of implementation and $1 million respectively. There were alsoprofessional services provided, as well as increases in third-party software integrated with our service offering expense, employee-related expense, rent expense, and consultant expensecosts of $866,000, $773,000, $268,000 and $253,000 respectively.$300,000. These increases were offset in part by decreases in content delivery, depreciation, intangible amortization,computer and maintenance support expenses of $2.1 million, $917,000, $380,000 and $103,000 respectively.$166,000.
Gross Profit | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Gross Profit | | Amount | | | Percentage of Related Revenue | | | Amount | | | Percentage of Related Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Subscription and support | | $ | 97,630 | | | | 65 | % | | $ | 92,495 | | | | 65 | % | | $ | 5,135 | | | | 6 | % | Professional services and other | | | 579 | | | | 4 | | | | (1,200 | ) | | | (9 | ) | | | 1,779 | | | | nm | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 98,209 | | | | 60 | % | | $ | 91,295 | | | | 59 | % | | $ | 6,914 | | | | 8 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
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 60%65% and 59%61% for the years ended December 31, 20182021 and 2017,2020, respectively. Subscription and support gross profit increased $5.1$15.9 million, or 6%13%, compared to 2017.2020. In addition, professional services and other gross profit increased $1.8 million$870,000, or 84%, compared to 2017.2020. 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, | | | | | | | 2018 | | | 2017 | | | Change | | Operating Expenses | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Research and development | | $ | 31,716 | | | | 19 | % | | $ | 31,850 | | | | 20 | % | | $ | (134 | ) | | | 0 | % | Sales and marketing | | | 55,775 | | | | 34 | | | | 57,294 | | | | 37 | | | | (1,519 | ) | | | (3 | ) | General and administrative | | | 23,103 | | | | 14 | | | | 21,847 | | | | 14 | | | | 1,256 | | | | 6 | | Merger-related | | | 716 | | | | — | | | | — | | | | — | | | | 716 | | | | nm | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 111,310 | | | | 68 | % | | $ | 110,991 | | | | 71 | % | | $ | 319 | | | | 0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
nm – not meaningful
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| | | | | | | | | | (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 2018,2021, research and development expense decreased by $134,000,$2.3 million, or 0%7%, compared to 20172020. This decrease was primarily due to a decreasedecreases in stock-based compensationemployee-related, rent, contractor, and travel expenses of $282,000. This decrease was$1.7 million, $1.1 million, $156,000, and $196,000, respectively. These decreases were offset by increases in rentstock-based compensation expense and employee-related expensesamortization of $181,000capitalized internal use software of $599,000 and $126,000$335,000, respectively. We expect our research and development expense, as percentage of revenue, to remain relatively unchanged in future periods.
During 2018,2021, sales and marketing expense decreasedincreased by $1.5$11.4 million, or 3%19%, compared to 20172020 primarily due to decreasesincreases in travel, employee-related, commissions, and commissionmarketing program expenses of $1$5.1 million, $656,000,$4.5 million, and $485,000 respectively. There were also decreases in stock-based compensation, computer maintenance and support, and consulting expenses of $373,000, $149,000, and $114,000$4.1 million, respectively. These decreasesincreases were partially offset by increasesdecreases in rent, expense, executive severance, conference expense,contractor, and marketing programs expenseintangible amortization expenses of $659,000, $386,000, $270,000$1.2 million, $701,000, and $118,000$256,000, 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. General and Administrative During 2018,2021, general and administrative expense increased by $1.3$2.2 million, or 6%8%, compared to 20172020 primarily due to increases in consulting,outside accounting and legal fee, employee-related, recruiting, and taxstock-based compensation expenses of $1.2 million, $578,000, $464,000,$873,000, and $184,000$643,000, respectively. These increases were offset by decreases in legal, depreciation, and travelrent expenses of $716,000, $232,000, and $130,000 respectively.$266,000. In future periods, we expect general and administrative expense, as a percentage of revenue, to remain relatively unchanged.
During 2018,2021, merger-related expenses increasedexpense decreased by $716,000$5.5 million, or 95%, compared to 2020 primarily due to costs incurred in connection with the entry into a definitive agreementgeneral merger and related activities in February 2019 to acquire the online video player related assets from Ooyala, Inc. and certain of its subsidiaries. In future periods, we expect merger-related expense to increase.Other Expense, Net
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Other Expense | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Interest income, net | | $ | 227 | | | | — | % | | $ | 124 | | | | — | % | | $ | 103 | | | | 83 | % | Interest expense | | | (8 | ) | | | — | | | | (26 | ) | | | — | | | | 18 | | | | (69 | ) | Other (expense) income, net | | | (545 | ) | | | — | | | | 449 | | | | — | | | | (994 | ) | | | (221 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | (326 | ) | | | — | % | | $ | 547 | | | | — | % | | $ | (873 | ) | | | (160 | )% | | | | | | | | | | | | | | | | | | | | | | | | | |
The interest expense during 2018 is primarily comprised of interest paid on capital leases and an equipment financing. The change in other (expense) income, net during the year ended December 31, 2018 was primarily due to realized foreign currency exchange losses recorded during the year ended December 31, 2018 compared to gains recorded2020 which did not recur in the corresponding periodcurrent 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 prior year.Provision for Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | 2018 | | | 2017 | | | Change | | Provision for Income Taxes | | Amount | | | Percentage of Revenue | | | Amount | | | Percentage of Revenue | | | Amount | | | % | | | | (in thousands, except percentages) | | Provision for income taxes | | $ | 601 | | | | — | % | | $ | 370 | | | | — | % | | $ | 231 | | | | 62 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
During 2018 and 2017,creation of certain employee retention credits. In the provision for income taxes was primarily comprisedfirst quarter of income tax expenses2021, we recognized a benefit of $2.0 million from the CARES 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, 20172020 and 2016Total revenue increased by 4%, or $5.6 million, in 2017 compared to 2016 due to an increase in subscription and support revenue of 1%, or $1.1 million, primarily related to the continued growth of2019
Please see our customer base Form10-K for our premium offerings including sales to both new and existing customers. The increase in professional services and other revenue of 55%, or $4.5 million, primarily related to the size and number of professional services engagements in 2017 compared to 2016. The increases 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. In addition, our revenue from premium offerings grew by $7.5 million, or 5%, in 2017 compared to 2016. 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 decreased by $3.1 million, or 3%, in 2017 compared to 2016, primarily due to increases in the cost of subscription and support revenue and the cost of professional services revenue without corresponding increases in revenue. Cost of subscription and support revenue increased due 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 hours during the year ended December 31, 2017. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs2020 for an overview of delivery. Loss fromresults of operations was $19.7 million in 2017 compared to $9.0 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 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, 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.
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 | % |
During 2017, revenue increased by $5.6 million, or 4%, compared to 2016, 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 million, or 5%, is partially the result of an 8% increase in the number of 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. During 2017, volume revenue decreased by $1.8 million, or 24%, compared to 2016, 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 | % |
During 2017, subscription and support revenue increased by $1.1 million, or 1%, compared to 2016. 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 during 2017. The increases are offset by the loss of a major customer during the first quarter of 2017. In addition, professional services and other revenue increased by $4.5 million, or
55%, primarily related to the size and number of professional services engagements during 2017 compared 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 | % |
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, total revenue for North America decreased $1.6 million, or 2%, 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. During 2017, total revenue outside of North America increased $7.2 million, or 13%, compared to 2016. The increase in revenue from international regions is primarily related to an increase in revenue in Asia Pacific and Japan. The increase in revenue from Asia Pacific and Japan is primarily related to an increase in 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.
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 | % |
During 2017, cost of subscription and support revenue increased $2.7 million, or 6%, compared to 2016. The increase resulted primarily from increases in content delivery network expenses, amortization ofcapitalized internal-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 with 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 decreases in depreciation expense, costs
associated with the closure of certain facilities, and bandwidth costs, of $1.2 million, $843,000 and $426,000, respectively.
During 2017, cost of professional services and other revenue increased $6.1 million, or 78%, compared to 2016. This increase corresponds to the increase in professional services revenue and resulted primarily from increases in contractor and employee-related expenses of $4.4 million and $1.4 million, respectively. There was an increase in the mix of contractor expenses versus internal expenses in order to support various professional services projects.
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
The overall gross profit percentage was 59% and 63% for the years ended December 31, 20172020 and 2016, 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 $1.5 million, or 2%, 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. 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, or 6%, 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. 2019.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.
Liquidity and Capital Resources
Cash and cash equivalents. Our cash and cash equivalents at December 31, 20182021 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, 20182021 and 2017,2020, we had $9.9$13.8 million and $7.8$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. On February 13, 2019,November 1, 2021, we entered intocompleted the acquisition of video interactivity technology assets that were provided by a definitive agreement to acquire a significant portion of the assets of Ooyala, Inc. and certain of its subsidiaries3rd party partner for $2.0 million in exchange for 1,056,763 unregistered shares of common stock of Brightcove Inc. and approximately $6.25 million of 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. | | | | | | | | | | | | | | | Year Ended December 31, | | Condensed Consolidated Statements of Cash Flow Data | | 2018 | | | 2017 | | | 2016 | | | | (in thousands) | | Cash flows provided by (used in) operating activities | | | 2,550 | | | | (6,441 | ) | | | 11,077 | | Cash flows used in investing activities | | | (4,531 | ) | | | (4,112 | ) | | | (5,293 | ) | Cash flows provided by (used in) financing activities | | | 5,250 | | | | (544 | ) | | | 3,633 | |
| | | | | | | | | | | | | | | | | 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.
Cash flows provided by (used in) 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 provided by operating activities during the year ended December 31, 20182021 was $2.6$19.6 million. The cash flowsflow provided by operating activities primarily resulted fromnetnon-cash charges of $13.8$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 $2.8a decrease in accrued expenses of $5.2 million, partially offset by net lossesan increase in other assets of $14 million. Increases of cash included decreases$1.4 million, an increase in accounts receivable of $846,000, and prepaid expenses of $2.8 million and $294,000, respectively, and increasesa decrease in accounts payable and accrued expense of $1.2 million and $326,000 respectively.$683,000. These inflowsoutflows were offset in part by decreasesa decrease in deferred revenue of $1.3$3.2 million. Netnon-cash expenses consisted primarily of $6.8 million for depreciation and amortization expense and $6.6 million for stock-based compensation expense.
Cash flows used in investing activities. Cash used in investing activities during the year ended December 31, 20182021 was $4.5$10.8 million, consisting primarily of $3.0$6.6 million for the capitalization of internal-use software costs, and $1.5$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 provided by (used in) financing activities. Cash provided by financing activities for the year ended December 31, 20182021 was $5.3 million,$702,000, consisting of proceeds received on the exercise of common stock options of $5.8$2.8 million, offset in part by payments under capital lease obligation, withholding tax on RSU vesting, and equipment financingother activity of $311,000, $170,000 and $26,000, respectively.$2.1 million. On December 14, 2018, we28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a $30.0 million asset basedasset-based line of credit (the “Line of Credit”). 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 as follows; (i) for prime rate advances, the greater of (A) the prime rate and (B) 4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points (the “LIBOR rate margin”) and (B) 4%. 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, 2018.2021. As we have not drawn on the Line of Credit, there are no amounts outstanding as of December 31, 2018.-Net2021.
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, 2018, we2021, the Company had federal and state net operating losses of approximately $199.4 million, of which $161.8 million and $76.8 million, respectively, which are available to offset future taxable income, if any, through 2038. We2037 and $37.6 million which are available to offset future taxable income indefinitely. As of December 31, 2021, the Company had federal and state net operating losses of approximately $13.8$92.3 million, and $0.7of which $89.2 million respectively, which are available to offset future taxable income, if any, through 2041 and $3.1 million which are available to offset future taxable income indefinitely. WeThe Company also had federal and state research and development tax credits of $6.9$9.0 million and $4.4$5.5 million, respectively, which expire in various amounts through 2038. 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. 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, 20182021 and 2017.2020.
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, 2018: | | | | | | | | | | | | | | | | | | | | | | | Payment Due by Period | | | | Total | | | Less than 1 Year | | | 1-3 Years | | | 3 - 5 Years | | | More than 5 Years | | Operating lease obligations | | $ | 21,516 | | | $ | 6,752 | | | $ | 10,476 | | | $ | 3,300 | | | $ | 988 | | Capital lease obligations | | | 277 | | | | 243 | | | | 34 | | | | — | | | | — | | Outstanding purchase obligations | | | 20,415 | | | | 17,415 | | | | 3,000 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 42,208 | | | $ | 24,410 | | | $ | 13,510 | | | $ | 3,300 | | | $ | 988 | | | | | | | | | | | | | | | | | | | | | | |
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, 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, | | | | 2018 | | | 2017 | | Revenues generated in locations outside the United States | | | 49 | % | | | 45 | % | Revenues in currencies other than the United States dollar (1) | | | 31 | % | | | 29 | % | Expenses in currencies other than the United States dollar (1) | | | 16 | % | | | 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, 20182021 and 2017:2020: |
| | | | | | | | | | | Twelve Months Ended December 31, 2018 | | | | Revenues | | | Expenses | | Euro | | | 6 | % | | | 1 | % | British pound | | | 7 | | | | 6 | | Japanese Yen | | | 13 | | | | 4 | | Other | | | 5 | | | | 5 | | | | | | | | | | | Total | | | 31 | % | | | 16 | % |
| | | | | | | | | | | 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 | % |
| | | | | | | | | | |
| | | | | | | | | | | | 8 | % | | | 1 | % | | | | 6 | % | | | 5 | % | | | | 12 | % | | | 3 | % | | | | 3 | % | | | 8 | % | | | | | | | | | | | | | 29 | % | | | 17 | % |
| | | | | | | | | | |
| | | | | | | | | | | | 8 | % | | | 1 | % | | | | 6 | % | | | 6 | % | | | | 13 | % | | | 2 | % | | | | 3 | % | | | 6 | % | | | | | | | | | | | | | 30 | % | | | 15 | % |
As of December 31, 20182021 and 2017,2020, we had $7.2$8.3 million and $7.3$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 as a component of other comprehensive income (loss), , as they are considered part of our net 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, 2018,2021, 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, 2018,2021, we estimated that a 10% unfavorable movement in foreign currency exchange rates would have decreased revenues by $5.2$6.0 million, decreased expenses by $2.9$3.5 million and decreasedincreased operating incomelosses by $2.3$2.6 million. The estimates used assume that all currencies move in the same direction at the same time and the ratio of non-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, 2018.2021. We had cash and cash equivalents totaling $29.3$45.7 million at December 31, 2018.2021. 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. While we continue to incur interest expense in connection with our capital leases, 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, 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 The
To the Stockholders and the Board of Directors and Stockholders 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, 20182021 and 2017,2020, 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, 2018,2021, 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, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, 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, 2018,2021, 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 21, 201918, 2022 expressed an unqualified opinion thereon. Adoption of ASUNo. 2014-09
As discussed in Note 3 to the consolidated financial statements, the Company changed its method for recognizing revenue as a result of the adoption of Accounting Standards Update (ASU)No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs2015-14,2016-08,2016-10 and2016-12 effective January 1, 2018.
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 21, 201918, 2022
Consolidated Balance Sheets | | | | | | | | | | | December 31, | | | | 2018 | | | 2017 | | | | (in thousands, except share and per share data) | | Assets | | | | | | | | | Current assets: | | | | | | | | | Cash and cash equivalents | | $ | 29,306 | | | $ | 26,132 | | Accounts receivable, net of allowance of $190 and $146 at December 31, 2018 and December 31, 2017, respectively | | | 23,264 | | | | 25,236 | | Prepaid expenses | | | 4,866 | | | | 3,991 | | Other current assets | | | 7,070 | | | | 3,045 | | | | | | | | | | | Total current assets | | | 64,506 | | | | 58,404 | | Property and equipment, net | | | 9,703 | | | | 9,143 | | Intangible assets, net | | | 5,919 | | | | 8,236 | | Goodwill | | | 50,776 | | | | 50,776 | | Deferred tax asset | | | — | | | | 87 | | Other assets | | | 2,452 | | | | 969 | | | | | | | | | | | Total assets | | $ | 133,356 | | | $ | 127,615 | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable | | $ | 7,712 | | | $ | 6,142 | | Accrued expenses | | $ | 13,746 | | | | 13,621 | | Capital lease liability | | | 236 | | | | 228 | | Equipment financing | | | — | | | | 26 | | Deferred revenue | | | 39,846 | | | | 39,370 | | | | | | | | | | | Total current liabilities | | | 61,540 | | | | 59,387 | | Deferred revenue, net of current portion | | | 146 | | | | 244 | | Deferred tax liability | | | 28 | | | | — | | Other liabilities | | | 1,028 | | | | 1,228 | | | | | | | | | | | Total liabilities | | | 62,742 | | | | 60,859 | | Commitments and contingencies(Note 6) | | | | | | | | | 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; 36,752,469 and 34,933,408 shares issued at December 31, 2018 and 2017, respectively | | | 37 | | | | 35 | | Additionalpaid-in capital | | | 251,122 | | | | 238,700 | | Treasury stock, at cost; 135,000 shares | | | (871 | ) | | | (871 | ) | Accumulated other comprehensive loss | | | (952 | ) | | | (809 | ) | Accumulated deficit | | | (178,722 | ) | | | (170,299 | ) | | | | | | | | | | Total stockholders’ equity | | | 70,614 | | | | 66,756 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 133,356 | | | $ | 127,615 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | (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, | | | | 2018 | | | 2017 | | | 2016 | | | | (in thousands, except per share data) | | Revenue: | | | | | | | | | | | | | Subscription and support revenue | | $ | 150,941 | | | $ | 143,159 | | | $ | 142,022 | | Professional services and other revenue | | | 13,892 | | | | 12,754 | | | | 8,244 | | | | | | | | | | | | | | | Total revenue | | | 164,833 | | | | 155,913 | | | | 150,266 | | Cost of revenue:(1) (2) | | | | | | | | | | | | | Cost of subscription and support revenue | | | 53,311 | | | | 50,664 | | | | 48,011 | | Cost of professional services and other revenue | | | 13,313 | | | | 13,954 | | | | 7,836 | | | | | | | | | | | | | | | Total cost of revenue | | | 66,624 | | | | 64,618 | | | | 55,847 | | | | | | | | | | | | | | | Gross profit | | | 98,209 | | | | 91,295 | | | | 94,419 | | Operating expenses:(1) (2) | | | | | | | | | | | | | Research and development | | | 31,716 | | | | 31,850 | | | | 30,171 | | Sales and marketing | | | 55,775 | | | | 57,294 | | | | 54,038 | | General and administrative | | | 23,103 | | | | 21,847 | | | | 19,167 | | Merger-related | | | 716 | | | | — | | | | 21 | | | | | | | | | | | | | | | Total operating expenses | | | 111,310 | | | | 110,991 | | | | 103,397 | | | | | | | | | | | | | | | Loss from operations | | | (13,101 | ) | | | (19,696 | ) | | | (8,978 | ) | Other income (expense), net | | | (326 | ) | | | 547 | | | | (598 | ) | | | | | | | | | | | | | | Loss before income taxes | | | (13,427 | ) | | | (19,149 | ) | | | (9,576 | ) | Provision for income taxes | | | 601 | | | | 370 | | | | 410 | | | | | | | | | | | | | | | Net loss | | $ | (14,028 | ) | | $ | (19,519 | ) | | $ | (9,986 | ) | | | | | | | | | | | | | | Net loss per share — basic and diluted | | $ | (0.39 | ) | | $ | (0.57 | ) | | $ | (0.30 | ) | | | | | | | | | | | | | | Weighted-average number of common shares used in computing net loss per share — basic and diluted | | | 35,808 | | | | 34,376 | | | | 33,189 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (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, | | | | 2018 | | | 2017 | | | 2016 | | | | (in thousands) | | Net loss | | $ | (14,028 | ) | | $ | (19,519 | ) | | $ | (9,986 | ) | Other comprehensive (loss) income: | | | | | | | | | | | | | Foreign currency translation adjustments | | | (143 | ) | | | 363 | | | | (284 | ) | | | | | | | | | | | | | | Comprehensive loss | | $ | (14,171 | ) | | $ | (19,156 | ) | | $ | (10,270 | ) | | | | | | | | | | | | | |
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) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | | Additional Paid-in Capital | | | Treasury Stock | | | Accumulated Other Comprehensive Loss | | | Accumulated Deficit | | | Total Stockholders’ Equity | | | | Shares | | | Par Value | | | | | | Shares | | | Value | | | | | | | | | | | 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 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Return of common stock issued pursuant to settlement agreement | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | 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 | | Issuance of common stock upon exercise of stock options | | | 1,173,288 | | | | 1 | | | | 5,756 | | | | — | | | | — | | | | — | | | | — | | | | 5,757 | | Issuance of common stock pursuant to restricted stock units | | | 645,773 | | | | 1 | | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Withholding tax on restricted stock units vesting | | | — | | | | — | | | | (170 | ) | | | — | | | | — | | | | — | | | | — | | | | (170 | ) | Stock-based compensation expense | | | — | | | | — | | | | 6,837 | | | | — | | | | — | | | | — | | | | — | | | | 6,837 | | Impact of adoption of ASU2014-09 as of January 1, 2018 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,605 | | | | 5,605 | | Foreign currency translation adjustment | | | — | | | | — | | | | — | | | | — | | | | — | | | | (143 | ) | | | — | | | | (143 | ) | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,028 | ) | | | (14,028 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2018 | | | 36,752,469 | | | $ | 37 | | | $ | 251,122 | | | | (135,000 | ) | | $ | (871 | ) | | $ | (952 | ) | | $ | (178,722 | ) | | $ | 70,614 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | (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, | | | | 2018 | | | 2017 | | | 2016 | | | | (in thousands) | | Operating activities | | | | | | | | | | | | | Net loss | | $ | (14,028 | ) | | $ | (19,519 | ) | | $ | (9,986 | ) | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | 6,796 | | | | 7,257 | | | | 7,796 | | Stock-based compensation | | | 6,649 | | | | 7,243 | | | | 6,012 | | Deferred income taxes | | | 118 | | | | 38 | | | | (47 | ) | Provision for reserves on accounts receivable | | | 199 | | | | 203 | | | | 230 | | Loss on disposal of equipment | | | — | | | | — | | | | 155 | | Changes in assets and liabilities: | | | | | | | | | | | | | Accounts receivable | | | 2,791 | | | | (3,811 | ) | | | (559 | ) | Prepaid expenses and other current assets | | | 294 | | | | (1,484 | ) | | | (894 | ) | Other assets | | | (536 | ) | | | 56 | | | | (299 | ) | Accounts payable | | | 1,197 | | | | 1,758 | | | | 733 | | Accrued expenses | | | 326 | | | | (2,930 | ) | | | 3,172 | | Deferred revenue | | | (1,256 | ) | | | 4,748 | | | | 4,764 | | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | | 2,550 | | | | (6,441 | ) | | | 11,077 | | Investing activities | | | | | | | | | | | | | Cash paid for purchase of intangible asset | | | — | | | | — | | | | (300 | ) | Purchases of property and equipment, net of returns(Note 2) | | | (1,538 | ) | | | (1,102 | ) | | | (1,307 | ) | Capitalizedinternal-use software costs | | | (2,993 | ) | | | (3,010 | ) | | | (3,887 | ) | Decrease in restricted cash | | | — | | | | — | | | | 201 | | | | | | | | | | | | | | | Net cash used in investing activities | | | (4,531 | ) | | | (4,112 | ) | | | (5,293 | ) | Financing activities | | | | | | | | | | | | | Proceeds from exercise of stock options | | | 5,757 | | | | 520 | | | | 4,555 | | Payments of withholding tax on RSU vesting | | | (170 | ) | | | (268 | ) | | | (405 | ) | Proceeds from equipment financing | | | — | | | | — | | | | 604 | | Payments on equipment financing(Note 9) | | | (26 | ) | | | (307 | ) | | | (271 | ) | Payments under capital lease obligation | | | (311 | ) | | | (489 | ) | | | (850 | ) | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | 5,250 | | | | (544 | ) | | | 3,633 | | Effect of exchange rate changes on cash and cash equivalents | | | (95 | ) | | | 416 | | | | (241 | ) | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 3,174 | | | | (10,681 | ) | | | 9,176 | | Cash and cash equivalents at beginning of period | | | 26,132 | | | | 36,813 | | | | 27,637 | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 29,306 | | | $ | 26,132 | | | $ | 36,813 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | | | Cash paid for income taxes | | $ | 384 | | | $ | 500 | | | $ | 351 | | | | | | | | | | | | | | | Cash paid for interest | | $ | 8 | | | $ | 26 | | | $ | 63 | | | | | | | | | | | | | | | Supplemental disclosure ofnon-cash operating activities | | | | | | | | | | | | | Capitalization of stock-based compensation related to internal use software | | $ | 188 | | | $ | 221 | | | $ | 169 | | | | | | | | | | | | | | | Supplemental disclosure ofnon-cash investing and financing activities | | | | | | | | | | | | | Unpaidinternal-use software costs | | $ | — | | | $ | 28 | | | $ | 20 | | | | | | | | | | | | | | | Unpaid purchases of property and equipment | | $ | 160 | | | $ | 138 | | | $ | 83 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 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, 2018, 20172021, 2020 and 20162019 (in thousands, except share and per share data, unless otherwise noted) Brightcove Inc. (the Company) is a 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. 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,variable consideration, contingent liabilities, 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, and the recoverabilityrealizability of the Company’s 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, other than as reported herein and described below, there are no material recognized or unrecognized subsequent events.
On February 13, 2019, the Company entered into a definitive agreement to acquire a significant portion of the assets of Ooyala, Inc. and certain of its subsidiaries, or “Ooyala”, a provider of cloud video ad insertion technology, in exchange for 1,056,763 unregistered shares of common stock of Brightcove Inc. and approximately $6.25 million of cash, which includes up to $500 as a reimbursement of Ooyala’s audit fees incurred in connection with the transaction. Pursuant to the purchase agreement, approximately $2.65 million of the cash will be placed into an escrow account to settle certain claims for indemnification for breaches or inaccuracies in Ooyala’s representations and warranties, covenants, and agreements. The escrow amount is the equivalent of 18% of the purchase price, and this amount will remain in escrow for 20 months. The expected acquisition will be accounted for as a purchase transaction, and as such the results of operations from the acquired assets will be consolidated with the Company beginning on the closing date of the acquisition. In connection with the acquisition of Ooyala, the Company incurred $716 of merger-related costs during 2018, which the Company recorded as an expense in its consolidated statements of operations for the year ended December 31, 2018. At this time, the Company has not completed its evaluation of the purchase accounting related to this transaction.
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, 20182021 or 2017.2020. 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, 2018Equipment Property and 2017 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, 2018 | | Description | | Contracted Maturity | | | Amortized Cost | | | Fair Market Value | | | Balance Per Balance Sheet | | Cash | | | Demand | | | $ | 21,007 | | | $ | 21,007 | | | $ | 21,007 | | Money market funds | | | Demand | | | | 8,299 | | | | 8,299 | | | | 8,299 | | | | | | | | | | | | | | | | | | | Total cash and cash equivalents | | | | | | $ | 29,306 | | | $ | 29,306 | | | $ | 29,306 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | |
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, 20182021 and 2017,2020, 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 5 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
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 accountssatisfies 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 revenue in accordancetransferring the promised services to the customer. The Company has elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with ASC Topic 606,Revenuea specific revenue-producing transaction and collected by the Company from Contracts witha customer (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 , which was adopted on January 1, 2018 using do not have the applied the modified retrospective method. For further discussionright to take possession of the Company’s software during the hosting arrangement. Contracts for premium customers generally have a term of one year and arenon-cancellable. These contracts generally provide the customer with a maximum annual level of entitlement, and provide the rate at which the customer must pay for actual usage above the annual entitlement 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 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 estimates the revenue pertaining to a customer’s usage that is expected to exceed the annual 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 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. Contracts with customersthat are month-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 of 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 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 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 remainder due when the related services have been 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.
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 then allocates the transaction price to each performance obligation in the contract based on a relative stand-alone selling price 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 capitalizes 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 policiesliterature and meet the specified criteria. Assets recognized for costs to obtain a contract are amortized over the period of performance for the underlying customer contracts. The commission expense on contracts with new customers is 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 commission amount related to revenue, see Note 3.incremental sales are recorded as expense over the term of the renewed contract. These assets are periodically assessed for impairment. 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, 2018, 20172021, 2020 and 2016: | | | | | | | | | | | | | | | | | | | Balance at Beginning of Period | | | Provision | | | Write-offs | | | Balance at End of Period | | Year ended December 31, 2018 | | $ | 146 | | | $ | 199 | | | $ | (155 | ) | | $ | 190 | | Year ended December 31, 2017 | | | 154 | | | | 203 | | | | (211 | ) | | | 146 | | Year ended December 31, 2016 | | | 332 | | | | 230 | | | | (408 | ) | | | 154 | |
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 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, 2018, 20172021, 2020 and 2016, no2019, 0 individual customer accounted for more than 10% of total revenue. As of December 31, 20182021 and 2017, no2020, 0 individual customer accounted for more than 10% of accounts 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, 2018, 20172021, 2020 and 2016,2019, the Company capitalized $3,152, $3,239$7,658, $6,659 and $4,038,$6,574, respectively, of internal-usesoftware development costs. The Company recorded amortization expense associated with its capitalizedinternal-use software development costs of $2,962, $1,867$3,649, $4,044 and $690$3,784 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, 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, | | | | | | | 2018 | | | 2017 | | Computer equipment | | | 3 | | | $ | 14,076 | | | $ | 17,157 | | Software | | | 3 - 6 | | | | 21,208 | | | | 17,996 | | Furniture and fixtures | | | 5 | | | | 2,929 | | | | 2,396 | | Leasehold improvements | |
| Shorter of lease term or the estimated useful life | | | | 1,665 | | | | 1,366 | | | | | | | | | | | | | | | | | | | | | | 39,878 | | | | 38,915 | | Less accumulated depreciation and amortization | | | | | | | 30,175 | | | | 29,772 | | | | | | | | | | | | | | | | | | | | | $ | 9,703 | | | $ | 9,143 | | | | | | | | | | | | | | |
Depreciation and amortization expense, which includes amortization expense associated with capitalizedinternal-use software development costs, for the years ended December 31, 2018, 2017 and 2016 was $4,479, $4,523 and $4,860, 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.
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, 2018, 20172021, 2020 and 2016,2019, 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. 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. If there is an impairment, the amount of the impairment is 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 2018 , 2021and 2017. 2020. The Company evaluates impairment by comparing the estimated fair value of its reporting unit to its carrying value. The Company estimates fair value primarily utilizing the market approach which calculates fair value based on the market values of comparable companies or comparable transactions.The Company adopted ASU2017-04 during the year ended December 31, 2018. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair valueand
0impairments 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 its fair value, determined in Step 1. For the year ended December 31, 2018, the Company has not identified any impairment of its goodwill.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, 20182021 and 2017.2020. 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, fromawards, where dilutive. The following table set forth the weighted-average numbercomputations of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred.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, 2018, 2017 and 2016: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | | 2016 | | Options outstanding | | | 2,738 | | | | 4,127 | | | | 4,291 | | Restricted stock units outstanding | | | 3,034 | | | | 2,050 | | | | 1,668 | | Warrants | | | — | | | | — | | | | 19 | |
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, 20182021 or 2017.2020.
At December 31, 2018,2021, the Company had five6 stock-based compensation plans, which are more fully described in Note 7.1 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 employee 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. The Company uses the straight-line amortization method for recognizing stock-based compensation expense associated with equity awards to employees.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. 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, 2018, 2017 and 2016, was $4.11, $3.08 and $4.01 per share, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table:
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | | 2016 | | Risk-free interest rate | | | 2.88 | % | | | 2.08 | % | | | 1.75 | % | Expected volatility | | | 43 | % | | | 42 | % | | | 45 | % | Expected life (in years) | | | 6.2 | | | | 6.1 | | | | 6.2 | | Expected dividend yield | | | — | | | | — | | | | — | |
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. 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. As of December 31, 2018, there was $16,967 of total unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.77 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the years ended December 31, 2018, 2017 and 2016:
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | | 2016 | | Cost of subscription and support revenue | | $ | 481 | | | $ | 439 | | | $ | 324 | | Cost of professional services and other revenue | | | 242 | | | | 251 | | | | 217 | | Research and development | | | 1,281 | | | | 1,563 | | | | 1,275 | | Sales and marketing | | | 2,377 | | | | 2,750 | | | | 2,320 | | General and administrative | | | 2,268 | | | | 2,240 | | | | 1,876 | | | | | | | | | | | | | | | | | $ | 6,649 | | | $ | 7,243 | | | $ | 6,012 | | | | | | | | | | | | | | |
Upon the adoption ofASU 2016-09 on January 1, 2017, we have elected to recognize prospectively gross stock-based compensation expense with actual forfeitures
Forfeitures are 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.For the years ended December 31, 2018, 2017 and 2016, stock-based compensation expense for stock options granted tonon-employees in the accompanying consolidated statements of operations was not material.
See Note 7 for a summary of the stock option and restricted stock activity under the Company’s stock-based compensation plans for the year ended December 31, 2018.
Advertising costs are charged to operations as incurred. The Company incurred advertising costs of $2,657, $2,485$5,970, $2,584 and $2,137$2,658 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, 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 and Standards
Recently IssuedAdopted Accounting Pronouncements In FebruaryJune 2016, the FASB issued Accounting StandardsUpdate (“ASU”) 2016-02, Leases (Topic 842), AmendmentsASU No. 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 FASB Accounting Standards Codification, which replaces the existing guidance forleases. ASU 2016-02 requires the identificationestimated allowance as of arrangements that should be accounted for as leases by lessees. December 31, 2019.
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. This guidance is effective for annual and interim periods beginning after December 15, 2018. In JulyAugust 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements,No. 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 provides an additional, optional transition methodaligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with whichthe requirements for capitalizing implementation costs incurred to adoptdevelop or obtaininternal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the new leases standard. This additional transition method allowsterm of the arrangement, and the financial statement presentation for a cumulative-effect adjustmentthese capitalized costs would be the same as that of the fees related to the opening balance of retained earnings in the period of adoption, rather than in the earliest period presented in the financial statements, as originally required byASU 2016-02.hosting arrangements.The Company will to adopt theadopted this standard using the additional transition method introduced byASU 2018-11. The Company completed its scoping assessment and determined that less than 15 leases will be impacted by the new standard. While the Company is still in the process of determining the effect that the new standard will have on its consolidated financial statements and related disclosures, the Company will be recognizing a significant amount of additional assets and corresponding liabilities on its consolidated balance sheet, as a result of its existing operating lease portfolio.Recently Adopted Accounting Standards
In August 2016, the FASB issuedASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard addresses eight specific cash flow issues with the objective of reducing diversity in practice.ASU 2016-15 iseffective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The amendment requires the use of the retrospective transaction approach for adoption. The adoptionof ASU 2016-15 did not have any effect on the Company’s consolidated financial statements or disclosures.
In November 2016, the FASBissued ASU 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 cashflows. ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017. A reporting entity must apply the amendmentsin ASU 2016-18January 1, 2020, using a full retrospective prospective approach. The adoptionof ASU 2016-18this new standard did not have a material effect on the Company’s consolidated financial statements or disclosures.
In January 2017, the FASB issuedASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendment changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The adoption ofASU 2017-01 did not have a material effect on the Company’s consolidated financial statements or disclosures.
In May 2017 the FASB issuedASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.ASU 2017-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2017 and interim periods within those years. The adoption ofASU 2017-09 did not have a material effectimpact on the Company’sour consolidated financial statements. Subsequent impacts on our consolidated financial statements and related disclosures.
On December 22, 2017,will depend on the Tax Cuts and Jobs Act (the “Act”) was enactedmagnitude of implementation costs to be incurred. Implementation costs capitalized subsequent to adoption are recognized in operating expenses on the United States. The Act reducesconsolidated statements of operations over the U.S. federal corporate tax rate from 34%noncancelable period of the hosting arrangement plus any renewal periods reasonably certain 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. be taken.
In December 2017,2019, the SecuritiesFASB 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 Exchange Commission (“SEC”) issued guidanceenacted 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.under Staff Accounting Bulletin No. 118,Income Tax Accounting ImplicationsThe Company adopted this standard prospectively effective January 1, 2020. The adoption of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it doesthis new standard did not have a material impact on the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. Asconsolidated financial statements.
3 . Cash and Cash EquivalentsCash and cash equivalents as of December 31, 2018, the Company had completed its accounting for all2021 and 2020 consist of the tax effectsfollowing: | | | | | | | | | | | | | | | | | | |
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| | | | | 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 enactment of the Act, including the effects on its existing deferred tax balancesfollowing: | | | | | | | | | | | | | | | | | | | | | | $ | 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 theone-time transition tax. The Company has not recognized any material adjustment to the provisional taxamortization expense, estimate previously recorded related to the Act. Refer to Note 9,Income Taxes, for additional information regarding this new tax legislation.The Company has taken into consideration the other impacts of the Act that became effective in 2018, including the provisions related to Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income, Base Erosion Anti-Abuse Tax, as well as other provisions which would limit the deductibility of future expenses. Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provideincludes amortization expense associated with capitalized
internal-use software development costs, for the tax expense related to GILTI in the year the tax is incurred as a period expense only. For the yearyears ended December 31, 2018, the Company made the accounting policy election to recognize GILTI as a period expense.3.2021, 2020 and 201
9 was $5,250, $5,284 and $5,217, respectively. 5 . Revenue from Contracts with Customers The Company primarily derives revenue 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 includeinitiation, set-up and customization services. In May 2014, the Financial Accounting Standards Board(FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which modifies how all entities recognize revenue, and consolidates revenue recognition guidance into one ASC Topic (ASC Topic 606, Revenue from Contracts with Customers). The Company adopted ASC 606 on January 1, 2018 and applied the modified retrospective method of adoption with acumulative catch-up adjustment to the opening balance of retained earnings at January 1, 2018. Under this method, the Company applied the revised guidance for the year of adoption and applied ASC Topic 605, Revenue Recognition (“ASC 605”), in the prior years. As a result, the Company applied ASC 606 only to contracts that were not yet completed as of January 1, 2018. The Company recognized acumulative catch-up adjustment to the opening balance of accumulated deficit at the effective date for contracts that still require performance by the entity at the date of adoption. 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.
| 1) | Identify the contract with a customer
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| 2) | Identify the performance obligations in the contract
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| 3) | Determine the transaction price
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| 4) | Allocate the transaction price to performance obligations in the contract
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| 5) | Recognize revenue when or as the Company satisfies a performance obligation
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The Company satisfies 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.
Disaggregation of Revenue
The Company classifies its customers by including them in either premium or volume offerings. For premium offerings, the Companyorganizes its go-to-market approach by focusing its sales and marketing teams on selling primarily to (i) media companies, who generally want to distribute video content to a broad audience and (ii) enterprises and organizations, who generally use video for marketing or enterprise communication purposes.
The following table summarizes revenue from contracts with customers by business unit for the years ended December 31, 2018, 2017 and 2016.
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | | 2016 | | Revenue by Business Unit | | | | | | | | | | | | | Media | | $ | 88,748 | | | $ | 85,562 | | | $ | 84,380 | | Enterprise | | | 71,537 | | | | 64,742 | | | | 58,460 | | Volume | | | 4,548 | | | | 5,609 | | | | 7,426 | | | | | | | | | | | | | | | Total | | | 164,833 | | | | 155,913 | | | | 150,266 | | | | | | | | | | | | | | |
Subscription and Support
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. 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 entitlement, and provide the rate at which the customer must pay for actual usage above the annual entitlement 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 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.
Under ASC 605, if usage exceeded the annual allowance level for a particular customer arrangement, the associated revenue was recognized in the period that the additional usage occurred. 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. The Company evaluates variable consideration for usage-based fees at contractinception and re-evaluates quarterly over the course of the contract. Specifically, the Company estimates the revenue pertaining to a customer’s usage that is expected to exceed the annual 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 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.
Contracts with customers thatare month-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 of performance. Contracts with customers that are invoiced ona pay-as-you-go basis, where there is no monthly or annual commitment for usage, provide the rate at which the customer must pay for actual usage for a particular period. Fees that are invoiced ona pay-as-you-go basis are recognized as revenue during the period of performance.
Professional Services and Other Revenue
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 remainder due when the related services have been 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.
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 then allocates the transaction price to each performance obligation in the contract based on a relative stand-alone selling price 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 capitalizes 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. Assets recognized for costs to obtain a contract are amortized over the period of performance for the underlying customer contracts. The commission expense on contracts with new customers was previously recorded over the respective contract term. Under the new guidance, 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 commission amount related to incremental sales was previously recorded as expense in the quarter the commission was earned; however, under ASC 606 these commission amounts are recorded as expense over the term of the renewed contract. These assets are periodically assessed for impairment.
Financial Statement Impact of Adoption ASC 606
The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made on the condensed consolidated balance sheet as of January 1, 2018.
| | | | | | | | | | | | | | | | | | | As Reported | | | Adjustments | | | Adjusted | | | | December 31, 2017 | | | Subscription and Support Revenue | | | Costs to Obtain a Contract | | | January 1, 2018 | | Assets | | | | | �� | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 26,132 | | | | | | | | | | | $ | 26,132 | | Accounts receivable, net | | | 25,236 | | | | 926 | | | | | | | | 26,162 | | Prepaid expenses | | | 3,991 | | | | | | | | | | | | 3,991 | | Other current assets | | | 3,045 | | | | 1,861 | | | | 3,384 | | | | 8,290 | | | | | | | | | | | | | | | | | | | Total current assets | | | 58,404 | | | | 2,787 | | | | 3,384 | | | | 64,575 | | Property and equipment, net | | | 9,143 | | | | | | | | | | | | 9,143 | | Intangible assets, net | | | 8,236 | | | | | | | | | | | | 8,236 | | Goodwill | | | 50,776 | | | | | | | | | | | | 50,776 | | Deferred tax asset | | | 87 | | | | | | | | | | | | 87 | | Other assets | | | 969 | | | | | | | | 978 | | | | 1,947 | | | | | | | | | | | | | | | | | | | Total assets | | $ | 127,615 | | | $ | 2,787 | | | $ | 4,362 | | | $ | 134,764 | | | | | | | | | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | Accounts payable | | $ | 6,142 | | | | | | | | | | | $ | 6,142 | | Accrued expenses | | | 13,621 | | | | | | | | | | | | 13,621 | | Capital lease liability | | | 228 | | | | | | | | | | | | 228 | | Equipment financing | | | 26 | | | | | | | | | | | | 26 | | Deferred revenue | | | 39,370 | | | | 1,429 | | | | | | | | 40,799 | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 59,387 | | | | 1,429 | | | | — | | | | 60,816 | | Deferred revenue, net of current portion | | | 244 | | | | 115 | | | | | | | | 359 | | Other liabilities | | | 1,228 | | | | | | | | | | | | 1,228 | | | | | | | | | | | | | | | | | | | Total liabilities | | | 60,859 | | | | 1,544 | | | | — | | | | 62,403 | | Commitments and contingencies | | | | | | | | | | | | | | | | | Stockholders’ equity: | | | | | | | | | | | | | | | | | Undesignated preferred stock | | | — | | | | | | | | | | | | — | | Common stock | | | 35 | | | | | | | | | | | | 35 | | Additionalpaid-in capital | | | 238,700 | | | | | | | | | | | | 238,700 | | Treasury stock | | | (871 | ) | | | | | | | | | | | (871 | ) | Accumulated other comprehensive loss | | | (809 | ) | | | | | | | | | | | (809 | ) | Accumulated deficit | | | (170,299 | ) | | | 1,243 | | | | 4,362 | | | | (164,694 | ) | | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 66,756 | | | | 1,243 | | | | 4,362 | | | | 72,361 | | | | | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 127,615 | | | $ | 2,787 | | | $ | 4,362 | | | $ | 134,764 | | | | | | | | | | | | | | | | | | |
Subscription and Support
Under ASC 606, the Company estimates the variable consideration to be received and recognizes those amounts, subject to constraint, as the Company satisfies its performance obligation. In conjunction with the
January 1, 2018 adoption of ASC 606, the Company reduced accumulated deficit by $1,243 reflecting the recognition of revenue primarily relating to variable consideration, for contracts that still require performance by the entity at the date of adoption.
Costs to Obtain a Contract
Under the new guidance, 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 is recorded as expense over the term of the renewed contract. The net impact of these changes resulted in a $4,362 reduction to accumulated deficit for contracts that still require performance by the Company at the date of adoption.
Income Taxes
The adoption of ASC 606 primarily resulted in an acceleration of revenue and the reduction of expense as of December 31, 2017, which in turn generated additional deferred tax liabilities. As the Company fully reserves its net deferred tax assets in the jurisdictions impacted by the adoption of ASC 606, this impact was offset by a corresponding reduction to the valuation allowance.
Impact of New Revenue Guidance on Financial Statement Line Items
The following tables compare the reported condensed consolidated balance sheet, statement of operations and cash flows, as of and for the year ended December 31, 2018, tothe pro-forma amounts had the previous guidance been in effect.
| | | | | | | | | | | As of December 31, 2018 | | Balance Sheet | | As reported | | | Pro forma as if the previous accounting guidance was in effect | | Assets | | | | | | | | | Current assets: | | | | | | | | | Cash and cash equivalents | | $ | 29,306 | | | | 29,306 | | Accounts receivable, net | | | 23,264 | | | | 22,294 | | Prepaid expenses | | | 4,866 | | | | 4,866 | | Other current assets | | | 7,070 | | | | 1,857 | | | | | | | | | | | Total current assets | | | 64,506 | | | | 58,323 | | Property and equipment, net | | | 9,703 | | | | 9,703 | | Intangible assets, net | | | 5,919 | | | | 5,919 | | Goodwill | | | 50,776 | | | | 50,776 | | Deferred tax asset | | | — | | | | — | | Other assets | | | 2,452 | | | | 1,004 | | | | | | | | | | | Total assets | | $ | 133,356 | | | $ | 125,725 | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable | | $ | 7,712 | | | $ | 7,712 | | Accrued expenses | | | 13,746 | | | | 13,746 | | Capital lease liability | | | 236 | | | | 236 | | Equipment financing | | | — | | | | — | | Deferred revenue | | | 39,846 | | | | 38,422 | | | | | | | | | | | Total current liabilities | | | 61,540 | | | | 60,116 | | Deferred revenue, net of current portion | | | 146 | | | | 146 | | Deferred tax liability | | | 28 | | | | 28 | | Other liabilities | | | 1,028 | | | | 1,028 | | | | | | | | | | | Total liabilities | | | 62,742 | | | | 61,318 | | Commitments and contingencies | | | | | | | | | Stockholders’ equity: | | | | | | | | | Undesignated preferred stock | | | — | | | | — | | Common stock | | | 37 | | | | 37 | | Additionalpaid-in capital | | | 251,122 | | | | 251,122 | | Treasury stock | | | (871 | ) | | | (871 | ) | Accumulated other comprehensive loss | | | (952 | ) | | | (952 | ) | Accumulated deficit | | | (178,722 | ) | | | (184,929 | ) | | | | | | | | | | Total stockholders’ equity | | | 70,614 | | | | 64,407 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 133,356 | | | $ | 125,725 | | | | | | | | | | |
Total reported assets were $7,631 greater thanthe pro-forma balance sheet, which assumes the previous guidance remained in effect as of December 31, 2018. This was largely due to impacts of variable consideration and costs to obtain a contract.
Total reported liabilities were $1,424 greater thanthe pro-forma balance sheet, which assumes the previous guidance remained in effect as of December 31, 2018. This was largely due to the impact of variable consideration.
The following summarizes the significant changes on the Company’s condensed consolidated statement of operations for the year ended December 31, 2018 as a result of the adoption of ASC 606 on January 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605.
| | | | | | | | | | | Year Ended December 31, 2018 | | Statement of Operations | | As reported | | | Pro forma as if the previous accounting guidance was in effect | | Revenue: | | | | | | | | | Subscription and support revenue | | $ | 150,941 | | | $ | 151,116 | | Professional services and other revenue | | | 13,892 | | | | 13,892 | | | | | | | | | | | Total revenue | | | 164,833 | | | | 165,008 | | Cost of revenue: | | | | | | | | | Cost of subscription and support revenue | | | 53,311 | | | | 53,311 | | Cost of professional services and other revenue | | | 13,313 | | | | 13,313 | | | | | | | | | | | Total cost of revenue | | | 66,624 | | | | 66,624 | | | | | | | | | | | Gross profit | | | 98,209 | | | | 98,384 | | Operating expenses: | | | | | | | | | Research and development | | | 31,716 | | | | 31,716 | | Sales and marketing | | | 55,775 | | | | 56,552 | | General and administrative | | | 23,103 | | | | 23,103 | | Merger-related | | | 716 | | | | 716 | | | | | | | | | | | Total operating expenses | | | 111,310 | | | | 112,087 | | | | | | | | | | | Loss from operations | | | (13,101 | ) | | | (13,703 | ) | Other income (expense), net | | | (326 | ) | | | (326 | ) | | | | | | | | | | Loss before income taxes | | | (13,427 | ) | | | (14,029 | ) | Provision for income taxes | | | 601 | | | | 601 | | | | | | | | | | | Net loss | | $ | (14,028 | ) | | $ | (14,630 | ) | | | | | | | | | | Net loss per share — basic and diluted | | $ | (0.39 | ) | | $ | (0.41 | ) | | | | | | | | | | Weighted-average number of common shares used in computing net loss per share | | | 35,808 | | | | 35,808 | | | | | | | | | | |
The primary difference in subscription and support revenue relates to the impacts of applying the variable consideration guidance under ASC 606. Under the previous guidance, subscription and support revenue would have been approximately $175 higher, for the year ended December 31, 2018 as revenue for usage based fees, for contracts with annual entitlement allowances, was recognized in the month of such usage. Under ASC 606, usage based fees, for contracts with annual entitlement allowances, are recognized as revenue over the term of the underlying arrangement.
Sales and marketing expense, under the previous guidance, would have increased by approximately $777 for the year ended December 31, 2018. Sales and marketing expense would have increased by $777 for the year ended December 31, 2018, due to a portion of the commission payments being recorded immediately to expense at the time a liability was recorded. In addition, certain commission amounts that were amortized to expense over the underlying term of the arrangement are now amortized over the average customer life under ASC 606.
The net impact of accounting for revenue under the new guidance decreased net loss per share by $0.02 per basic and diluted share for the year ended December 31, 2018.
| | | | | | | | | | | Year Ended December 31, 2018 | | Statement of Cash Flows | | As reported | | | Pro forma as if the previous accounting guidance was in effect | | Operating activities | | | | | | | | | Net loss | | $ | (14,028 | ) | | $ | (14,630 | ) | Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | | Depreciation and amortization | | | 6,796 | | | | 6,796 | | Stock-based compensation | | | 6,649 | | | | 6,649 | | Deferred income taxes | | | 118 | | | | 118 | | Provision for reserves on accounts receivable | | | 199 | | | | 199 | | Changes in assets and liabilities: | | | | | | | | | Accounts receivable | | | 2,791 | | | | 2,835 | | Prepaid expenses and other current assets | | | 294 | | | | 262 | | Other assets | | | (536 | ) | | | (65 | ) | Accounts payable | | | 1,197 | | | | 1,197 | | Accrued expenses | | | 326 | | | | 326 | | Deferred revenue | | | (1,256 | ) | | | (1,137 | ) | | | | | | | | | | Net cash provided by operating activities | | $ | 2,550 | | | $ | 2,550 | | | | | | | | | | |
The adoption of ASC 606 had no impact on the Company’s cash flows from operations. The aforementioned impacts resulted in offsetting shifts in cash flows between net loss and various working capital balances.
The following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers. | | | | | | | | | | | | | | | | | | | | | | | Accounts Receivable, net | | | Contract Assets (current) | | | Deferred Revenue (current) | | | Deferred Revenue (non-current) | | | Total Deferred Revenue | | Balance at January 1, 2018 | | $ | 26,162 | | | $ | 3,124 | | | $ | 40,799 | | | $ | 359 | | | $ | 41,158 | | Balance at December 31, 2018 | | | 23,264 | | | | 1,640 | | | | 39,846 | | | | 146 | | | | 39,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 year ended December 31, 20182021 from amounts included in deferred revenue at the beginning of the period was approximately $40.5 $58.1million. During the year ended December 31, 2018,2021, the Company did not recognize any material revenue from performance obligations satisfied or partially satisfied in previous periods. The assets recognized for costs to obtain a contract were $5.9$12.2 million and $5.4$13.3 million as of December 31, 20182021 and January 1, 2018,December 31, 2020, respectively. Amortization expense recognized during the year ended December 31, 2018 related tofor costs to obtain a contract was $7.2 million.$12.7 million, $8.3 million and $7.3 million during the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively. Transaction Price Allocated to Future Performance Obligations ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as December 31, 2018. ASC 606 provides certain practical expedients that limit the requirement to disclose the aggregate amount of transaction price allocated to unsatisfied performance obligations.
Subscription and Support Revenue
As of December 31, 2018,2021, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $109.4$156.2 million, of which approximately $90.7$121.2 million is expected to be recognized over the next 12 months. The Company expects to recognize substantially all of the remaining unsatisfied performance obligations by the endJune 2024.
6. Intangible Assets and Goodwill Finite-lived intangible assets consist of the following as of December 31, 2018: | | | | | | | | | | | | | | | | | Description | | Weighted Average Estimated Useful Life (in years) | | | Gross Carrying Value | | | Accumulated Amortization | | | Net Carrying Value | | Developed technology | | | 7 | | | $ | 14,223 | | | $ | 11,082 | | | $ | 3,141 | | Customer relationships | | | 11 | | | | 6,257 | | | | 3,479 | | | | 2,778 | | Non-compete agreements | | | 3 | | | | 1,912 | | | | 1,912 | | | | — | | Tradename | | | 3 | | | | 368 | | | | 368 | | | | — | | | | | | | | | | | | | | | | | | | Total | | | | | | $ | 22,760 | | | $ | 16,841 | | | $ | 5,919 | | | | | | | | | | | | | | | | | | |
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, 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 | | | | | | | | | | | | | | | | | | |
2020: | | | | | | | | | | | | | | | | | | | 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, 2018, 20172021, 2020 and 2016: | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2018 | | | 2017 | | | 2016 | | Cost of subscription and support revenue | | $ | 1,651 | | | $ | 2,031 | | | $ | 2,031 | | Research and development | | | — | | | | 11 | | | | 126 | | Sales and marketing | | | 666 | | | | 692 | | | | 959 | | | | | | | | | | | | | | | | | $ | 2,317 | | | $ | 2,734 | | | $ | 3,116 | | | | | | | | | | | | | | |
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 | | 2019 | | $ | 1,603 | | 2020 | | | 1,584 | | 2021 | | | 1,328 | | 2022 | | | 370 | | 2023 | | | 285 | | 2024 and thereafter | | | 749 | | | | | | | Total | | $ | 5,919 | | | | | | |
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, 2018 and 2017.5. 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;
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| • | | 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
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| • | | 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.
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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, 2018 and 2017:
| | | | | | | | | | | | | | | | | | | December 31, 2018 | | | | 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 | | $ | 8,299 | | | $ | — | | | $ | — | | | $ | 8,299 | | | | | | | | | | | | | | | | | | | Total assets | | $ | 8,299 | | | $ | — | | | $ | — | | | $ | 8,299 | | | | | | | | | | | | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | |
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, 2018 or 2017.
6. 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, 2018 are as follows:
| | | | | Year Ending December 31, | | Operating Lease Commitments | | 2019 | | $ | 6,752 | | 2020 | | | 5,355 | | 2021 | | | 5,122 | | 2022 | | | 2,192 | | 2023 | | | 1,108 | | 2024 and thereafter | | | 988 | | | | | | | | | $ | 21,517 | | | | | | |
$1.9 million with a useful life of four years.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.
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 $2.4 million. Certain
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, 2018 and 2017, the Company had deferred rent and rent incentives of $1,264 and $1,464, respectively, of which $876 and $1,102, 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, 2018, 20172021, 2020 and 2016 was $7,857, $6,6082019, respectively. The Company entered into two operating lease agreements in the current year, resulting in the recording of an initial liability and $6,334, respectively. Income from sublease rental activity amountedcorrespondingasset of $20.3 million, of which $19.4 million related to $92, $285 and $219, 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, 2018, 2017 and 2016. 2021. The weighted-average discount rate was 5.7% at December 31, 2021.
The Company’s existing sublease agreement expired in June 2018, and as of December 31, 2018, the Company was not party to any sublease agreements.Capital Lease Commitments
The Companyoperating leases certain computer equipment and support undernon-cancelable capital leases. The lease arrangements expire at various dates through April 2020. Future minimum rental commitments2032. The following shows the undiscounted cash flows for the remaining years under capitaloperating leases at December 31, 2018 are as follows:
| | | | | Year Ending December 31, | | Capital Lease Commitments | | 2019 | | $ | 243 | | 2020 | | $ | 34 | | Less – interest on capital leases | | | 7 | | | | | | | | | $ | 270 | | | | | | |
At2021:
| | | | | | | 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 discountednon-current lease liability at December 31, 2018, total assets under capital leases2021 were $353$2.6 million and related accumulated amortization was $83.$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 operatingfourth quarter of 2020 the Company subleased 100% of its London office through the remaining lease and capital lease commitments discussed above, as ofterm. For the year ended December 31, 2018,2021, the Company hadnon-cancelable commitmentsrecognized rent income of $17,415 and $3,000 payable$901from the sublease which is included in 2019 and 2020, respectively, primarily for content delivery network services, hosting and other support services.Legal Matters
On May 22, 2017, a lawsuitOther income (expense). Lease income relating to variable lease payments was filed against Brightcove and two individuals by Ooyala, Inc. (“Ooyala”) and Ooyala Mexico S. de R.L. de C.V. (“Ooyala Mexico”). immaterial.
The lawsuit, which was filedCompany’s London sublease expires in December of 2024. The following table shows the United States District Courtundiscounted cash inflows from the London sublease for the District of Massachusetts, concerned allegations that the two individuals, who were former employees of Ooyala Mexico, misappropriated customer informationremaining years at December 31, 2021: | | | | | | | | | | | $ | 985 | | | | | 1,048 | | | | | 989 | | | | | 0 | | | | | | | Total operating sublease cash inflows | | $ | 3,022 | |
8 . Commitments 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 were 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 taken, andContingenciesseeking the return of any information that was allegedly taken. On June 16, 2017, Brightcove filed an opposition to the motion for preliminary injunction, and also moved to dismiss the lawsuit. The motion to dismiss was denied on September 6, 2017. The court issued a preliminary injunction on July 10, 2018. The injunction required Brightcove to delete any Ooyala confidential information obtained from the former Ooyala employees and prohibited Brightcove from using such information to pursue business withtwenty-two specified Latin American prospective customers. On October 19, 2018, the parties settled the matter for an immaterial amount, and the case was dismissed on October 24, 2018.
On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against Brightcove and its subsidiary Brightcove Holdings, Inc. in the United States District Court for the District of Delaware. The complaint alleged that Brightcove infringed five patents related to file compression technology. The complaint sought 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. The plaintiff 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 was not issued by the court. On July 31, 2018, Brightcove filed a Motion to Transfer Venue, which motion was opposed by the plaintiff. On October 18, 2018, Brightcove, via its insurer, entered into a Patent License Agreement which provides Brightcove a license to thepatents-in-suit (as well as additional patents and patent applications owned by Realtime) in exchange for aone-time payment, which is immaterial in amount. As a result of entering into the Patent License Agreement, the case was dismissed on October 31, 2018.
On January 30, 2019, Uniloc 2017 LLC filed a complaint against the Company and its subsidiary, Brightcove Holdings, Inc. in the United States District Court for the District of Delaware. The complaint alleges that Brightcove infringed four patents and seeks monetary damages and other relief. 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.
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. 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 claims 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, 2018,2021, 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. 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, 20182021 and 2017.Equity Incentive Plans
2020.
Common Stock Reserved for Future Issuance At December 31, 2018,2021, 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 five stock-based6stock-based compensation plans, theplans: The Amended and Restated 2004 Stock Option and Incentive Plan (the 2004 Plan) , the 2012 Stock Incentive Plan (the 2012 Plan), the Brightcove Inc. 2012 RSU Inducement Plan (the RSU Plan), the Brightcove Inc. 2014 Stock Option Inducement Plan (the 2014 Stock Inducement Plan), and the 2018 Inducement Plan (the 2018 plan). The 2004 Plan and the 2012 Plan provided for the issuance of incentive and non-qualified stock options, restricted stock, and other equity awards to the Company’s employees, officers, directors, consultants and 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 Company adopted the RSU Plan in connection with the acquisition of Zencoder. The restricted stock units were settled in shares of the Company’s common stock upon vesting. The Brightcove Inc. 2012 RSU Inducement 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 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 in connection with the Unicorn asset purchase agreement. The 2018 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 and restricted stock units to the Company’s Chief Executive Officer (“CEO”). During 2018,
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 shares of stock reserved and available for issuance under the 2021 Plan is 6,200,000 shares.
The following table summarizes stock-based compensation 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 years ended December 31, 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, 2021, December 31, 2020, and December 31, 2019 of $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 weighted-average fair value of options granted and assumptions utilized to determine such values are presented in the 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 2021 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 an aggregate of 1,169,000 restricted stock units, respectively, to certain key executives, which contain both performance-based (“P-RSU”) and service-based vesting conditions.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. At December 31, 2018, 2,105,806 shares The Company determined that the conditions for a portion of the performance-based restricted stock units were available for issuance under allachieved in the first quarter of 2020. As such, the Company recognized $233,000
and$ 1.3 million of stock-based compensation plans. The following is a summary of the stock option activityexpense relating to performance-based awards for all stock option plans during the year ended December 31, 2018:
| | | | | | | | | | | | | | | | | | | Number of Shares | | | Weighted-Average Exercise Price | | | Weighted-Average Remaining Contractual Term (In Years) | | | Aggregate Intrinsic Value(1) | | Outstanding at December 31, 2017 | | | 3,924,313 | | | $ | 7.33 | | | | | | | | | | Granted | | | 1,234,184 | | | | 8.99 | | | | | | | | | | Exercised | | | (1,173,288 | ) | | | 4.91 | | | | | | | $ | 4,897 | | Cancelled | | | (1,247,554 | ) | | | 8.54 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2018 | | | 2,737,655 | | | $ | 8.57 | | | | 6.84 | | | $ | 678 | | | | | | | | | | | | | | | | | | | Exercisable at December 31, 2018 | | | 1,413,875 | | | $ | 8.36 | | | | 4.83 | | | $ | 545 | | | | | | | | | | | | | | | | | | |
(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, 2018 of $7.04 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.
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The aggregate intrinsic value for options exercised during the years ended December 31, 2017 and 2016 was $1,243 and $5,159,2021, 2020, respectively.
The Company has entered into restricted stock unit (RSU) agreements with certain
The following table summarizes the RSU P-RSU andS-RSU activity during the year ended December 31, 2018: | | | | | | | | | | | Shares | | | Weighted Average Grant Date Fair Value | | Unvested by December 31, 2017 | | | 2,218,704 | | | $ | 7.44 | | Granted | | | 2,218,036 | | | | 8.43 | | Vested and issued | | | (645,773 | ) | | | 7.33 | | Cancelled | | | (757,385 | ) | | | 7.44 | | | | | | | | | | | Unvested by December 31, 2018 | | | 3,033,582 | | | $ | 8.07 | | | | | | | | | | |
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 agreement.
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. 2021, 2020, and2019:Common Stock Reserved for Future Issuance
At December 31, 2018, the Company has reserved the following shares of common stock for future issuance:
| | | | | | | December 31,
2018 | | Common stock options outstanding
| | | 2,737,655 | | Restricted stock unit awards outstanding
| | | 3,033,582 | | Shares available for issuance under all stock-based compensation plans
| | | 2,105,806 | | | | | | | Total shares of authorized common stock reserved for future issuance
| | | 7,877,043 | | | | | | |
8.
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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, | | | | 2018 | | | 2017 | | | 2016 | | Domestic | | $ | (15,026 | ) | | $ | (20,528 | ) | | $ | (10,756 | ) | Foreign | | | 1,599 | | | | 1,379 | | | | 1,180 | | | | | | | | | | | | | | | Total | | $ | (13,427 | ) | | $ | (19,149 | ) | | $ | (9,576 | ) | | | | | | | | | | | | | |
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, | | | | 2018 | | | 2017 | | | 2016 | | Current provision: | | | | | | | | | | | | | Federal | | $ | — | | | $ | — | | | $ | — | | State | | | 19 | | | | 21 | | | | 33 | | Foreign | | | 464 | | | | 311 | | | | 424 | | | | | | | | | | | | | | | Total current | | | 483 | | | | 332 | | | | 457 | | | | | | | | | | | | | | | Deferred (benefit): | | | | | | | | | | | | | Federal | | | — | | | | — | | | | — | | State | | | — | | | | — | | | | — | | Foreign | | | 118 | | | | 38 | | | | (47 | ) | | | | | | | | | | | | | | Total deferred | | | 118 | | | | 38 | | | | (47 | ) | | | | | | | | | | | | | | Total provision | | $ | 601 | | | $ | 370 | | | $ | 410 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 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, | | | | 2018 | | | 2017 | | | 2016 | | Tax at statutory rates | | | (21.0 | )% | | | (34.0 | )% | | | (34.0 | )% | State income taxes | | | (5.5 | ) | | | (4.1 | ) | | | (6.1 | ) | Change in tax rate | | | — | | | | 103.9 | | | | 0.1 | | Permanent differences | | | 7.0 | | | | 7.1 | | | | 11.7 | | Foreign rate differential | | | 1.4 | | | | (0.7 | ) | | | (1.1 | ) | Research and development credits | | | (6.1 | ) | | | (3.7 | ) | | | (6.7 | ) | Change in valuation allowance | | | 29.2 | | | | (66.3 | ) | | | 40.8 | | Other, net | | | (0.5 | ) | | | (0.3 | ) | | | (0.4 | ) | | | | | | | | | | | | | | Effective tax rate | | | 4.5 | % | | | 1.9 | % | | | 4.3 | % | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 2018 , 2021and 2017 2020is as follows: | | | | | | | | | | | As of December 31, | | | | 2018 | | | 2017 | | Deferred tax assets: | | | | | | | | | Net operating loss carry-forwards | | $ | 41,440 | | | $ | 37,964 | | Tax credit carry-forwards | | | 10,327 | | | | 9,173 | | Stock-based compensation | | | 974 | | | | 1,856 | | Fixed Assets | | | 179 | | | | 267 | | Account receivable reserves | | | 136 | | | | 189 | | Accrued compensation | | | 910 | | | | 851 | | Capitalizedstart-up costs | | | 92 | | | | 138 | | Other temporary differences | | | 325 | | | | 371 | | | | | | | | | | | Total deferred tax assets | | | 54,383 | | | | 50,809 | | Deferred tax liabilities: | | | | | | | | | Other deferred tax liabilities | | | (1,520 | ) | | | — | | Intangible assets | | | (3,100 | ) | | | (3,611 | ) | | | | | | | | | | Total deferred tax liabilities | | | (4,620 | ) | | | (3,611 | ) | | | | | | | | | | Valuation allowance | | | (49,791 | ) | | | (47,111 | ) | | | | | | | | | | Net deferred tax asset (liability) | | $ | (28 | ) | | $ | 87 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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, 20182021 and 2017,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 Company 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 20172020 to 20182021 of $2.7 $ 0.2million principally relates to the current year U.S taxable loss. The Company maintains net deferred tax liabilities for temporary differences related to its foreignJapanese and Portuguese subsidiaries. As of December 31, 2018,2021, the Company had federal and state net operating losses of approximately $199.4 million, of which $161.8 million and $76.8 million, respectively, which are available to offset future taxable income, if any, through 2038. The Company had federal2037 and state net operating losses of approximately $13.8$37.6 million and $0.7 million, respectively, 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 $6.9$9.0 million and $4.4 $5.5 million, respectively, which expire in various amounts through 2038. 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. 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 immediately 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, 2018.2021. If a change in ownership were to have occurred during that period, and resulted in the restriction of net operating loss and tax credit carryforwards, the reduction in the related deferred tax asset would be offset with a corresponding reduction in the valuation allowance. On January 1, 2009,
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, 2018 and 2017, the Company had no 0recorded liabilities for uncertain tax positions.At December 31, 2018 and 2017, 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 20152018 through 2018.2021. 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 2013.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, 2018, the Company had completed its accounting for all of the tax effects of the enactment of the Act, including the effects on its existing deferred tax balances and theone-time transition tax. The Company had not recognized any material adjustment to the provisional tax expense estimate previously recorded related to the Act.
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.9.
On December 14, 2018, we28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a $30.0 million asset basedasset-based line of credit (the “Line of Credit”). Under the Line of Credit, we can borrow up to $30.0 million. Borrowings under the Line of Credit are secured by substantially all of ourthe Company’s assets, excluding ourits intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate as follows;follows: (i) for prime rate advances, the greater of (A) the prime rate and (B) 4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points (the “LIBOR rate margin”) and (B) 4%. Under the Loan Agreement, wethe 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 basedonnon-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenderslenders 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 wereThe Line of Credit agreement will expire on December 28, 2023. The Company was in compliance with
all applicable covenants under the Line of Credit as of December 31, 20182021 and there were no0 borrowings outstanding.10.outstanding as of December 31, 2021.
In 2020, under the loan and security agreement prior to the December 28, 2020 amendment, the Company obtained $10 million of financing in early 2020, which it subsequently paid back prior to the amendment.
Accrued expenses consist of the following: | | | | | | | | | | | December 31, | | | | 2018 | | | 2017 | | Accrued payroll and related benefits | | $ | 4,777 | | | $ | 4,436 | | Accrued sales and other taxes | | | 1,639 | | | | 1,363 | | Accrued professional fees and outside contractors | | | 1,253 | | | | 2,021 | | Accrued content delivery | | | 2,979 | | | | 2,390 | | Accrued other liabilities | | | 3,098 | | | | 3,411 | | | | | | | | | | | Total | | $ | 13,746 | | | $ | 13,621 | | | | | | | | | | |
11.
| | | | | | | | | | | | | | | | | | | | 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, | | | | 2018 | | | 2017 | | | 2016 | | Revenue: | | | | | | | | | | | | | North America | | $ | 88,778 | | | $ | 91,358 | | | $ | 92,912 | | Europe | | | 27,754 | | | | 24,425 | | | | 25,196 | | Japan | | | 21,960 | | | | 16,881 | | | | 15,230 | | Asia Pacific | | | 25,766 | | | | 22,539 | | | | 15,617 | | Other | | | 575 | | | | 710 | | | | 1,311 | | | | | | | | | | | | | | | Total revenue | | $ | 164,833 | | | $ | 155,913 | | | $ | 150,266 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 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 $83,435, $85,459$111.5, $99.6 and $87,302 $90.5million during the years ended December 31, 2018, 20172021, 2020 and 2016,2019, 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, 20182021 and 2017.2020. As of December 31, 20182021 and December 31, 2017,2020, property and equipment at locations outside the U.S. was not material. 12.
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, 2018, 20172021, 2020 and 2016,2019, the Company has made contributions to the plan of $424, $425$412, $434 and $336,$392, respectively. 13. Quarterly Financial Data (unaudited)
The following table presents certain unaudited quarterly financial information for the eight quarters in the period ended December 31, 2018. 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, 2018 | | | Sep. 30, 2018 | | | Jun. 30, 2018 | | | Mar. 31, 2018 | | | Dec. 31, 2017 | | | Sep. 30, 2017 | | | Jun. 30, 2017 | | | Mar. 31, 2017 | | Revenue | | $ | 40,864 | | | $ | 41,121 | | | $ | 41,654 | | | $ | 41,194 | | | $ | 40,101 | | | $ | 39,487 | | | $ | 38,753 | | | $ | 37,572 | | Gross profit | | | 24,387 | | | | 24,803 | | | | 25,036 | | | | 23,983 | | | | 23,783 | | | | 22,983 | | | | 22,175 | | | | 22,354 | | Loss from operations | | | (2,527 | ) | | | (3,141 | ) | | | (5,017 | ) | | | (2,416 | ) | | | (1,331 | ) | | | (5,349 | ) | | | (7,884 | ) | | | (5,132 | ) | Net loss | | | (2,617 | ) | | | (3,502 | ) | | | (5,652 | ) | | | (2,257 | ) | | | (1,372 | ) | | | (5,396 | ) | | | (7,678 | ) | | | (5,073 | ) | Basic and diluted net loss per share | | | (0.07 | ) | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | (0.04 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.15 | ) |
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, 20182021 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, 2018.2021. The effectiveness of our internal control over financial reporting as of December 31, 20182021 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 The
To the Stockholders and the Board of Directors and Stockholders of Opinion on Internal Control overOver Financial Reporting We have audited Brightcove Inc.’s internal control over financial reporting as of December 31, 2018,2021, 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, 2018,2021, 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, 20182021 and 2017,2020, 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, 2018,2021, and the related notes and our report dated February 21, 201918, 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 21, 201918, 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* (13)(14) | | Form of Indemnification Agreement between the Registrant and its directors and executive officers. | | | 10.2†* (14)(15) | | Amended and Restated 2004 Stock Option and Incentive Plan of the Registrant, together with forms of award agreement. | | | 10.3†* (15)(16) | | 2012 Stock Incentive Plan of the Registrant. | | | 10.4†* (16)(17) | | Form of Incentive Stock Option Agreement under the 2012 Stock Incentive Plan. | | | 10.5† (17)(18) | | Form ofNon-Qualified Stock Option Agreement for Company Employees under the 2012 Stock Incentive Plan. | | | 10.6* (18)(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* (19)(20) | | Lease dated June 15, 2011 between BP Russia Wharf LLC and Brightcove Inc. | | | 10.8* (20)(21) | | Loan and Security Agreement dated March 30, 2011 between Silicon Valley Bank and Brightcove Inc., as amended. |
| | | Exhibits
| | | | | 10.11* (23)(24) | | Loan and Security Agreement dated November 19, 2015 between Silicon Valley Bank and Brightcove Inc. | | | 10.12†* (24)(25) | | Employment Agreement dated August 8, 2011 between the Registrant and Jeremy Allaire. | | | 10.13†* (25)(26) | | Employment Agreement dated August 8, 2011 between the Registrant and David Mendels. | | | 10.14†* (26)(27) | | Employment Agreement dated August 8, 2011 between the Registrant and Edward Godin. | | | 10.15†* (27)(28) | | Employment Agreement dated August 8, 2011 between the Registrant and Andrew Feinberg. | | | 10.16* (28)(29) | | Employment Separation Agreement dated January 2, 2013 between the Registrant and Edward Godin. | | | 10.17†* (29)(30) | | Amended and Restated Employment Agreement dated July 25, 2013 between Brightcove Inc. and Jeremy Allaire | | | 10.18†* (30)(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†* (31)(32) | | Employment Agreement dated October 1, 2014 between the Registrant and Jon Corley. | | | 10.20†* (32)(33) | | Employment Agreement dated October 1, 2014 between the Registrant and Paul Goetz. | | | 10.21†* (33)(34) | | Employment Agreement dated November 3, 2014 between the Registrant and Kevin R. Rhodes. | | | 10.22†* (34)(35) | | Non-Employee Director Compensation Policy. | | | 10.23†* (35)(36) | | Senior Executive Incentive Bonus Plan. | | | 10.24†* (36)(37) | | Form of Restricted Stock Unit Award Agreement under the 2012 Stock Incentive Plan. | | | 10.25†* (37)(38) | | Form of Restricted Stock Unit Award Agreement for Company Employees under the 2012 Stock Incentive Plan. | | | 10.26†* (38)(39) | | Form of Restricted Stock Unit Award Agreement forNon-Employee Directors under the 2012 Stock Incentive Plan. | | | 10.27* (39)(40) | | Form ofNon-Qualified Stock Option Agreement forNon-Employee Directors under the 2012 Stock Incentive Plan. | | | 10.28†* (40)(41) | | Separation Agreement dated July 24, 2017 between the Registrant and David Mendels. | | | 10.29†* (41)(42) | | Amendment to Employment Agreement dated July 24, 2017 between the Registrant and Andrew Feinberg. | | | 10.30†* (42)(43) | | Employment Agreement dated September 20, 2017 between the Registrant and David Plotkin. | | | 10.31*† (43)(44) | | Amendment to Employment Agreement dated April 11, 2018 between the Registrant and Andrew Feinberg. | | | 10.32*† (44)(45) | | Employment Agreement dated April 11, 2018 between the Registrant and Jeff Ray. | | | 10.34†* (45)(46) | | Non-Employee Director Compensation Policy, as amended and restated on April 11, 2018. | | | 10.35†* (46)(47) | | Employment Agreement dated May 3, 2018 between the Registrant and Robert Noreck. | | | 10.36* (47)(48) | | Second Amended and Restated Loan and Security Agreement dated December 14, 2018 between the Registrant and Silicon Valley BankBank. |
| | | | | | | | 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. |
(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 Securities and Exchange Commission on May 1, 2018. |
(11) | Filed as Exhibit 4.5 to Registrant’s Registration Statement on FormS-8 filed with the Securities and Exchange Commission on May 1, 2018. |
(12) | Filed as Exhibit 4.6 to Registrant’s Registration Statement on FormS-8 filed with the Securities and Exchange 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. |
(14)(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. |
(15)(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. |
(16)(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. |
(17)(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. |
(18)(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. |
(19)(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. |
(20)(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. |
(21)(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. |
(22)(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. |
(23)(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. |
(24)(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. |
(25)(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. |
(26)(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. |
(27)(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. |
(28)(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. |
(29)(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. |
(30)(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. |
(31)(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. |
(32)(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. |
(33)(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. |
(34)(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. |
(35)(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. |
(36)(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. |
(37)(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. |
(38)(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. |
(39)(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. |
(40)(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. |
(41)(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. |
(42)(43) | Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on October 26, 2017. |
(43)(44) | Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018. |
(44)(45) | Filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018. |
(45)(46) | Filed as Exhibit 99.5 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018. |
(46)(47) | Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2018. |
(47)(48) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-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 December 14, 2018.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 21st18th day of February, 2019.2022. | | | | | | | | By: | | /s/ Jeff Ray | | | | | Jeff Ray | | | Chief Executive Officer |
Each person whose individual signature appears below hereby constitutes and appoints Robert 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. | | | | | | | | | | | | | | | (Principal Executive Officer) and Director | | February 21, 201918, 2022 | | | | | | (Principal Financial Officer) and Principal Accounting Officer) | | February 21, 201918, 2022 | | | | | | Chairperson of the Board of Directors | | February 21, 201918, 2022 | | | | | | Director | | February 21, 201918, 2022 | | | | | | Director | | February 21, 201918, 2022 | | | | /s/ Derek HarrarDerek Harrar Diane Hessan | | Director | | February 21, 201918, 2022 | | | | /s/ Diane HessanDiane Hessan Scott Kurnit | | Director | | February 21, 201918, 2022 | | | | /s/ Scott KurnitScott Kurnit Tsedal Neeley | | Director | | February 21, 201918, 2022 | | | | /s/ Thomas E. WheelerThomas E. Wheeler Ritcha Ranjan | | Director | | February 21, 201918, 2022 | | | | | | Director | | February 18, 2022 |
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