The following outstanding common shares have been excluded from the computation of dilutive (loss) earnings per share as of the periods indicated because such securities are anti-dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
(shares in thousands)	2022		2021		2022		2021
Options outstanding		1,548		145		1,548		122
Restricted stock units outstanding		5,892		68		5,892		68

Three Months Ended
September 30,

Nine Months Ended
September 30,

(shares in thousands)

2021

2020

2021

2020

Options outstanding
   1,803    1,570    147    2,234
Restricted stock units outstanding
   3,185    155    56    3,264

6. Stock-based Compensation

On March 28, 2022, Marc DeBevoise began as the Company’s CEO. Effective February 8, 2022, the Company adopted the 2022 Inducement Plan (“2022 Plan”). The 2022 Plan provides for the grant of “employment inducement awards” within the meaning of NASDAQ Listing Rule 5635(c)(4). In connection with the commencement of his employment, the Company granted 800,000 restricted stock units to the CEO under the 2022 Plan, of which 300,000 are subject solely to service-based vesting conditions (the “RSUs”) and 500,000 are subject to both market-based and service-based vesting conditions (the

“PSUs”). The RSUs vest in equal annual installments over three years following March 28, 2022. The market-based vesting conditions applicable to the PSUs are achieved only if the volume weighted average price of the Company’s common stock during any 20 consecutive trading day period in the four year performance period following the CEO’s start date, March 28, 2022, equals or exceeds stock price hurdles ranging from $12.50 to $30.00, increasing in seven increments of $2.50. The percentage of the award that is earned upon achievement of each stock price hurdle is 10% of the PSUs for each of the first two achievement tiers, 12.5% for each of the next four achievement tiers and 15% for each of the final two achievement tiers. The PSUs vest 50% upon achievement of a stock price hurdle and 50% upon the earlier of the one-year anniversary of such achievement date or March 28, 2025, subject to the CEO’s continued employment through the applicable vesting date.

For restricted stock units with market-based performance conditions, the cost of the awards is recognized as the requisite service is rendered by the employee, regardless of when, if ever, the market-based performance conditions are satisfied. The Monte-Carlo simulation model is used to estimate fair value of market-based performance restricted stock units. The Monte-Carlo simulation model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. Key assumptions for the Monte-Carlo simulation model include the risk-free rate, expected volatility, expected dividends and the correlation coefficient.

The weighted-average assumptions utilized to determine the weighted-average fair value of options are presented in the following table:


	Six Months Ended June 30,
	2022		2021

Weighted-average fair value of options granted during the period	$	0	$	7.72
Risk-free interest rate		0		1.16	%
Expected volatility		0		48	%
Expected life (in years)		—		6.2
Expected dividend yield		0		0

Three Months Ended
September 30,

Nine Months Ended
September 30,


2021

2020

2021

2020

Weighted-average fair value of options granted during the period
   $ 6.29 $ 4.86 $ 7.51 $ 4.01
Risk-free interest rate
   1.14 % 0.33 % 1.16 % 0.76 %
Expected volatility
   48 % 47 % 48 % 46 %
Expected life (in years)
   6.2 5.9 6.2 6.1
Expected dividend yield
   0   0   0   0

As of ~~September~~June 30, ~~2021,~~2022, there was ~~$23.6~~$39 million of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of ~~2.28~~2.74 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the three and six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation:
Cost of subscription and support revenue	$	144	$	187	$	253	$	344
Cost of professional services and other revenue		139		118		258		186
Research and development		935		531		1,657		853
Sales and marketing		899		762		1,842		1,499
General and administrative		1,527		1,011		2,864		2,019
Other expense (benefit)		-		—		249		0
	$	3,644	$	2,609	$	7,123	$	4,901

Three Months Ended
September 30,

Nine Months Ended
September 30,


2021

2020

2021

2020

Stock-based compensation:

Cost of subscription and support revenue
   $ 157    $ 139    $ 501    $ 452
Cost of professional services and other revenue
   113    63    299    233
Research and development
   408    142    1,261    839
Sales and marketing
   583    768    2,082    2,440
General and administrative
   1,072    896    3,091    2,760








   $ 2,333    $ 2,008    $ 7,234    $ 6,724

The following is a summary of the stock option activity during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~

Number of

Shares

Weighted-Average

Exercise Price

Weighted-Average

Remaining

Contractual

Term (In Years)

Aggregate

Intrinsic

Value (1)

Outstanding at December 31, 2020
   2,110,486    $ 9.19
Granted
   92,905    16.05
Exercised
   (254,502 )    8.65       $ 2,724
Canceled
   (145,930 )    10.17



Outstanding at September 30, 2021
   1,802,959    $ 9.56    5.94    $ 4,177



Exercisable at September 30, 2021
   1,313,116    $ 8.96    5.23    $ 3,522

~~(1)~~

The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on September 30, 2021 of $11.54 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

2022.


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2021		1,681,477		$	9.59
Granted		0			0
Exercised		(15,900	)		6.31			$	33,483
Canceled		(117,286	)		12.11
Outstanding at June 30, 2022		1,548,291		$	9.42		5.28	$	82,101
Exercisable at June 30, 2022		1,350,807		$	9.08		4.90	$	81,296

(1)

The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on June 30, 2022 of $6.32 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

The following table summarizes the restricted stock unit activity for our service-based awards

(“S-RSU”)

and our performance-based awards

(“P-RSU”)

during the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


	S-RSU Shares			Weighted Average Grant Date Fair Value		P-RSU Shares			Weighted Average Grant Date Fair Value		Total RSU Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2021		2,915,720		$	11.66		1,021,172		$	11.04		3,936,892		$	11.50
Granted		2,755,385			7.31		500,000			8.11		3,255,385			7.43
Vested and issued		(416,525	)		12.18		—			—		(416,525	)		12.18
Canceled		(599,184	)		10.37		(284,298	)		12.80		(883,482	)		11.15
Unvested at June 30, 2022		4,655,396		$	9.21		1,236,874		$	9.46		5,892,270		$	9.26

S-RSU

Shares

Weighted

Average Grant

Date Fair Value

P-RSU

Shares

Weighted

Average Grant

Date Fair Value

Total RSU
Shares

Weighted

Average Grant

Date Fair Value

Unvested at December 31, 2020
   2,000,416 $ 10.40    1,587,801 $ 10.30    3,588,217 $ 10.35
Granted
   1,039,266 14.44    64,011 12.65    1,103,277 14.33
Vested and issued
   (546,818 ) 9.11    (181,910 ) 8.74    (728,728 ) 9.01
Canceled
   (411,567 ) 11.38    (365,909 ) 9.50    (777,476 ) 10.49






Unvested at September 30, 2021
   2,081,297 $ 12.56    1,103,993 $ 10.97    3,185,290 $ 12.00

7. Income Taxes

The income tax expense relates principally to the Company’s foreign operations.

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 assets 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 its remaining U.S. net deferred tax assets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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.

During the three months ended March 31, 2022, the Company recorded a benefit of $1.0 million in the U.S. for the release of a portion of the Company’s valuation allowance. This release of the valuation allowance is related to the acquisition of Wicket Labs Inc. completed in February 2022 and the creation of deferred tax liabilities in purchase accounting that serve as a source of income for the Company’s pre-existing deferred tax assets.

8. Commitments and Contingencies

Legal Matters

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 ~~September~~June 30, ~~2021,~~2022, 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.

~~Table of Contents~~

9. Debt

On December 28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a ~~$30.0~~$30.0 million asset-based line of credit (the “Line of Credit”). Borrowings under the Line of Credit are secured by substantially all of the Company’s assets, excluding its intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate as follows: (i) for prime rate advances, the greater of (A) the prime rate and (B) 4%4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points and (B) 4%4%. Under the Loan Agreement, the Company must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least ~~$15.0~~$15.0 million, the Company must also maintain a minimum net income threshold based on

non-GAAP

operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the 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. The Line of Credit agreement will expire on December 28, ~~2023.~~2023. The Company was in compliance with all applicable covenants under the Line of Credit as of ~~September~~June 30, ~~2021~~2022 and there were 0 borrowings outstanding as of ~~September~~June 30, ~~2021.~~2022.

10. Segment Information

Geographic Data

Total revenue from unaffiliated customers by geographic area, based on the location of the customer, was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue:
North America	$	30,019	$	29,398	$	59,480	$	59,784
Europe		10,128		9,547		19,233		18,470
Japan		5,077		5,370		12,338		13,078
Asia Pacific		9,060		7,016		16,496		14,675
Other		163		141		279		282
Total revenue	$	54,447	$	51,472	$	107,826	$	106,289

Three Months Ended
September 30,

Nine Months Ended
September 30,


2021

2020

2021

2020

Revenue:

North America
   $ 29,420    $ 27,515    $ 89,204    $ 78,553
Europe
   9,689    8,435    28,159    25,323
Japan
   6,185    5,688    19,263    17,344
Asia Pacific
   6,746    7,211    21,421    21,795
Other
   123    235    405    648








Total revenue
   $ 52,163    $ 49,084    $ 158,452    $ 143,663

North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was ~~$27.6~~$28.2 million and ~~$25.6~~$27.5 million for the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~Revenue from customers located in the United States was $83.6 million and $72.5 million for the nine months ended September 30, 2021 and 2020, respectively.~~

Other than the United States and Japan, no other country contributed more than ~~10%~~10% of the Company’s total revenue during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

11. Business Combinations

Other Business Combinations

On February 1, 2022, the Company acquired 100% of ~~September~~the outstanding shares of Wicket Labs, Inc. (“Wicket Labs”) a provider of subscriber and content insights, in exchange for common stock of the Company and cash, (“Wicket Acquisition”). At the closing, the Company issued 212,507 unregistered shares of common stock of the Company valued at approximately $2.0 million and approximately $13.2 million in cash. Pursuant to the merger 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. During the three months ended June 30, ~~2021~~2022, the Company paid $0.1 million of cash consideration held back to the sellers for the satisfaction of certain representations and ~~December 31, 2020, property~~warranties.

The Wicket Acquisition was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification 805 — Business Combinations. Accordingly, the results of operations of the acquired company have been included in the accompanying condensed consolidated financial statements since the date of acquisition. The purchase price has been allocated to the tangible and ~~equipment at locations outside~~intangible assets acquired and liabilities assumed based upon the ~~U.S. was not material.~~

respective estimates of fair value as of the date of the Wicket Acquisition, and using assumptions that the Company’s management believes are reasonable given the information currently available. The Company is in the process of completing its valuation of its intangible assets, accounts receivable, deferred revenue and the valuation of the acquired deferred tax assets and liabilities. The final allocations of the purchase price to intangible assets, accounts

receivable, deferred revenue, goodwill and any deferred tax assets and liabilities may differ materially from the information presented in these unaudited condensed consolidated financial statements.

During the three and six months ended June 30, 2022, the Company incurred $0.2 million and $0.7 million, respectively, of merger-related costs related to the Wicket Acquisition.

The excess of the purchase price over the estimated amounts of net assets as of the effective date of the acquisition was allocated to goodwill in accordance with the accounting guidance. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Wicket Acquisition. These benefits include the acquired workforce and opportunities to expand the Company’s offerings in target market segments that use subscriber and content insights to make decisions. The goodwill is expected to be non-deductible for tax purposes.

The total purchase price for the Wicket Acquisition has been allocated as follows:


Cash	$	53
Accounts receivable and other assets		782
Identifiable intangible assets		4,382
Goodwill		13,935
Deferred revenue		(1,033	)
Deferred tax liabilities		(1,009	)
Other liabilities		(95	)
Total estimated purchase price	$	17,015

The following are the identifiable intangible assets acquired and their respective useful lives, as determined based on preliminary valuations:


	Amount		Useful Life (in years)
Developed technology	$	4,200		6
Customer relationships		182		5
Total	$	4,382

The preliminary fair value of the intangible assets has been estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital.

The estimated amortization expense for 2022 and for each of the five succeeding years and thereafter is as follows:


Year Ending December 31,	Amount
2022	$	614
2023		736
2024		736
2025		736
2026		736
2027 and thereafter		824
Total	$	4,382

Pro forma results of operations for the Wicket Acquisition have not been presented because the effect of the acquisition is not material to the Company's consolidated financial results. Revenue and earnings attributable to acquired operations since the date of the acquisition are included in the Company's consolidated statements of operations.

The changes in the carrying amount of goodwill for the six months ended June 30, 2022 were as follows:


Balance as of January 1, 2022	$	60,902
Wicket acquisition		13,935
Balance as of June 30, 2022	$	74,837

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in thousands, except share and per share data, unless otherwise noted)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form

10-Q

and our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~

2021.

Company Overview

We are a leading global provider of cloud-based services for video. We were incorporated in Delaware in August 2004. With our ~~Emmy~~

Emmy®-winning technology and award-winning services, we help our customers realize the potential of video to address business-critical challenges. Customers rely on our suite of products, services, and expertise to reduce the cost and complexity associated with publishing, distributing, measuring and monetizing video across devices.

We sell five core video products that help our customers use video to further their businesses in meaningful ways: (1) Video Cloud, our flagship product and the world’s leading online video platform, enables our customers to quickly and easily distribute high-quality video to Internet-connected devices; (2) Brightcove Live, our industry-leading solution for live streaming, delivers high-quality viewer experiences at scale; (3) Brightcove Beacon, a purpose-built application that enables companies to launch premium OTT video experiences quickly and cost effectively, across devices and with the flexibility of multiple monetization models; (4) Brightcove Player, an exceptionally fast, cloud-based technology for creating and managing video experiences; and (5) Zencoder, a powerful, cloud-based video encoding technology.

Customers can complement their use of our core products with modular technologies that provide enhanced capabilities such as (1) innovative ad insertion and video stitching through Brightcove SSAI; (2) efficient publication of videos to Facebook, Twitter, and YouTube through Brightcove Social; (3) an app for creating marketing campaigns with insightful data and industry benchmarks through Brightcove Campaign; ~~(4) simple streaming of video communications to an app through Brightcove Engage;~~ and ~~(5)~~(4) create branded video experience by accessing templates with

built-in

best practices through Brightcove Gallery.

We have also brought to market several video solutions, which are comprised of a suite of video technologies that address specific customer

use-cases

and needs: (1) Virtual Events Experience helps brands to transform events into customized virtual experiences; (2) Brightcove Video Marketing Suite, enables marketers to use video to drive brand awareness, engagement and conversion; ~~and~~ (3) Brightcove Enterprise Video Suite, provides an enterprise-class platform for internal communications, employee training, live streaming, marketing and ecommerce ~~videos.~~

videos; and (4) Brightcove CorpTV™, provides a new way to deliver marketing videos, product announcements, training programs, and other live and on-demand content in a branded experience for companies.

Our philosophy for the next few years will continue to be to invest in our product strategy and development, sales,

and go-to-market activities

to support our long-term revenue growth. We believe these investments will help us address some of the challenges facing our business such as demand for our products by existing and potential customers, rapid technological change in our industry, increased competition and resulting price sensitivity. These investments include support for the expansion of our infrastructure within our hosting facilities, the hiring of additional technical and sales personnel, the innovation of new features for existing products and the development of new products. We believe this strategy will help us retain our existing customers, increase our average annual subscription revenue per premium customer and lead to the acquisition of new customers. Additionally, we believe customer growth will enable us to achieve economies of scale which will reduce our cost of goods sold, research and development and general and administrative expenses as a percentage of total revenue.

As of ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 we had ~~693~~703 and ~~616~~670 employees, respectively.

We generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenue ~~grew~~increased from ~~$143.7 million~~$106.3 in the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to ~~$158.5 million~~$107.8 in the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, due to an increase in subscription and support revenue. This increase was due to an increase in the average annual subscription revenue per premium ~~customer.~~

customer during the six months ended June 30, 2022 as compared to the prior period and an increase in usage-based fees during the three months ended June 30, 2022 as compared to the prior period.

Included in the consolidated net ~~income~~loss for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was stock-based compensation expense and amortization of acquired intangible assets of ~~$7.2~~$7.1 million and ~~$2.3~~$1.6 million, respectively. Included in the consolidated net ~~loss~~income for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was merger-related expense, stock-based compensation expense and amortization of acquired intangible assets of ~~$5.8~~$0.3 million, ~~$6.7~~$4.9 million and ~~$2.6~~$1.5 million, respectively.

For the ~~nine~~three and six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our revenue derived from customers located outside North America was ~~44%~~45% and ~~45%~~44%, and 43% and 43%, respectively. 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.

Key Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

The following table includes our key metrics for the periods presented:


	Six Months Ended June 30,
	2022			2021
Customers (at period end)
Premium		2,301			2,280
Volume		636			983
Total customers (at period end)		2,937			3,263
Net revenue retention rate		96.4	%		98.2	%
Recurring dollar retention rate		87.5	%		86.0	%
Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands)	$	96.6		$	94.4
Average annual subscription revenue per premium customer for Starter edition customers only (in thousands)	$	4.2		$	4.5
Total backlog, excluding professional services engagements (in millions)	$	151.9		$	152.8
Total backlog to be recognized over next 12 months, excluding professional services engagements (in millions)	$	121.6		$	119.8

•

Nine Months Ended September 30,


2021

2020

Customers (at period end)

Premium
   2,265 2,267
Volume
   940 1,114


Total customers (at period end)
   3,205 3,381


Net revenue retention rate
   97.1 % 93.8 %
Recurring dollar retention rate
   88 % 88 %
Average annual subscription revenue per premium customer,
excluding Starter edition customers (in thousands)
   $ 93.9 $ 87.3
Average annual subscription revenue per premium customer
for Starter edition customers only (in thousands)
   $ 4.6 $ 4.5
Total backlog, excluding professional services engagements (in millions)
   $ 148.6 $ 144.2
Total backlog to be recognized over next 12 months, excluding
professional services engagements (in millions)
   $ 115.0 $ 109.6

Number of Customers

. We define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue at the end of the quarter. We believe the number of customers is a key indicator of our market penetration, the productivity of our sales organization and the value that our products bring to our customers. We classify our customers by including them in either premium or volume offerings. Our premium offerings include our premium Video Cloud customers (Enterprise and Pro editions), our Zencoder customers (other than Zencoder customers on

month-to-month

contracts and

pay-as-you-go

contracts), our SSAI customers, our Player customers, our OTT Flow customers (OTT Flow is our partner-based OTT platform, which preceded Brightcove Beacon), our Virtual Event Experience customers, our Video Marketing Suite customers, our Enterprise Video Suite customers, our Brightcove Beacon customers, our Brightcove Engage customers, our Brightcove CorpTV™ customers, and our Brightcove Campaign customers. Our volume offerings include our Video Cloud Express customers and our Zencoder customers on

month-to-month

contracts and

pay-as-you-go contracts.

~~contracts.~~

Our

go-to-market

focus and growth strategy is to expand our premium customer base, as we believe our premium customers represent a greater opportunity for our solutions. Premium customers decreased compared to the prior period due to some customers deciding to switch to

in-house

solutions or other third-party solutions and some customers acquired in the Ooyala acquisition deciding not to switch to our solution. Volume customers decreased in recent periods primarily due to our discontinuation of the promotional Video Cloud Express offering. As a result, we have experienced attrition of this base level offering without a corresponding addition of customers. We expect customers using our volume offerings to continue to decrease in ~~2021~~2022 and beyond as we continue to focus on the market for our premium solutions.

•

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 focuses on contracts up for renewal in a given quarter and only captures expansion/upsells at time of renewal, and is more susceptible to swings than the net revenue retention rate. Accordingly, we plan to continue to report the net revenue retention rate and discontinue reporting recurring dollar retention rate after December 31, 2021.

•

~~Table of Contents~~

Recurring Dollar Retention ~~Rate~~

. 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 for the 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.

•

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.

COVID-19

~~Update~~

and Geopolitical Events

While the ~~implications~~future trends of

the COVID-19 pandemic

remain uncertain, we ~~plan to~~have not experienced a significant disruption during the pandemic. We will continue to ~~make investments~~monitor COVID-19’s effect on our employees, customers, vendors and the regions we operate in.

In late February 2022, Russian military forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is likely. Subsequent to ~~support business growth.~~the invasion, the U.S. and other countries imposed economic sanctions against officials, individuals, regions, and industries in Russia, Ukraine and Belarus. We ~~believe that the growth~~do not have operations or customers in Russia or Ukraine and none of our ~~business is dependent on many factors, including our ability~~material vendors source their services 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.us from Russia or Ukraine. We ~~expect to invest in sales and marketing to support customer growth. We also expect to invest in research and development as we~~will continue to ~~introduce new products~~monitor the situation and ~~applications to extend~~comply with any sanctions and restrictions imposed by 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.

U.S. government.

Components of Consolidated Statements of Operations

Revenue

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

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, platinum and platinum plus support to our premium customers for an additional 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 target

small 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 generally

enter 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 are

typically one-year contracts,

which include a subscription to Virtual Events Experience, Brightcove Live or the Brightcove Player, basic support and

a 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.

~~Table of Contents~~

Zencoder is offered to customers on a subscription basis, with either committed contracts or

pay-as-you-go

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 customers

on month-to-month contracts

or pay-as-you-go contracts,

which are considered volume customers.

Brightcove Beacon and Brightcove Campaign are 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 typically

one-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 a

pre-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 or

month-to-month

agreements. Starter customers with

month-to-month

agreements 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, 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 Revenue

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 increased in absolute dollars from the first ~~nine~~six months of ~~2020~~2021 to the first ~~nine~~six months of ~~2021.~~2022. 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.

Operating Expenses

We classify our operating expenses as follows:

Research and Development

. 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

~~Table of Contents~~

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

. 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

. Merger-related costs consist of expenses related to mergers and acquisitions, integration costs and general corporate development activities.

Other Expense (Benefit) ~~Expense~~

. Reflects other operating benefits, costs that do not directly relate to the operating activities listed above.

Other (Expense) Income, ~~(Expense),~~ net

Other (expense) income ~~(expense)~~ consists primarily of interest income earned on our cash, cash equivalents, and foreign exchange gains and losses.

Income Taxes

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 at December 31, ~~2020.~~2021. We maintain net deferred tax liabilities for temporary differences related to our Japanese subsidiary.

During the six months ended June 30, 2022, we recorded a non-recurring benefit of $1.0 million in the U.S. for the release of a portion of our valuation allowance. This release of the valuation allowance is related to the Wicket Acquisition completed in February 2022 and the creation of deferred tax liabilities in purchase accounting that serve as a source of income for our pre-existing deferred tax assets.

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 grant date 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 three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, we recorded ~~$2.3~~$3.6 million and ~~$2.0~~$2.6 million, respectively, of stock-based compensation expense. We expect stock-based compensation expense to increase in absolute dollars in future periods.

~~Table of Contents~~

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. 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. During the six months ended June 30, 2022, the U.S. dollar increased in value as compared to the foreign currencies in which we conduct business, and our foreign currency-based revenues decreased 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.

Should the U.S. dollar continue to increase in value, our future percentage of total net revenue derived from outside North America may remain relatively unchanged or decrease.

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 consider the assumptions and estimates associated with revenue recognition, income taxes, business combinations, intangible assets and goodwill to be our critical accounting policies and estimates.

We discuss any assumptions and estimates that could have a material effect on the results of operations in the applicable section of this discussion and analysis of the financial condition and results of operations.

For a detailed explanation of the judgments made in these areas, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, which we filed with the Securities and Exchange Commission on February ~~24, 2021.~~

18, 2022.

Results of Operations

The following tables set forth our results of operations for the periods presented. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form

10-Q

which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The

period-to-period

comparison of financial results is not necessarily

indicative of future results. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~

~~Table of Contents~~

Three Months Ended September 30,

Nine Months Ended September 30,


2021

2020

2021

2020



(in thousands, except share and per share data)

Revenue:

Subscription and support revenue
   $ 49,226    $ 46,338    $ 148,667    $ 136,613
Professional services and other revenue
   2,937    2,746    9,785    7,050








Total revenue
   52,163    49,084    158,452    143,663
Cost of revenue:

Cost of subscription and support revenue
   16,406    15,735    46,840    50,290
Cost of professional services and other revenue
   2,247    2,363    8,205    6,349








Total cost of revenue
   18,653    18,098    55,045    56,639








Gross profit
   33,510    30,986    103,407    87,024
Operating expenses:

Research and development
   7,902    8,215    24,041    26,199
Sales and marketing
   18,451    14,813    52,730    42,370
General and administrative
   7,345    6,694    21,822    19,633
Merger-related
   45    —      300    5,768
Other (benefit) expense
   —      —      (1,965 )    —








Total operating expenses
   33,743    29,722    96,928    93,970








(Loss) income from operations
   (233 )    1,264    6,479    (6,946 )
Other (expense) income, net
   (319 )    204    (937 )    (291 )








(Loss) income before income taxes
   (552 )    1,468    5,542    (7,237 )
Provision for income taxes
   468    154    562    597








Net (loss) income
   $ (1,020 )    $ 1,314    $ 4,980    $ (7,834 )
Net (loss) income per share—basic and diluted

Basic
   $ (0.02 )    $ 0.03    $ 0.12    $ (0.20 )
Diluted
   $ (0.02 )    $ 0.03    $ 0.12    $ (0.20 )
Weighted-average shares—basic and diluted

Basic
   40,934,689    39,682,337    40,570,817    39,319,703
Diluted
   40,934,689    40,645,982    42,237,438    39,319,703

2021.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(in thousands, except share and per share data)
Revenue:
Subscription and support revenue	$	52,988		$	48,602		$	104,589		$	99,441
Professional services and other revenue		1,459			2,870			3,237			6,848
Total revenue		54,447			51,472			107,826			106,289
Cost of revenue:
Cost of subscription and support revenue		16,943			14,756			33,925			30,434
Cost of professional services and other revenue		1,761			2,468			3,759			5,958
Total cost of revenue		18,704			17,224			37,684			36,392
Gross profit		35,743			34,248			70,142			69,897
Operating expenses:
Research and development		8,372			7,855			16,609			16,139
Sales and marketing		17,961			18,130			36,249			34,279
General and administrative		8,554			7,418			16,643			14,477
Merger-related		153			255			747			255
Other expense (benefit)		—			—			1,149			(1,965	)
Total operating expenses		35,040			33,658			71,397			63,185
Income (loss) from operations		703			590			(1,255	)		6,712
Other (expense) income, net		(825	)		117			(1,212	)		(618	)
(Loss) income before income taxes		(122	)		707			(2,467	)		6,094
Provision (benefit) for income taxes		179			(163	)		(529	)		94
Net (loss) income	$	(301	)	$	870		$	(1,938	)	$	6,000
Net (loss) income per share—basic and diluted
Basic	$	(0.01	)	$	0.02		$	(0.05	)	$	0.15
Diluted	$	(0.01	)	$	0.02		$	(0.05	)	$	0.14
Weighted-average shares—basic and diluted
Basic		41,723			40,615			41,580			40,386
Diluted		41,723			42,209			41,580			42,391

Overview of Results of Operations for the Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~

2021

Total revenue increased by 6%, or ~~$3.1~~$3.0 million, in the three months ended ~~September~~June 30, ~~2021~~2022 compared to the three months ended ~~September~~June 30, ~~2020~~2021 due to an increase in subscription and support revenue of ~~6%,~~9% or ~~$2.9~~$4.4 million, primarily due to an increase in revenue from our premium offerings. The increase in revenue from our premium offerings was due to an increase in the average annual subscription revenue per premium customer ~~of 6.9%.~~and an increase in usage-based fees. Professional services and other revenue ~~also increased~~decreased by 7%49% or ~~$191.~~$1.4 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. 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~~Our revenue from premium offerings ~~grew~~increased by $3.3 million, or 7%, in the three months ended ~~September~~June 30, ~~2021~~2022 compared to the three months ended ~~September~~June 30, ~~2020.~~2021. 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.

The U.S. dollar has strengthened against the Japanese Yen and the Euro when compared against exchange rates during the prior year period of comparison. In constant currency, our total revenue for the three months ended June 30, 2022 would have been approximately $56.2 million. The majority of the effect of revenue in constant currency was in revenues denominated in Japanese Yen of $634 and Euro of $687. Constant currency is calculated as translating current period revenue denominated in foreign currencies at the exchange rates of the prior period of comparison.

Our gross profit increased by ~~$2.5~~$1.5 million, or 8%4%, in the three months ended ~~September~~June 30, ~~2021~~2022 compared to the three months ended ~~September~~June 30, ~~2020,~~2021, primarily due to an increase in ~~revenue~~subscription and ~~our transition of acquired Ooyala customers to our technology during 2020, which resulted in reduced costs.~~support revenue. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

~~Loss~~

Income from operations was ~~$0.2~~$0.7 million in the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~a loss~~income from operations of ~~$1.3~~$0.6 million in the three months ended ~~September~~June 30, ~~2020.~~2021. This is primarily due to an increase in revenue of ~~$3.1~~$3.0 million and ~~the~~an improvement

of gross profit on subscription and support revenue in the three months ended ~~September~~June 30, ~~2021~~2022 compared to the three months ended ~~September~~June 30, ~~2020.~~

~~Table of Contents~~

2021.

Revenue

Three Months Ended September 30,


2021

2020

Change

Revenue by Product Line

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
Premium
   $ 51,466    99 % $ 48,175    98 % $ 3,291 7 %
Volume
   697    1 909    2 (212 ) (23 )






Total
   $ 52,163    100 % $ 49,084    100 % $ 3,079 6 %


	Three Months Ended June 30,
	2022					2021					Change
Revenue by Product Line	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Premium	$	53,998		99	%	$	50,694		99	%	$	3,304			7	%
Volume		449		1			778		1			(329	)		(42	)
Total	$	54,447		100	%	$	51,472		100	%	$	2,975			6	%

During the three months ended ~~September~~June 30, ~~2021,~~2022, revenue increased by ~~$3.1~~$3.0 million, or 6%, compared to the three months ended ~~September~~June 30, ~~2020,~~2021, primarily due to an increase in revenue from our premium offerings. The increase in premium revenue of $3.3 million, or 7%, is ~~primarily~~ the result of ~~increased premium subscription offerings to our customers as~~ the increase in average annual subscription revenue per premium customer ~~increased 6.9% compared to the prior period.~~and an increase in usage-based fees. In the three months ended ~~September~~June 30, ~~2021,~~2022, volume revenue decreased by ~~$212,~~$329, or ~~23%~~42%, compared to the three months ended ~~September~~June 30, ~~2020,~~2021, as we continue to focus on the market for our premium solutions.

Three Months Ended September 30,


2021

2020

Change

Revenue by Type

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
Subscription and support
   $ 49,226    94 % $ 46,338    96 % $ 2,888    6 %
Professional services and other
   2,937    6 2,746    4 191    7








Total
   $ 52,163    100 % $ 49,084    100 % $ 3,079    6 %


	Three Months Ended June 30,
	2022					2021					Change
Revenue by Type	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	52,988		97	%	$	48,602		94	%	$	4,386			9	%
Professional services and other		1,459		3			2,870		6	%		(1,411	)		(49	)
Total	$	54,447		100	%	$	51,472		100	%	$	2,975			6	%

During the three months ended ~~September~~June 30, ~~2021,~~2022, subscription and support revenue increased ~~by $2.9 million, or 6%,~~ compared to the three months ended ~~September~~June 30, 2020. The increase was primarily related to an increase in the average annual subscription revenue per premium customer of 6.9% during the three months ended September 30, 2021 compared to the three months ended September 30, 2020. In addition, professional2021. Professional services and other revenue ~~increased~~decreased by ~~$191,~~$1.4 million, or 7%49%, compared to the corresponding quarter in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.

Three Months Ended September 30,


2021

2020

Change

Revenue by Geography

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
North America
   $ 29,420    56 % $ 27,515    56 % $ 1,905 7 %






Europe
   9,689    19 8,435    17 1,254 15
Japan
   6,185    12 5,688    12 497 9
Asia Pacific
   6,746    13 7,211    15 (465 ) (6 )
Other
   123    —   235    —   (112 ) (48 )






International subtotal
   22,743    44 21,569    44 1,174 5






Total
   $ 52,163    100 % $ 49,084    100 % $ 3,079 6 %


	Three Months Ended June 30,
	2022					2021					Change
Revenue by Geography	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
North America	$	30,019		55	%	$	29,398		57	%	$	621			2	%
Europe		10,128		19			9,547		19			581			6
Japan		5,077		9			5,370		10			(293	)		(5	)
Asia Pacific		9,060		17			7,016		14			2,044			29
Other		163		—			141		—			22			16
International subtotal		24,428		45			22,074		43			2,354			11
Total	$	54,447		100	%	$	51,472		100	%	$	2,975			6	%

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 the three months ended ~~September~~June 30, ~~2021,~~2022, total revenue for North America increased ~~$1.9 million,~~by $621, or 7%2%, compared to the three months ended ~~September~~June 30, ~~2020.~~2021. In the three months ended ~~September~~June 30, ~~2021,~~2022, total revenue outside of North America increased ~~$1.2~~by $ 2.35 million, or 5%11%, compared to the three months ended ~~September~~June 30, ~~2020.~~2021. The increase in revenue from international regions is primarily related to ~~increases~~an increase in usage-based revenue in ~~Europe.~~

Asia Pacific.

Cost of Revenue

Three Months Ended September 30,


2021

2020

Change

Cost of Revenue

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%


   (in thousands, except percentages)
Subscription and support
   $ 16,406    33 % $ 15,735    34 % $ 671 4 %
Professional services and other
   2,247    77 2,363    86 (116 ) (5 )






Total
   $ 18,653    36 % $ 18,098    37 % $ 555 3 %


	Three Months Ended June 30,
	2022					2021					Change
Cost of Revenue	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	16,943		32	%	$	14,756		30	%	$	2,187			15	%
Professional services and other		1,761		121			2,468		86			(707	)		(29	)
Total	$	18,704		34	%	$	17,224		33	%	$	1,480			9	%

In the three months ended ~~September~~June 30, ~~2021,~~2022, cost of subscription and support revenue increased by ~~$671,~~$ 2.2 million, or 4%15%, compared to the three months ended ~~September~~June 30, ~~2020.~~2021. The increase resulted primarily from ~~the 6%~~an increase in ~~subscription~~content delivery network and ~~support revenue~~network hosting services expenses in the three months ended ~~September~~June 30, ~~2021~~2022 compared to the three months ended ~~September~~June 30, ~~2020.~~2021. In the three months ended ~~September~~June 30, ~~2021,~~2022, cost of professional services and other revenue decreased ~~by $116,~~by$ 0.7 million, or 5%29%, compared to the three months ended ~~September~~June 30, ~~2020.~~2021. This decrease corresponds to athe 49% decrease ~~in contractor expenses of $216~~professional services and other revenue in the three months ended ~~September~~June 30, ~~2021,~~2022, compared to the three months ended ~~September~~June 30, ~~2020.~~

2021.

Gross Profit

Three Months Ended September 30,


2021

2020

Change

Gross Profit

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%


   (in thousands, except percentages)
Subscription and support
   $ 32,820    67 % $ 30,603    66 % $ 2,217    7 %
Professional services and other
   690    23 383    14 307    80 %








Total
   $ 33,510    64 % $ 30,986    63 % $ 2,524    8 %


	Three Months Ended June 30,
	2022						2021					Change
Gross Profit	Amount			Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	36,045			68	%	$	33,846		70	%	$	2,199			6	%
Professional services and other		(302	)		(21	)		402		14			(704	)		(175	)%
Total	$	35,743			66	%	$	34,248		67	%	$	1,495			4	%

The overall gross profit percentage was ~~64%~~66% for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~63%~~67% for the three months ended ~~September~~June 30, ~~2020.~~2021. Subscription and support gross profit increased $2.2 million ~~or 7%,~~in the three months ended June 30, 2022 compared to the three months ended ~~September~~June 30, ~~2020.~~2021. The increase in gross profit dollars for subscription and support revenue was due to ~~incremental costs from~~ the ~~acquisition of Ooyala~~9% increase in subscription and support revenue. Professional services and other gross profit decreased $704, or 175%. The decrease in gross profit dollars for professional services and other revenue was due to the ~~three months ended September 30, 2020 which did not recur~~49% decrease in ~~the three months ended September 30, 2021.~~

professional services and other revenue.

Operating Expenses

Three Months Ended September 30,


2021

2020

Change

Operating Expenses

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
Research and development
   $ 7,902    15 % $ 8,215    17 % $ (313 ) (4 )%
Sales and marketing
   18,451    35 14,813    30 3,638 25
General and administrative
   7,345    14 6,694    14 651 10
Merger-related
   45    —   —      —   45 N/A






Total
   $ 33,743    65 % $ 29,722    61 % $ 4,021 14 %


	Three Months Ended June 30,
	2022					2021					Change
Operating Expenses	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Research and development	$	8,372		15	%	$	7,855		15	%	$	517			7	%
Sales and marketing		17,961		33			18,130		35			(169	)		(1	)
General and administrative		8,554		16			7,418		14			1,136			15
Merger-related		153		—			255		—			(102	)		(40	)
Other expense (benefit)		—		—			—		—			—		NM
Total	$	35,040		64	%	$	33,658		65	%	$	1,382			4	%

Research and Development

In the three months ended ~~September~~June 30, ~~2021,~~2022, research and development ~~expense decreased~~increased by ~~$313~~$517 or ~~4%,~~7% compared to the three months ended ~~September~~June 30, ~~2020~~2021, primarily due to ~~a decrease in rent and contractor expenses of $315 and $292 respectively. These decreases were offset by~~ an increase in stock-based compensation expense of ~~$267, as well as~~$404. The remaining increase was due to various other expenses that, in ~~the~~ aggregate, increased by approximately ~~$27.~~$113. We expect our research and development expense as a percentage of revenue to remain relatively unchanged.

~~Table of Contents~~

Sales and Marketing

In the three months ended ~~September~~June 30, ~~2021,~~2022, sales and marketing expense ~~increased~~decreased by ~~$3.6 million,~~$169, or ~~25%~~1%, compared to the three months ended ~~September~~June 30, ~~2020,~~2021, primarily due to a decrease in marketing program expenses of $1.0 million, offset

by an increase in ~~marketing campaigns,~~ employee-related ~~and commission~~ expenses of $1.8 million, $1.6 million, and $1.2 million, respectively. These increases were offset by a decrease in rent and contractor expenses of $435 and $627, respectively. The remaining decrease was due to various other expenses that, in aggregate, decreased by approximately $46.$816. We expect that our sales and marketing expense will increase in absolute dollars for the remainder of ~~2021~~2022 as compared to the prior period as we will continue to invest in these activities to support revenue growth.

General and Administrative

In the three months ended ~~September~~June 30, ~~2021,~~2022, general and administrative expense increased by ~~$651,~~$1.1 million, or ~~10%~~15%, compared to the three months ended ~~September~~June 30, ~~2020,~~2021, primarily due to increases in ~~outside professional services, employee- related,~~employee-related and stock-based compensation expenses of ~~$244, $193,~~$707 and ~~$176,~~$515, respectively. ~~The remaining increase was due to~~These increases were offset by various other expenses that, in aggregate, ~~increased~~decreased by approximately ~~$38.~~$86. In future periods, we expect general and administrative expense to remain relatively unchanged.

Merger-Related

In the three months ended ~~September~~June 30, ~~2021,~~2022, merger-related ~~expenses~~expense remained relatively unchanged compared to the three months ended ~~September~~June 30, ~~2020.~~

2021.

Provision (benefit) for Income taxes.In the three months ended June 30, 2022, provision (benefit) for income taxes expense remained relatively unchanged compared to the three months ended June 30, 2021.

Overview of Results of Operations for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~

2021

Total revenue increased by ~~10%~~1%, or ~~$14.8~~$1.5 million, in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to an increase in subscription and support revenue of 9%5%, or ~~$12.1~~$5.1 million, primarily due to an increase in revenue from our premium ~~offerings.~~offerings during the three months ended June 30, 2022 as described in the results of operations for that period. Professional services and other revenue ~~also increased~~decreased by ~~39%~~53%, or ~~$2.7~~$3.6 million, compared to the corresponding period in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. Our revenue from premium offerings grew by ~~$15.3~~$2.1 million, or ~~11%~~2%, in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. 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.

The U.S. dollar has strengthened against the Japanese Yen and the Euro when compared against exchange rates during the prior year period of comparison. In constant currency, our total revenue for the six months ended June 30, 2022 would have been approximately $110.8 million. The majority of the effect of revenue in constant currency was in revenues denominated in Japanese Yen of $1.3 million and Euro of $982. Constant currency is calculated as translating current period revenue denominated in foreign currencies at the exchange rates of the prior period of comparison.

Our gross profit increased ~~by $16.4 million, or 19%,~~remained relatively unchanged in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, 2020, due to an increase in revenue and an improvement in subscription and support gross profit. The increase in revenue is due to an increase in our average revenue per premium customer. The improvement in subscription and support gross profit was primarily due to transition of acquired Ooyala customers to our technology during 2020, which reduced costs.2021. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

~~Income~~

Loss from operations was ~~$6.5~~$1.3 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~a loss~~income from operations of ~~$6.9~~$6.7 million in the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This is primarily due to ~~the aforementioned~~an increase in ~~revenue~~operating expenses of ~~$14.8 million and decreases in costs of revenue of $1.6~~$8.2 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

2021.

Revenue

Nine Months Ended September 30,


2021

2020

Change

Revenue by Product Line

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
Premium
   $ 156,182    99 % $ 140,904    98 % $ 15,278 11 %
Volume
   2,270    1 2,759    2 (489 ) (18 )






Total
   $ 158,452    100 % $ 143,663    100 % $ 14,789 10 %


	Six Months Ended June 30,
	2022					2021					Change
Revenue by Product Line	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Premium	$	106,770		99	%	$	104,716		99	%	$	2,054			2	%
Volume		1,056		1			1,573		1			(517	)		(33	)
Total	$	107,826		100	%	$	106,289		100	%	$	1,537			1	%

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, revenue increased by ~~$14.8~~$1.5 million, or ~~10%~~1%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, primarily due to an increase in revenue from our premium offerings, which consists of subscription and support revenue as well as professional services. The increase in premium revenue of ~~$15.3~~$2.1 million, or ~~11%~~2%, is primarily the result of an 8%2% increase in average annual subscription revenue per premium customer during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This increase in average annual subscription revenue per premium customer is primarily due to premium customers ordering more of our products.

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, volume revenue decreased by ~~$489~~$517 or ~~18%~~33%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as we continue to focus on the market for our premium solutions.

Nine Months Ended September 30,


2021

2020

Change

Revenue by Type

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%



   (in thousands, except percentages)
Subscription and support
   $ 148,667    94 % $ 136,613    95 % $ 12,054    9 %
Professional services and other
   9,785    6 7,050    5 2,735    39








Total
   $ 158,452    100 % $ 143,663    100 % $ 14,789    10 %


	Six Months Ended June 30,
	2022					2021					Change
Revenue by Type	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	104,589		97	%	$	99,441		94	%	$	5,148			5	%
Professional services and other		3,237		3			6,848		6			(3,611	)		(53	)
Total	$	107,826		100	%	$	106,289		100	%	$	1,537			1	%

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, subscription and support revenue increased by ~~$12.1~~$5.1 million, or 9%5%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase was ~~primarily~~ related to ~~an 8%~~a 2% increase in average annual subscription revenue per premium ~~customer.~~

customer and an increase in usage-based fees.

In addition, professional services and other revenue ~~increased~~decreased by ~~$2.7~~$3.6 million, or ~~39%~~53%, compared to the corresponding period in the prior year. ~~This increase was driven by one particular project that was completed in the three months ended March 31, 2021.~~ Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.

Nine Months Ended September 30,


2021

2020

Change

Revenue by Geography

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
North America
   $ 89,204    56 % $ 78,553    55 % $ 10,651 14 %






Europe
   28,159    18 25,323    18 2,836 11
Japan
   19,263    12 17,344    12 1,919 11
Asia Pacific
   21,421    14 21,795    15 (374 ) (2 )
Other
   405    —   648    —   (243 ) (38 )






International subtotal
   69,248    44 65,110    45 4,138 6






Total
   $ 158,452    100 % $ 143,663    100 % $ 14,789 10 %


	Six Months Ended June 30,
	2022					2021					Change
Revenue by Geography	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
North America	$	59,480		56	%	$	59,784		56	%	$	(304	)		(1	)%
Europe		19,233		18			18,470		17			763			4
Japan		12,338		11			13,078		12			(740	)		(6	)
Asia Pacific		16,496		15			14,675		14			1,821			12
Other		279		—			282		—			(3	)		(1	)
International subtotal		48,346		44			46,505		43			1,841			4
Total	$	107,826		100	%	$	106,289		100	%	$	1,537			1	%

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, total revenue for North America ~~increased $10.7 million, or 14%,~~remained relatively unchanged compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. The increase was due to revenue from our premium offerings.~~

2021.

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, total revenue outside of North America increased ~~$4.1~~$1.8 million, or 6%4%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase in revenue from international regions is primarily related to ~~increased sales of our premium offerings to existing customers~~an increase in ~~Japan and Europe.~~

usage-based revenue in Asia Pacific.

Cost of Revenue

Nine Months Ended September 30,


2021

2020

Change

Cost of Revenue

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%


   (in thousands, except percentages)
Subscription and support
   $ 46,840    32 % $ 50,290    37 % $ (3,450 ) (7 )%
Professional services and other
   8,205    84 6,349    90 1,856 29






Total
   $ 55,045    35 % $ 56,639    39 % $ (1,594 ) (3 )%


	Six Months Ended June 30,
	2022					2021					Change
Cost of Revenue	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	33,925		32	%	$	30,434		31	%	$	3,491			11	%
Professional services and other		3,759		116			5,958		87			(2,199	)		(37	)
Total	$	37,684		35	%	$	36,392		34	%	$	1,292			4	%

In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, cost of subscription and support revenue ~~decreased~~increased $3.5 million, or 7%11%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The ~~decrease~~increase resulted primarily from ~~incremental costs from~~an increase in content delivery network, network hosting services, and third-party software integration expenses of $1.7 million, $1.5 million, and $1.0 million, respectively. These increases were offset by a decrease in partner commissions of $807. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $70.

In the ~~acquisition of Ooyala in the nine~~six months ended ~~September~~June 30, ~~2020 which did not recur in the nine months ended September 30, 2021.~~

~~Table of Contents~~

~~In the nine months ended September 30, 2021,~~2022, cost of professional services and other revenue ~~increased $1.9~~decreased $2.2 million, or ~~29%~~37%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This ~~increase~~decrease corresponds to ~~an increase~~a decrease in contractor expenses of ~~$1.7~~$2.2 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

2021.

Gross Profit

Nine Months Ended September 30,


2021

2020

Change

Gross Profit

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%


   (in thousands, except percentages)
Subscription and support
   $ 101,827    68 % $ 86,323    63 % $ 15,504    18 %
Professional services and other
   1,580    16 701    10 879    125








Total
   $ 103,407    65 % $ 87,024    61 % $ 16,383    19 %


	Six Months Ended June 30,
	2022						2021					Change
Gross Profit	Amount			Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	70,664			68	%	$	69,007		69	%	$	1,657			2	%
Professional services and other		(522	)		(16	)		890		13			(1,412	)		(159	)
Total	$	70,142			65	%	$	69,897		66	%	$	245			0	%

The overall gross profit percentage was 65% and ~~61%~~66% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Subscription and support gross profit increased ~~$15.5~~$1.7 million, or ~~18%~~2%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Professional services and other gross profit decreased by $1.4 million, or 159%, compared to the six months ended June 30, 2021. 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

Nine Months Ended September 30,


2021

2020

Change

Operating Expenses

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%


   (in thousands, except percentages)
Research and development
   $ 24,041 15 % $ 26,199    18 % $ (2,158 ) (8 )%
Sales and marketing
   52,730 33 42,370    29 10,360 24
General and administrative
   21,822 14 19,633    14 2,189 11
Merger-related
   300 0 5,768    4 (5,468 ) (95 )
Other (benefit) expense
   (1,965 ) (1 ) —      —   (1,965 ) N/A




Total
   $ 96,928 61 % $ 93,970    65 % $ 2,958 3 %



	Six Months Ended June 30,
	2022					2021						Change
Operating Expenses	Amount		Percentage of Revenue			Amount			Percentage of Revenue			Amount		%
	(in thousands, except percentages)
Research and development	$	16,609		15	%	$	16,139			15	%	$	470		3	%
Sales and marketing		36,249		34			34,279			32			1,970		6
General and administrative		16,643		15			14,477			14			2,166		15
Merger-related		747		1			255			—			492		193
Other (benefit) expense		1,149		1			(1,965	)		(2	)		3,114		(158	)

Research and Development

In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, research and development expense ~~decreased~~increased by ~~$2.2 million,~~$470 , or 8%3%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to ~~a decrease in employee-related and rent expenses of $1.6 million and $1.0 million, respectively. These decreases were partially offset by~~ an increase in stock-based compensation expense of ~~$423.~~

$804, offset by a decrease in employee-related expenses of $422. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $89.

Sales and Marketing

In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, sales and marketing expense increased by ~~$10.4~~$2.0 million, or ~~24%~~6%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to ~~increases~~an increase in ~~marketing campaigns, commission~~contractor, rent, stock-based compensation, travel, computer maintenance and ~~employee-related~~support of $580, $489, $343, $263, and $241, respectively. The remaining increase was due to various other expenses ~~of $4.7 million, $4.1 million, and $3.8 million, respectively. These increases were offset~~that, in aggregate, increased by ~~decreases in rent, contractor and travel expenses of $1.2 million, $550 and $404, respectively.~~

approximately $50.

General and Administrative

In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, general and administrative increased by $2.2 million or ~~11%~~15%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to increases in ~~outside accounting and legal fees,~~ employee-related, stock-based compensation, and ~~contractor~~recruiting and relocation expenses of ~~$995, $669, $330~~ $991, $845,and ~~$297,~~$231, respectively.

The remaining increase was due to various other expenses that, in aggregate, increased by approximately $100.

Merger-Related

In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, merger-related expenses ~~decreased $5.5 million~~increased $492.0 due to costs incurred in connection with ~~general merger~~the Wicket Acquisition in 2022.

Other (benefit) expense. On March 28, 2022 our CEO retired. Pursuant to a Transition Agreement that was entered into by the previous CEO and ~~related activities~~the Company in ~~2020 which did not recur in~~October 2021, the CEO, upon retirement, would be paid his annual base compensation through

December 31, 2022 and his 2022 annual bonus, the bonus amount to be determined by the Company’s 2022 performance. In accordance with generally accepted accounting principles we determined that the remaining base compensation and the current ~~period.~~

~~Other (benefit)~~estimate of the 2022 annual bonus should be accrued and the expense

recognized as of March 28, 2022. The total expense of $1.1 million also reflects $0.2 million of stock-based compensation expense as a result of the modification of certain awards pursuant to the Transition Agreement. Of the total annual base compensation and bonus accrued, $0.8 million remains unpaid as of June 30, 2022 and is reflected in Accrued Expenses on the Company’s Condensed Consolidated Balance Sheets.

On March 27, 2020, in response to the

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”~~"CARES Act"). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain employee retention credits. In the first quarter of 2021, we recognized a benefit of $1,965 from the CARES Act related to employee retention credits. The benefit was recorded as Other (benefit) expense.

~~Table of Contents~~

Liquidity and Capital Resources

Cash and cash equivalents.

Our cash and cash equivalents at ~~September~~June 30, ~~2021~~2022 were held for working capital purposes and were invested primarily in cash. We do not enter into investments for trading or speculative purposes. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$14.5~~$13.0 million and ~~$17.1~~$13.8 million, respectively, of cash and cash equivalents held by subsidiaries in international locations, including subsidiaries located in Japan and the United Kingdom. These earnings can be repatriated to the United

States tax-free but

could still be subject to foreign withholding taxes.

Nine Months Ended
September 30,

Condensed Consolidated Statements of Cash Flow Data

2021

2020

   (in thousands)
Cash flows provided by operating activities
   $ 14,748    $ 8,922
Cash flows used in investing activities
   $ (6,282 )    $ (7,271 )
Cash flows provided by financing activities
   $ 350    $ 5,759

On February 1, 2022, we acquired 100% of the outstanding shares of Wicket Labs, in exchange for 212,507 unregistered shares of our common stock valued at approximately $2 million and approximately $13.2 million in cash. 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. 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.


	Six Months Ended June 30,
Condensed Consolidated Statements of Cash Flow Data	2022			2021
	(in thousands)
Cash flows provided by operating activities	$	9,257		$	7,377
Cash flows used in investing activities	$	(25,485	)	$	(3,785	)
Cash flows provided by financing activities	$	93		$	157

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 operating activities.

Cash provided by operating activities consists primarily of net income 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$14.7~~$9.3 million. The cash ~~flow~~ provided by operating activities primarily resulted from net ~~income of $5 million and net~~

non-cash

charges of ~~$13.7~~$11.4 million, offset by net changes in our operating assets and liabilities of ~~$4.0~~$225 and a net loss of $1.9 million. Net

non-cash

expenses mainly consisted of ~~$6.3~~$4.2 million for depreciation and amortization and ~~$7.2~~$7.1 million for stock-based compensation. Cash outflows resulting from changes in our operating assets and liabilities consisted primarily of ~~a decrease in accrued expenses of $4.4 million,~~ an increase in ~~other assets~~accounts receivable of ~~$1.3~~$2.4 million, anand increase in prepaid expenses and other current assets of ~~$914,~~$2.6 million, a decrease in ~~operating leases~~accrued expenses of ~~$903,~~$1.2 million, and a decrease in accounts payable of $834, offset by an increase in deferred revenue of ~~$2.7~~$2.6 million, an increase in operating leases of $4.0 million, and a decrease in ~~accounts receivable~~other assets of ~~$710.~~$161. In summary, cash ~~provided by~~used in operating activities has increased when compared to the prior period due to ~~an increase in~~a net ~~income, offset by~~loss, and decreases in working capital.

Cash flows used in investing activities.

Cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$6.3~~$25.5 million, consisting primarily of ~~$4.7~~$13.2 million for cash paid for the acquisition of Wicket Labs, $6.5 million for the capitalization of

internal-use

software costs and ~~$1.6~~$5.8 million in capital expenditures to support the business.

Cash flows provided by financing activities.

Cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$350,~~$93, consisting ~~primarily~~ of ~~$2.2 million in~~ proceeds from the exercise of stock options, offset by $475 deferred acquisition payments and $1.4 million in other financing activities. Other financing activities reflects the repurchase of stock withheld for taxes for Section 16 executives’ vesting.

options.

Credit facility.

On December 28, 2020, we 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-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. We were in compliance with all covenants under the Line of Credit as of ~~September~~June 30, ~~2021.~~2022. As we have not currently drawn on the Line of Credit, there are no amounts outstanding as of ~~September~~June 30, ~~2021.~~

~~Table of Contents~~

2022.

Net operating loss carryforwards.

As of December 31, ~~2020,~~2021, we had federal and state net operating losses of approximately $161.8 million and ~~$82.4~~$89.2 million, respectively, which are available to offset future taxable income, if any, through ~~2039.~~2037 and 2041, respectively. We had federal and state net operating losses of approximately ~~$23.9~~$37.6 million and ~~$1.7~~$3.1 million, respectively, which are available to offset future taxable income, if any, indefinitely. We had federal and state research and development tax credits of ~~$7.8~~$9.0 million and ~~$4.8~~$5.5 million, respectively, which expire in various amounts through ~~2039.~~2041. Our net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~

2021.

Contractual Obligations and Commitments

Our principal commitments consist primarily of obligations under our leases for our office as well as content delivery network services, hosting and other support services. During the second quarter of 2022 we renewed agreements with our primary providers of content delivery network services, hosting and other support services. The terms of the two agreements comprised: 1) a minimum commitment of $90 million over three years and 2) a minimum commitment of $4.8 million over two years. 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, nor do we have any off-balance sheet arrangements.

Our contractual obligations as of December 31, ~~2020~~2021 are summarized in our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~

2021.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see

Recently Issued and Adopted Accounting Standards

in Note 2 to the condensed consolidated financial statements in this Quarterly Report on Form

10-Q.

~~Off-Balance~~

~~Sheet Arrangements~~

~~We do not have any special purpose entities or~~

~~off-balance~~

~~sheet arrangements.~~

Anticipated Cash Flows

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 and credit facility 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, and especially if interest rates continue to
rise, we may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to us or at all. Market volatility resulting from the

COVID-19

coronavirus pandemic, increase foreign exchange rate fluctuations, inflationary pressures,
interest rate increases or other factors could also adversely impact our ability to access capital as and when needed.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (in thousands, except share and per share data, unless otherwise noted)~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (in thousands, except share and per share data, unless otherwise noted)

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

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.

~~Table of Contents~~

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:


	Three Months Ended June 30,
	2022			2021
Revenues generated in locations outside the United States		48	%		47	%
Revenues in currencies other than the United States dollar (1)		27	%		27	%
Expenses in currencies other than the United States dollar (1)		18	%		17	%


	Six Months Ended June 30,
	2022			2021
Revenues generated in locations outside the United States		48	%		47	%
Revenues in currencies other than the United States dollar (1)		28	%		28	%
Expenses in currencies other than the United States dollar (1)		16	%		16	%

(1)

Percentage of revenues and expenses denominated in foreign currency for the three and six months ended June 30, 2022 and 2021:

Three Months Ended September 30,


2021

2020

Revenues generated in locations outside the United States
   47 % 48 %
Revenues in currencies other than the United States dollar (1)
   29 % 29 %
Expenses in currencies other than the United States dollar (1)
   18 % 17 %

Nine Months Ended September 30,

2021

2020

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 % 16 %

~~(1)~~

~~Percentage of revenues and expenses denominated in foreign currency for the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended
September 30, 2021

Three Months Ended
September 30, 2020


Revenues

Expenses

Revenues

Expenses

Euro
   8 % 2 % 8 % 1 %
British pound
   6 5 6 6
Japanese Yen
   12 3 12 3
Other
   3 8 3 7


Total
   29 % 18 % 29 % 17 %

Nine Months Ended
September 30, 2021

Nine Months Ended
September 30, 2020


Revenues

Expenses

Revenues

Expenses

Euro
   8 % 1 % 8 % 1 %
British pound
   6 5 6 6
Japanese Yen
   12 3 12 3
Other
   3 8 4 6


Total
   29 % 17 % 30 % 16 %


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	Revenues			Expenses			Revenues			Expenses
Euro		9	%		2	%		8	%		1	%
British pound		6			5			6			5
Japanese Yen		9			2			10			3
Other		3			9			3			8
Total		27	%		18	%		27	%		17	%


	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		1	%		7	%		0	%
British pound		6			5			6			5
Japanese Yen		11			2			12			3
Other		3			8			3			8
Total		28	%		16	%		28	%		16	%

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$7.5~~$7.8 million and ~~$9.0~~$8.3 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 (expense) income, ~~(expense),~~ net”, while exchange rate fluctuations on long-term intercompany accounts are recorded as a component of other comprehensive (loss) income, ~~(loss),~~ as they are considered part of our net investment.

~~Table of Contents~~

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, in addition to the Japanese Yen as result of our ongoing operations in Japan. During the six months ended June 30, 2022 the U.S. dollar has strengthened approximately 10% compared to the British pound and euro and over 15% compared to the Japanese Yen. Relative to foreign currency exposures existing at ~~September~~June 30, ~~2021,~~2022, a ~~10%~~20% unfavorable movement in foreign currency exchange rates would expose us to losses in earnings or cash flows or significantly diminish the fair value of our foreign currency financial instruments. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we estimated that a ~~10%~~20% unfavorable movement in foreign currency exchange rates would have decreased revenues by ~~$4.5~~$6.0 million, decreased expenses by ~~$2.6~~$3.6 million and decreased operating income by ~~$1.9~~$2.4 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 ~~September~~June 30, ~~2021.~~

2022.

Interest rate risk

We had cash and cash equivalents totaling ~~$45.3~~$27.8 million at ~~September~~June 30, ~~2021.~~2022. Cash and cash equivalents were invested primarily in cash and are held for working capital purposes. We do not use derivative financial instruments in our investment portfolio. Declines in interest rates, however, would reduce future interest income. We did not incur interest expense in the three months ended ~~September~~June 30, ~~2021.~~2022. An unfavorable movement of 10% in the interest rate on the Line of Credit would not have had a material effect on interest expense.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

Inflation Risk

We do not believe that inflation has had a material effect on our business. However, if our costs, in particular personnel, sales and marketing and hosting costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of ~~September~~June 30, ~~2021,~~2022, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2021,~~2022, our disclosure controls and procedures were effective in ensuring that material information

required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required

by Rule 13a-15(d) and 15d-15(d) of

the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

We, from time to time, are 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 our consolidated financial position, results of operations or cash flows based on the status of proceedings at this time.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

You should carefully consider the risks described in our annual report on Form

10-K

for the fiscal year ended December 31, ~~2020,~~2021, under the heading “Part I — Item 1A. Risk Factors,” together with the additional risk factor included below and all of the other information in this Quarterly Report on Form

10-Q.

Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

~~Table~~

Weakened global economic conditions may harm our industry, business and results of ~~Contents~~

~~If we do not successfully manage~~operations.

Our overall performance depends in part on worldwide economic conditions. Global financial developments and downturns seemingly unrelated to us or the ~~transition~~software industry may harm us. The U.S. and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, inflation and overall uncertainty with respect to the economy, including with respect to tariff and trade issues. In particular, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the ~~planned retirement~~banking sector, uncertainty over the future of ~~our Chief Executive Officer (“CEO”)~~the Euro zone and volatility in the value of the pound sterling and the ~~appointment of a new CEO, it could be viewed negatively by our customers~~Euro, including instability surrounding Brexit, and ~~shareholders~~instability resulting from the ongoing conflict between Russia and ~~could have an adverse impact on our business.~~

~~Jeff Ray plans to step down from his position as the Company’s CEO and as a member~~Ukraine. The effect of the ~~Board effective on the earlier of December 31, 2022~~conflict between Russia and Ukraine, including any resulting sanctions, export controls or ~~the date~~other restrictive actions that we hire a new CEO. Mr. Ray will remain as our CEO until such date and, once a new CEO is hired, will remain with the company as an advisor, assisting with the leadership transition, until December 31, 2022. The Board has an active search process underway to select the next CEO from internal and external candidates. Such leadership transitions can be inherently difficult to manage, and an inadequate transition of our CEO may cause disruption to our business, including to our relationships with customers, vendors and employees. In addition, if we are unable to attract and retain a qualified candidate to become our permanent CEO in a timely manner, our ability to meet our financial and operational goals and strategic plans may be ~~adversely impacted,~~imposed against governmental or other entities in, for example, Russia, have in the past contributed and may in the future contribute to disruption, instability and volatility in the global markets. We have operations, as well as current and potential new customers in Europe. If economic conditions in Europe and other key markets for our platform continue to remain uncertain or deteriorate further, it could adversely affect our customers’ ability or willingness to subscribe to our platform, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions or affect renewal rates, all of which could harm our operating results.

More recently, inflation rates, particularly in the U.S., have increased to levels not seen in several years and may continue to

rise , which may result in decreased demand for our products and services, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced government spending and volatility in financial ~~performance. It~~markets. Central banks worldwide, including the Federal Reserve in the U.S., have raised, and may ~~also make it more difficult~~again raise, interest rates in response to ~~retain~~concerns over rising inflation rates. There continues to be uncertainty in the changing market and ~~hire key employees.~~

~~ITEM 5.~~

~~OTHER INFORMATION~~

economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other domestic and foreign government agencies, related to the COVID-19 pandemic and concerns over inflation risk.

ITEM 5. OTHER INFORMATION

Our policy governing transactions in our securities by directors, officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule

10b5-1

under the Exchange Act. We have been advised that our Chief Legal Officer, David Plotkin, has entered into a trading plan in accordance with

Rule 10b5-1 and

our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

We anticipate that, as permitted by Rule

10b5-1

and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule

10b5-1

and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form

10-Q

and

10-K

filed with the Securities and Exchange Commission. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan.

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 6. EXHIBITS


Exhibits


3.1 (1)		Eleventh Amended and Restated Certificate of Incorporation.

3.2 (2)		Amended and Restated By-Laws.

4.1 (3)		Form of Common Stock certificate of the Registrant.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1^		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		~~Inline~~ XBRL Instance Document.

101.SCH		~~Inline~~ XBRL Taxonomy Extension Schema Document.

101.CAL		~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		~~Inline~~ XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

(1)

~~(1)~~

~~Filed as Exhibit 3.2 to Amendment No. 5 to Registrant’s Registration Statement on Form~~

~~S-1~~

Filed as Exhibit 3.2 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

~~(2)~~

~~Filed as Exhibit 3.3 to Amendment No. 5 to Registrant’s Registration Statement on Form~~

~~S-1~~

~~filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.~~

~~(3)~~

~~Filed as Exhibit 4.1 to Amendment No. 5 to Registrant’s Registration Statement on Form~~

~~S-1~~

~~filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.~~

^	~~Furnished herewith.~~

(2)

Filed as Exhibit 3.3 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

(3)

Filed as Exhibit 4.1 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

^ Furnished herewith.

SIGNATURES

Pursuant to the requirements 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.


			BRIGHTCOVE INC.
			(Registrant)

Date: ~~October 27, 2021~~August 2, 2022			By:		~~/s/ Jeff Ray~~
			/s/ Marc DeBevoise
					~~Jeff Ray~~
	Marc DeBevoise
				Chief Executive Officer
					( Principal Executive ~~Officer~~ )Officer)

Date: ~~October 27, 2021~~August 2, 2022	By:
		~~By:~~		/s/ Robert Noreck

					Robert Noreck
					Chief Financial Officer
					( Principal Financial ~~Officer~~ )Officer)


Delaware		20-1579162
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	~~Trading~~ ~~Symbol(s)~~	Name of each exchange on which registered
Common Stock, par value $0.001 per share	BCOV	~~BCOV~~	The NASDAQ Global Market


Large accelerated filer	☐	☐	Accelerated filer		☒

Non-accelerated filer	☐	☐	Smaller reporting company		☐

			Emerging growth company	☐	☐


	September 30, 2021			December 31, 2020

	(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	45,285		$	37,472
Accounts receivable, net of allowance of $443 and $648 at September 30, 2021 and December 31, 2020, respectively		28,138			29,305
Prepaid expenses		8,965			5,760
Other current assets		11,411			12,978

Total current assets		93,799			85,515
Property and equipment, net		18,777			15,968
Operating lease right-of-use asset		5,668			8,699
Intangible assets, net		8,213			10,465
Goodwill		60,902			60,902
Other assets		6,491			5,254

Total assets	$	193,850		$	186,803

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,007		$	10,456
Accrued expenses		21,082			25,397
Operating lease liability		2,176			4,346
Deferred revenue		61,739			58,741

Total current liabilities		96,004			98,940
Operating lease liability, net of current portion		3,734			5,498
Other liabilities		1,536			2,763

Total liabilities	$	101,274			107,201
Commitments and contingencies (Note 8)		0			0
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued		0—			0—
Common stock, $0.001 par value; 100,000,000 shares authorized; 41,175,854 and 40,152,021 shares issued at September 30, 2021 and December 31, 2020, respectively		41			40
Additional paid-in capital		295,464			287,059
Treasury stock, at cost; 135,000 shares		(871	)		(871	)
Accumulated other comprehensive loss		(600	)		(188	)
Accumulated deficit		(201,458	)		(206,438	)

Total stockholders’ equity		92,576			79,602

Total liabilities and stockholders’ equity	$	193,850		$	186,803


	June 30, 2022			December 31, 2021
	(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	27,804		$	45,739
Accounts receivable, net of allowance of $299 and $353 at June 30, 2022 and December 31, 2021, respectively		32,567			29,866
Prepaid expenses		10,911			7,792
Other current assets		10,351			10,833
Total current assets		81,633			94,230
Property and equipment, net		32,538			20,514
Operating lease right-of-use asset		19,048			24,891
Intangible assets, net		12,088			9,276
Goodwill		74,837			60,902
Other assets		6,465			6,655
Total assets	$	226,609		$	216,468
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,956		$	11,039
Accrued expenses		22,907			20,925
Operating lease liability		2,595			2,600
Deferred revenue		64,567			62,057
Total current liabilities		102,025			96,621
Operating lease liability, net of current portion		20,970			22,801
Other liabilities		877			786
Total liabilities	$	123,872			120,208
Commitments and contingencies (Note 8)
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 42,029,575 and 41,384,643 shares issued at June 30, 2022 and December 31, 2021, respectively		42			41
Additional paid-in capital		308,307			298,793
Treasury stock, at cost; 135,000 shares		(871	)		(871	)
Accumulated other comprehensive loss		(1,762	)		(662	)
Accumulated deficit		(202,979	)		(201,041	)
Total stockholders’ equity		102,737			96,260
Total liabilities and stockholders’ equity	$	226,609		$	216,468

☒
☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

☐
☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


		Page
PART I. FINANCIAL INFORMATION			4
Item 1. Financial Statements (Unaudited)			4
Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 andDecember 31, ~~2020~~ 2021			4
Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and2021 ~~and 2020~~			5
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and2021 ~~and 2020~~			6
Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021			7
Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, 2022 and2021 ~~and 2020~~			8
Notes to Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15	17

Item 3. Quantitative and Qualitative Disclosures About Market Risk			28	31

Item 4. Controls and Procedures			30	32

PART II. OTHER INFORMATION			30	33

Item 1. Legal Proceedings			30	33

Item 1A. Risk Factors			30	33

Item 5. Other Information			31	34

Item 6. Exhibits			32	35
~~Signatures~~
Signatures	33	36


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020

	(in thousands, except share and per share data)
Revenue:
Subscription and support revenue	$	49,226		$	46,338	$	148,667		$	136,613
Professional services and other revenue		2,937			2,746		9,785			7,050

Total revenue		52,163			49,084		158,452			143,663
Cost of revenue:
Cost of subscription and support revenue		16,406			15,735		46,840			50,290
Cost of professional services and other revenue		2,247			2,363		8,205			6,349

Total cost of revenue		18,653			18,098		55,045			56,639

Gross profit		33,510			30,986		103,407			87,024
Operating expenses:
Research and development		7,902			8,215		24,041			26,199
Sales and marketing		18,451			14,813		52,730			42,370
General and administrative		7,345			6,694		21,822			19,633
Merger-related		45			0		300			5,768
Other (benefit) expense		—			—		(1,965	)		—

Total operating expenses		33,743			29,722		96,928			93,970

(Loss) income from operations		(233	)		1,264		6,479			(6,946	)
Other (expense) income, net		(319	)		204		(937	)		(291	)

(Loss) income before income taxes		(552	)		1,468		5,542			(7,237	)
Provision for income taxes		468			154		562			597

Net (loss) income	$	(1,020	)	$	1,314	$	4,980		$	(7,834	)
Net (loss) income per share—basic and diluted
Basic	$	(0.02	)	$	0.03	$	0.12		$	(0.20	)
Diluted	$	(0.02	)	$	0.03	$	0.12		$	(0.20	)
Weighted-average shares—basic and diluted
Basic		40,934,689			39,682,337		40,570,817			39,319,703
Diluted		40,934,689			40,645,982		42,237,438			39,319,703


	Nine Months Ended September 30,
	2021			2020

	(in thousands)
Operating activities
Net income (loss)	$	4,980		$	(7,834	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,284			6,497
Stock-based compensation		7,234			6,724
Provision for reserves on accounts receivable		246			461
Changes in assets and liabilities:
Accounts receivable		710			(1,433	)
Prepaid expenses and other current assets		(914	)		(6,414	)
Other assets		(1,273	)		(1,247	)
Accounts payable		79			104
Accrued expenses		(4,402	)		3,410
Operating leases		(903	)		(13	)
Deferred revenue		2,707			8,667

Net cash provided by operating activities		14,748			8,922
Investing activities
Purchases of property and equipment		(1,625	)		(2,163	)
Capitalized internal-use software costs		(4,657	)		(5,108	)

Net cash used in investing activities		(6,282	)		(7,271	)
Financing activities
Proceeds from exercise of stock options		2,200			1,207
Deferred acquisition payments		(475	)		—
Proceeds from debt		—			10,000
Debt paydown		—			(5,000	)
Other financing activities		(1,375	)		(448	)

Net cash provided by financing activities		350			5,759
Effect of exchange rate changes on cash and cash equivalents		(1,003	)		163

Net increase in cash and cash equivalents		7,813			7,573
Cash and cash equivalents at beginning of period		37,472			22,759

Cash and cash equivalents at end of period	$	45,285		$	30,332

Supplemental disclosure of cash flow information
Cash paid for operating lease liabilities	$	3,505		$	5,087
Cash paid for income taxes	$	681		$	993


	Allowance for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	353
Current provision for credit losses		70
Write-offs against allowance		(124	)
Balance as of June 30, 2022	$	299


	Allowance for Credit Losses
	(in thousands)
Balance as of December 31, 2020	$	648
Current provision for credit losses		303
Write-offs against allowance		(451	)
Recoveries		(57	)
Balance as of September 30, 2021	$	443


(in thousands)	Accounts Receivable, net		Contract Assets (current)		Deferred Revenue (current)		Deferred Revenue (non-current)		Total Deferred Revenue
Balance at December 31, 2021	$	29,866	$	2,375	$	62,057	$	114	$	62,171
Balance at June 30, 2022		32,567		2,006		64,567		285		64,852


	Accounts Receivable, net		Contract Assets (current)		Deferred Revenue (current)		Deferred Revenue (non- current)		Total Deferred Revenue
Balance at December 31, 2020	$	29,305	$	2,078	$	58,741	$	811	$	59,552
Balance at September 30, 2021		28,138		2,311		61,739		50		61,789


	June 30, 2022
Description	Contracted Maturity	Cost		Fair Market Value
	(in thousands)
Cash	Demand	$	27,763	$	27,763
Money market funds	Demand		41		41
Total cash and cash equivalents		$	27,804	$	27,804


	September 30, 2021
Description	Contracted Maturity		Cost		Fair Market Value
Cash		Demand	$	45,244	$	45,244
Money market funds		Demand		41		41

Total cash and cash equivalents			$	45,285	$	45,285


	December 31, 2020
Description	Contracted Maturity		Cost		Fair Market Value
Cash		Demand	$	37,431	$	37,431
Money market funds		Demand		41		41

Total cash and cash equivalents			$	37,472	$	37,472


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2020		2,110,486		$	9.19
Granted		92,905			16.05
Exercised		(254,502	)		8.65			$	2,724
Canceled		(145,930	)		10.17

Outstanding at September 30, 2021		1,802,959		$	9.56		5.94	$	4,177

Exercisable at September 30, 2021		1,313,116		$	8.96		5.23	$	3,522


	S-RSU Shares			Weighted Average Grant Date Fair Value		P-RSU Shares			Weighted Average Grant Date Fair Value		Total RSU Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2020		2,000,416		$	10.40		1,587,801		$	10.30		3,588,217		$	10.35
Granted		1,039,266			14.44		64,011			12.65		1,103,277			14.33
Vested and issued		(546,818	)		9.11		(181,910	)		8.74		(728,728	)		9.01
Canceled		(411,567	)		11.38		(365,909	)		9.50		(777,476	)		10.49

Unvested at September 30, 2021		2,081,297		$	12.56		1,103,993		$	10.97		3,185,290		$	12.00


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020

	(in thousands, except share and per share data)
Revenue:
Subscription and support revenue	$	49,226		$	46,338	$	148,667		$	136,613
Professional services and other revenue		2,937			2,746		9,785			7,050

Total revenue		52,163			49,084		158,452			143,663
Cost of revenue:
Cost of subscription and support revenue		16,406			15,735		46,840			50,290
Cost of professional services and other revenue		2,247			2,363		8,205			6,349

Total cost of revenue		18,653			18,098		55,045			56,639

Gross profit		33,510			30,986		103,407			87,024
Operating expenses:
Research and development		7,902			8,215		24,041			26,199
Sales and marketing		18,451			14,813		52,730			42,370
General and administrative		7,345			6,694		21,822			19,633
Merger-related		45			—		300			5,768
Other (benefit) expense		—			—		(1,965	)		—

Total operating expenses		33,743			29,722		96,928			93,970

(Loss) income from operations		(233	)		1,264		6,479			(6,946	)
Other (expense) income, net		(319	)		204		(937	)		(291	)

(Loss) income before income taxes		(552	)		1,468		5,542			(7,237	)
Provision for income taxes		468			154		562			597

Net (loss) income	$	(1,020	)	$	1,314	$	4,980		$	(7,834	)
Net (loss) income per share—basic and diluted
Basic	$	(0.02	)	$	0.03	$	0.12		$	(0.20	)
Diluted	$	(0.02	)	$	0.03	$	0.12		$	(0.20	)
Weighted-average shares—basic and diluted
Basic		40,934,689			39,682,337		40,570,817			39,319,703
Diluted		40,934,689			40,645,982		42,237,438			39,319,703


	Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		2	%		8	%		1	%
British pound		6			5			6			6
Japanese Yen		12			3			12			3
Other		3			8			3			7

Total		29	%		18	%		29	%		17	%


	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		1	%		8	%		1	%
British pound		6			5			6			6
Japanese Yen		12			3			12			3
Other		3			8			4			6

Total		29	%		17	%		30	%		16	%