Table of Contents

ne

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

☒

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

For the quarterly period ended March 31, 20222023

OR

☐

☐

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

For the transition period from to

Commission File Number:

001-35429

BRIGHTCOVE INC.

INC.

(Exact name of registrant as specified in its charter)

Delaware

20-1579162

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

281 Summer Street

Boston, MA MA02210

(Address of principal executive offices)

(888)

(888) 882-1880

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T
(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the
Exchange Act.

Large accelerated filer

☐

☐

Accelerated filer

☒

Non-accelerated filer

☐

☐

Smaller reporting company

☐

Emerging growth company

☐

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2
of the Exchange Act). Yes ☐
No ☒

As of April 25

, 2022,27, 2023, there were 41,552,08842,857,371 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Table of Contents

BRIGHTCOVE INC.

Table of Contents

Page

PART I. FINANCIAL INFORMATION

4

Item 1. Financial Statements (Unaudited)

4

Condensed Consolidated Balance Sheets as of March 31, 20222023 andDecember 31, 2021

2022

4

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and2022 and 2021

5

Condensed Consolidated Statements of Comprehensive (Loss) IncomeLoss for the three months ended March 31, 2023 and2022 and 2021

6

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 20222023 and 20212022

7

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and2022 and 2021

8

Notes to Condensed Consolidated Financial Statements

9

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

17

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

28

26

Item 4. Controls and Procedures

29

28

PART II. OTHER INFORMATION

29

28

Item 1. Legal Proceedings

29

28

Item 1A. Risk Factors

29

28

Item 5. Other Information

30

Item 6. Exhibits

31

Signatures

32

2

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q
contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form
10-Q
that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements related to adding employees; statements related to potential benefits of acquisitions; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in Item 1A of Part III of this Quarterly Report on Form
10-Q,
and the risks discussed in our other Securities and Exchange Commission, or SEC, filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. However, any further disclosures made on related subjects in our subsequent reports filed with the

SEC should be consulted. Forward-looking statements in this Quarterly Report on Form

10-Q
may include statements about:

•
our ability to achieve profitability;
•
our competitive position and the effect of competition in our industry;
•
our ability to retain and attract new customers;
•
our ability to penetrate existing markets and develop new markets for our services;
•
our ability to retain or hire qualified accounting and other personnel;
•
our ability to successfully integrate acquired businesses;
•
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•
our ability to maintain the security and reliability of our systems;
•
our estimates with regard to our future performance and total potential market opportunity;
•
our estimates regarding our anticipated results of operations, future revenue, bookings growth, capital requirements, and our needs for additional financing;financing and broader economic challenges, including interest rate fluctuations; and
•
our goals and strategies, including those related to revenue and bookings growth.

3

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Brightcove Inc.

Condensed Consolidated Balance Sheets

(unaudited)

  
March 31, 2022
  
December 31, 2021
 
       
  
(in thousands, except share
and per share data)
 
Assets
         
Current assets:         
Cash and cash equivalents  $26,705  $45,739 
Accounts receivable, net of allowance of $379 and $353 at March 31, 2022 and December 31, 2021, respectively   34,037   29,866 
Prepaid expenses   10,740   7,792 
Other current assets   11,099   10,833 
          
Total current assets   82,581   94,230 
Property and equipment, net   26,317   20,514 
Operating lease
right-of-use
asset
   23,655   24,891 
Intangible assets, net   12,881   9,276 
Goodwill   74,838   60,902 
Other assets   6,612   6,655 
          
Total assets  $226,884  $216,468 
          
Liabilities and stockholders’ equity
         
Current liabilities:         
Accounts payable  $14,027  $11,039 
Accrued expenses   22,851   20,925 
Operating lease liability   2,950   2,600 
Deferred revenue   64,110   62,057 
          
Total current liabilities   103,938   96,621 
Operating lease liability, net of current portion   21,920   22,801 
Other liabilities   932   786 
          
Total liabilities  $126,790   120,208 
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; 41,685,163 and 41,384,643 shares issued at March 31, 2022 and December 31, 2021, respectively   42   41 
Additional
paid-in
capital
   304,506   298,793 
Treasury stock, at cost; 135,000 shares   (871)   (871) 
Accumulated other comprehensive loss   (905)   (662) 
Accumulated deficit   (202,678)  (201,041) 
          
Total stockholders’ equity   100,094   96,260 
          
Total liabilities and stockholders’ equity  $226,884  $216,468 
          

 

 

March 31, 2023

 

 

December 31, 2022

 

 

 

(in thousands, except share
 and per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,478

 

 

$

31,894

 

Accounts receivable, net of allowance of $343 and $294 at March 31, 2023 and December 31, 2022, respectively

 

 

40,623

 

 

 

26,004

 

Prepaid expenses

 

 

9,786

 

 

 

8,700

 

Other current assets

 

 

11,513

 

 

 

10,722

 

Total current assets

 

 

74,400

 

 

 

77,320

 

Property and equipment, net

 

 

42,155

 

 

 

39,677

 

Operating lease right-of-use asset

 

 

18,025

 

 

 

18,671

 

Intangible assets, net

 

 

9,261

 

 

 

10,279

 

Goodwill

 

 

74,859

 

 

 

74,859

 

Other assets

 

 

6,750

 

 

 

7,007

 

Total assets

 

$

225,450

 

 

$

227,813

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

13,014

 

 

$

11,326

 

Accrued expenses

 

 

21,692

 

 

 

26,877

 

Operating lease liability

 

 

4,218

 

 

 

4,157

 

Deferred revenue

 

 

71,537

 

 

 

61,597

 

Total current liabilities

 

 

110,461

 

 

 

103,957

 

Operating lease liability, net of current portion

 

 

19,740

 

 

 

20,528

 

Other liabilities

 

 

959

 

 

 

981

 

Total liabilities

 

$

131,160

 

 

 

125,466

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized;
   no shares issued

 

 

—

 

 

 

—

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 42,992,371 and 42,449,677 shares issued at March 31, 2023 and December 31, 2022, respectively

 

 

43

 

 

 

42

 

Additional paid-in capital

 

 

318,293

 

 

 

314,825

 

Treasury stock, at cost; 135,000 shares

 

 

(871

)

 

 

(871

)

Accumulated other comprehensive loss

 

 

(1,405

)

 

 

(1,593

)

Accumulated deficit

 

 

(221,770

)

 

 

(210,056

)

Total stockholders’ equity

 

 

94,290

 

 

 

102,347

 

Total liabilities and stockholders’ equity

 

$

225,450

 

 

$

227,813

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Operations

(unaudited)

   
Three Months Ended March 31,
 
   
2022
  
2021
 
        
   
(in thousands, except share and per share data)
 
Revenue:
   
Subscription and support revenue  $51,601  $50,839 
Professional services and other revenue   1,778   3,978 
          
Total revenue   53,379   54,817 
Cost of revenue:         
Cost of subscription and support revenue   16,982   15,678 
Cost of professional services and other revenue   1,998   3,490 
          
Total cost of revenue   18,980   19,168 
          
Gross profit   34,399   35,649 
Operating expenses:         
Research and development   8,237   8,284 
Sales and marketing   18,288   16,149 
General and administrative   8,089   7,059 
Merger-related   594   0 
Other
expense (benefit)
   1,149   (1,965) 
          
Total operating expenses   36,357   29,527 
          
(Loss) income from operations   (1,958)   6,122 
Other (expense), net

   (387)   (735) 
          
(Loss) income before income taxes   (2,345)   5,387 
(Benefit) provision for income taxes   (708)   257 
          
Net (loss) income  $(1,637)  $5,130 
Net (loss) income per share—basic and diluted         
Basic  $(0.04)  $0.13 
Diluted  $(0.04)  $0.12 
Weighted-average shares—basic and diluted         
Basic   41,436   40,154 
Diluted   41,436   42,480 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands, except share and per share data)

 

Revenue:

 

 

 

 

 

 

Subscription and support revenue

 

$

47,102

 

 

$

51,601

 

Professional services and other revenue

 

 

1,961

 

 

 

1,778

 

Total revenue

 

 

49,063

 

 

 

53,379

 

Cost of revenue:

 

 

 

 

 

 

Cost of subscription and support revenue

 

 

18,265

 

 

 

16,982

 

Cost of professional services and other revenue

 

 

2,002

 

 

 

1,998

 

Total cost of revenue

 

 

20,267

 

 

 

18,980

 

Gross profit

 

 

28,796

 

 

 

34,399

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

9,866

 

 

 

8,237

 

Sales and marketing

 

 

19,465

 

 

 

18,288

 

General and administrative

 

 

10,064

 

 

 

8,089

 

Merger-related

 

 

145

 

 

 

594

 

Other expense

 

 

—

 

 

 

1,149

 

Total operating expenses

 

 

39,540

 

 

 

36,357

 

Loss from operations

 

 

(10,744

)

 

 

(1,958

)

Other expense, net

 

 

(543

)

 

 

(387

)

Loss before income taxes

 

 

(11,287

)

 

 

(2,345

)

Provision (benefit) for income taxes

 

 

427

 

 

 

(708

)

Net loss

 

$

(11,714

)

 

$

(1,637

)

Net loss per share—basic and diluted

 

 

 

 

 

 

         Basic

 

$

(0.28

)

 

$

(0.04

)

         Diluted

 

$

(0.28

)

 

$

(0.04

)

Weighted-average shares—basic and diluted

 

 

 

 

 

 

         Basic

 

 

42,528

 

 

 

41,436

 

         Diluted

 

 

42,528

 

 

 

41,436

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Loss

(unaudited)

   
Three Months Ended March 31,
 
   
2022
  
2021
 
        
   
(in thousands)
 
Net (loss) income  $(1,637)  $5,130 
Other comprehensive income:         
Foreign currency translation adjustments   (243)   (209) 
          
Comprehensive (loss) income  $(1,880)  $4,921 
          

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net loss

 

$

(11,714

)

 

$

(1,637

)

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

188

 

 

 

(243

)

Comprehensive loss

 

$

(11,526

)

 

$

(1,880

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)


   
Three Months Ended March 31,
 
   
2022
  
2021
 
        
   
(in thousands, except share data)
 
Shares of common stock issued
         
Balance, beginning of period   41,384,643   40,152,021 
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units   300,520   260,556 
          
Balance, end of period   41,685,163   40,412,577 
          
Shares of treasury stock
         
Balance, beginning of period   (135,000)   (135,000) 
          
Balance, end of period   (135,000)   (135,000) 
          
Par value of common stock issued
         
Balance, beginning of period  $41  $40 
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units   0   0—   
Common stock issued upon acquisition   1   0   
          
Balance, end of period  $42  $40 
          
Value of treasury stock
         
Balance, beginning of period  $(871)  $(871) 
          
Balance, end of period  $(871)  $(871) 
          
Additional
paid-in
capital
         
Balance, beginning of period  $298,793  $287,059 
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units, net of tax   100   1,008 
Stock-based compensation expense   3,627   2,336 
Common stock issued upon acquisition   1,986   0   
          
Balance, end of period  $304,506  $290,403 
          
Accumulated deficit
         
Balance, beginning of period  $(201,041)  $(206,438) 
Net (loss) income   (1,637)   5,130 
          
Balance, end of period  $(202,678)  $(201,308) 
          
Accumulated other comprehensive loss
         
Balance, beginning of period  $(662)  $(188) 
Foreign currency translation adjustment   (243)   (209) 
          
Balance, end of period  $(905)  $(397) 
          
Total stockholders’ equity
  $100,094  $87,867 
          

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands, except share data)

 

Shares of common stock issued

 

 

 

 

 

 

Balance, beginning of period

 

 

42,449,677

 

 

 

41,384,643

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

 

 

542,694

 

 

 

300,520

 

Balance, end of period

 

 

42,992,371

 

 

 

41,685,163

 

Shares of treasury stock

 

 

 

 

 

 

Balance, beginning of period

 

 

(135,000

)

 

 

(135,000

)

Balance, end of period

 

 

(135,000

)

 

 

(135,000

)

Par value of common stock issued

 

 

 

 

 

 

Balance, beginning of period

 

$

42

 

 

$

41

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units

 

 

1

 

 

 

—

 

Common stock issued upon acquisition

 

 

—

 

 

 

1

 

Balance, end of period

 

$

43

 

 

$

42

 

Value of treasury stock

 

 

 

 

 

 

Balance, beginning of period

 

$

(871

)

 

$

(871

)

Balance, end of period

 

$

(871

)

 

$

(871

)

Additional paid-in capital

 

 

 

 

 

 

Balance, beginning of period

 

$

314,825

 

 

$

298,793

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock units, net of tax

 

 

(226

)

 

 

100

 

Stock-based compensation expense

 

 

3,694

 

 

 

3,627

 

Common stock issued upon acquisition

 

 

 

 

 

1,986

 

Balance, end of period

 

$

318,293

 

 

$

304,506

 

Accumulated deficit

 

 

 

 

 

 

Balance, beginning of period

 

$

(210,056

)

 

$

(201,041

)

Net loss

 

 

(11,714

)

 

 

(1,637

)

Balance, end of period

 

$

(221,770

)

 

$

(202,678

)

Accumulated other comprehensive loss

 

 

 

 

 

 

Balance, beginning of period

 

$

(1,593

)

 

$

(662

)

Foreign currency translation adjustment

 

 

188

 

 

 

(243

)

Balance, end of period

 

$

(1,405

)

 

$

(905

)

Total stockholders’ equity

 

$

94,290

 

 

$

100,094

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

   
Three Months Ended March 31,
 
   
2022
  
2021
 
        
   
(in thousands)
 
Operating activities
         
Net (loss) income  $(1,637)  $5,130 
Adjustments to reconcile net loss to net cash used in operating activities:         
Depreciation and amortization   2,061   2,163 
Stock-based compensation   3,479   2,292 
Provision for reserves on accounts receivable   106   71 
Changes in assets and liabilities:         
Accounts receivable   (3,802)   (1,585) 
Prepaid expenses and other current assets   (1,550)   (1,390) 
Other assets   54   (919) 
Accounts payable   347   (425) 
Accrued expenses   (1,980)   (5,797) 
Operating leases   705   (626) 
Deferred revenue   1,527   482 
          
Net cash used in operating activities   (690)   (604) 
Investing activities
         
Cash paid for acquisition, net of cash acquired   (13,176)   0   
Purchases of property and equipment   (1,884)   (468) 
Capitalized
internal-use
software costs
   (2,882)   (1,054) 
          
Net cash used in investing activities   (17,942)   (1,522) 
Financing activities
         
Proceeds from exercise of stock options   100   1,095 
Deferred acquisition payments   0     (475) 
Other financing activities   0     (87) 
          
Net cash provided by financing activities   100   533 
Effect of exchange rate changes on cash and cash equivalents   (502)   (727) 
          
Net decrease in cash and cash equivalents   (19,034)   (2,320) 
Cash and cash equivalents at beginning of period   45,739   37,472 
          
Cash and cash equivalents at end of period  $26,705  $35,152 
          
Supplemental disclosure of cash flow information
         
Cash paid for operating lease liabilities  $796  $1,477 
Cash paid for income taxes  $216  $314 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(11,714

)

 

$

(1,637

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,949

 

 

 

2,061

 

Stock-based compensation

 

 

3,543

 

 

 

3,479

 

Provision for reserves on accounts receivable

 

67

 

 

 

106

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(14,713

)

 

 

(3,802

)

Prepaid expenses and other current assets

 

 

(986

)

 

 

(1,550

)

Other assets

 

 

314

 

 

 

54

 

Accounts payable

 

 

956

 

 

 

347

 

Accrued expenses

 

 

(3,999

)

 

 

(1,980

)

Operating leases

 

 

(81

)

 

 

705

 

Deferred revenue

 

 

10,032

 

 

 

1,527

 

Net cash used in operating activities

 

 

(12,632

)

 

 

(690

)

Investing activities

 

 

 

 

 

 

Cash paid for acquisition, net of cash acquired

 

 

—

 

 

 

(13,176

)

Purchases of property and equipment

 

 

(952

)

 

 

(1,884

)

Capitalized internal-use software costs

 

 

(3,930

)

 

 

(2,882

)

Net cash used in investing activities

 

 

(4,882

)

 

 

(17,942

)

Financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

—

 

 

 

100

 

Deferred acquisition payments

 

 

(1,700

)

 

 

—

 

Other financing activities

 

 

(225

)

 

 

—

 

Net cash (used in) provided by financing activities

 

 

(1,925

)

 

 

100

 

Effect of exchange rate changes on cash and cash equivalents

 

 

23

 

 

 

(502

)

Net decrease in cash and cash equivalents

 

 

(19,416

)

 

 

(19,034

)

Cash and cash equivalents at beginning of period

 

 

31,894

 

 

 

45,739

 

Cash and cash equivalents at end of period

 

$

12,478

 

 

$

26,705

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for operating lease liabilities

 

$

874

 

 

$

796

 

Cash paid for income taxes

 

$

505

 

 

$

216

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

Table of Contents

Brightcove Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

1. Business Description and Basis of Presentation

Business Description

Brightcove Inc. (the “Company”) is a leading global provider of cloud services for video which enable its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner.

The Company is headquartered in Boston, Massachusetts and was incorporated in the state of Delaware on August 24, 2004.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10-K
for the year ended December 31, 2021.
2022.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 20212022 contained in the Company’s Annual Report on Form

10-K
and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations for the three months ended March 31, 20222023 and 2021.2022. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

2. Quarterly Update to Significant Accounting Policies

Allowance for Doubtful Accounts

The following details the changes in the Company’s reserve allowance for estimated credit losses for accounts receivable for the period:

 

 

Allowance for Credit Losses

 

 

 

(in thousands)

 

Balance as of December 31, 2022

 

$

294

 

Current provision for credit losses

 

 

67

 

Write-offs against allowance

 

 

(18

)

Balance as of March 31, 2023

 

$

343

 

9
Table of Contents
   
Allowance for Credit Losses
 
   
(in thousands)
 
Balance as of December 31, 2021  $353 
Current provision for credit losses   106 
Write-offs against allowance   (80)
Recoveries   0— 
      
Balance as of March 31, 2022  $379 
      

Estimated credit losses for unbilled trade accounts receivable were not material.

Other Expense (Benefit)

.

Other expense, (benefit), reflects other operating costs (or benefits) that do not directly relate to research and development, sales and marketing, general and administrative, and merger related.

The Company did not incur expenses of this nature during the quarter ended March 31, 2023.

On March 28, 2022, the CEOChief Executive Officer (“CEO”) of the Company retired. Pursuant to a Transition Agreement that was entered into by the CEO and the Company in October 2021, the Company recorded $1.1$1.1 million of expense reflecting both wages and stock compensation in the first quarter of 2022.

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”). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain refundable employee retention credits. In the first quarter of 2021, the Company recognized a benefit of $2.0
million from the CARES Act related to employee retention credits. The Company recognizes such government relief when it is reasonably assured that it qualifies for the relief, the underlying expense has been incurred and it is probable that the Company will receive it. Credits associated with government relief are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expense the related costs for which the relief is intended to compensate. 

Recently Issued and Adopted Accounting Pronouncements

9

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In November 2021,March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10,

Government Assistance2023-01, Leases (Topic 832)842): Disclosure by Business Entities about Government Assistance
Common Control Arrangements,
which improves the transparency of government assistance received by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on an entity’s financial statements. The guidance is effective for annual periods beginning after December 15, 2021,amends Accounting Standards Codification ("ASC") 842 with early adoption permitted. Effective January 1, 2022, the Company early adopted ASU 2021-10 on a prospective basis. Please see
Other Expense (Benefit)
section of these Notesrespect to Condensed Consolidated Financial Statements for government assistance received by the Company in 2021.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606).arrangements between related parties under common control. The guidance is effective for interim and annual periods beginning after December 15, 2022,25, 2023, with early adoption permitted. Effective January 1, 2022,The Company does not expect the Company early adopted ASU 2021-08 on a prospective basis. The impact of the adoption of this standard on the Company’s consolidated financial statements was notto be material.

3. Revenue from Contracts with Customers

The Company primarily derives revenue from the sale of its online video platform, which enables its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from three primary sources: (1) the subscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which

include initiation, set-up and customization
services.

The following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with

customers.

(in thousands)

 

Accounts Receivable, net

 

 

Contract Assets (current)

 

 

Deferred Revenue (current)

 

 

Deferred Revenue (non-current)

 

 

Total Deferred Revenue

 

Balance at December 31, 2022

 

$

26,004

 

 

$

1,786

 

 

$

61,597

 

 

$

360

 

 

$

61,957

 

Balance at March 31, 2023

 

 

40,623

 

 

 

1,788

 

 

 

71,537

 

 

 

393

 

 

 

71,930

 

   
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 March 31, 2022   34,037    2,498    64,110    299    64,409 
10
Table

Revenue recognized for the three months ended March 31, 2023 from amounts included in deferred revenue at the beginning of Contents

the period was approximately $30.5 million. Revenue recognized for the three months ended March 31, 2022 from amounts included in deferred revenue at the beginning of the period was approximately $32.8 million. Revenue recognized during the three months ended March 31, 2021 from amounts included in deferred revenue at the beginning of the period was approximately $31.2$32.8 million. During the three months ended March 31, 2022,2023, the Company did not recognize a material amount of revenue from performance obligations satisfied or partially satisfied in previous periods.

The assets recognized for costs to obtain a contract were $12.3$12.9 million as of March 31, 20222023 and $12.2$12.4 million as of December 31, 2021.2022 and are recorded in other current assets and other assets. Amortization expense recognized for the three months ended March 31, 2023 related to costs to obtain a contract was $2.5 million and is included in operating expenses for the respective period. Amortization expense recognized for the three months ended March 31, 2022 related to costs to obtain a contract was $2.5 million. Amortization expense recognized$2.5 million and is included in operating expenses for the three months ended March 31, 2021 related to costs to obtain a contract was $3.1 million.

respective period.

Transaction Price Allocated to Future Performance Obligations

As of March 31, 2022,2023, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $159.2$181.3 million, of which approximately $128.7$129.3 million is expected to be recognized over the next 12 months. The Company expects to recognize substantially all of the remaining unsatisfied performance obligations by December 2024.2024.

4. Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 20222023 consist of the following:

   
March 31, 2022
 
Description
  
Contracted

Maturity
   
Cost
   
Fair Market

Value
 
Cash   Demand   $26,664   $26,664 
Money market funds   Demand    41    41 
                
Total cash and cash equivalents       $26,705   $26,705 
                

 

 

March 31, 2023

 

Description

 

Contracted
Maturity

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Cash

 

Demand

 

$

12,436

 

 

$

12,436

 

Money market funds

 

Demand

 

 

42

 

 

 

42

 

Total cash and cash equivalents

 

 

 

$

12,478

 

 

$

12,478

 

10

Table of Contents

Cash and cash equivalents as of December 31, 20212022 consist of the following:

 

 

December 31, 2022

 

Description

 

Contracted
Maturity

 

Cost

 

 

Fair Market
Value

 

 

 

(in thousands)

 

Cash

 

Demand

 

$

31,852

 

 

$

31,852

 

Money market funds

 

Demand

 

 

42

 

 

 

42

 

Total cash and cash equivalents

 

 

 

$

31,894

 

 

$

31,894

 

   
December 31, 2021
 
Description
  
Contracted

Maturity
   
Cost
   
Fair Market

Value
 
Cash   Demand   $45,698   $45,698 
Money market funds   Demand    41    41 
                
Total cash and cash equivalents       $45,739   $45,739 
                

5. Net (Loss) IncomeLoss per Share

The Company calculates basic and diluted (loss) earningsnet loss per common share by dividing the (loss) earnings amountnet loss by the number of common shares outstanding during the period. The calculation of diluted earnings perCompany has excluded other potentially dilutive shares, which include outstanding common share includes the effects of the assumed exercise of any outstanding stock options and the assumed vesting of shares ofunvested restricted stock awards, where dilutive.

The following table set forthunits, from the computationsnumber of basic and diluted (loss) earnings percommon shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred.

share:
   
Three Months Ended March 31,
 
(in thousands)
  
2022
   
2021
 
Net (loss) income  $(1,637)   $5,130 
           
Weighted average shares used in computing basic earnings per share   41,436    40,154 
Effect of weighted average dilutive stock-based awards   0      2,326 
           
Weighted average shares used in computing diluted earnings per share   41,436    42,480 
Net (loss) income per share—basic and diluted          
Basic  $(0.04)   $0.13 
Diluted  $(0.04)   $0.12 
11
Table of Contents

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

dilutive:indicated:

 

 

Three Months Ended March 31,

 

(shares in thousands)

 

2023

 

 

2022

 

Options outstanding

 

 

2,979

 

 

 

1,607

 

Restricted stock units outstanding

 

 

6,036

 

 

 

4,589

 

   
Three Months Ended March 31,
 
(shares in thousands)
  
2022
   
2021
 
Options outstanding   1,607    34 
Restricted stock units outstanding   4,589    68 

6. Stock-based Compensation

In 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.

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.

On March 20, 2023, the Company granted 1,563,688 premium-priced options to some of its employees under its 2021 Stock Incentive Plan. The options have a strike price of $7.00 and vest in equal installments over three years following March 10, 2023. The binomial lattice model is used to estimate the fair value of the premium-priced options. The binomial lattice model calculates multiple potential outcomes for option exercises and establishes a fair value based on the most likely outcome. Key assumptions for the binomial lattice model include share price, volatility, the early exercise multiple, risk-free rate, expected dividends, and number of time steps.

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

table:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Weighted-average fair value of options granted during the period

 

$

1.75

 

 

$

—

 

Risk-free interest rate

 

3.4 - 4.8%

 

 

 

—

 

Expected volatility

 

47.9 - 55.5%

 

 

 

—

 

Expected dividend yield

 

 

—

 

 

 

—

 

11

Table of Contents


   
Three Months Ended March 31,
 
   
2022
   
2021
 
Weighted-average fair value of options granted during the period  $0     $
 
10.55 
Risk-free interest rate   0      1.00% 
Expected volatility   0      47% 
Expected life (in years)   —      6.3 
Expected dividend yield   0      0   

As of March 31, 2022,2023, there was

$
3939.8 million of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.802.77 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the three months ended March 31, 20222023 and 2022:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Stock-based compensation:

 

 

 

 

 

 

Cost of subscription and support revenue

 

$

138

 

 

$

109

 

Cost of professional services and other revenue

 

 

100

 

 

 

119

 

Research and development

 

 

688

 

 

 

722

 

Sales and marketing

 

 

1,169

 

 

 

943

 

General and administrative

 

 

1,448

 

 

 

1,337

 

Other expense

 

 

-

 

 

 

249

 

 

 

$

3,543

 

 

$

3,479

 

2021:
   
Three Months Ended March 31,

   
2022
   
2021

Stock-based compensation:    
(in thou
sands)
     
Cost of subscription and support revenue  $109   $157
Cost of professional services and other revenue   119    68
Research and development   722    322
Sales and marketing   943    737
General and administrative   1,337    1,008
Other expense (benefit)   249    —   
          
   $3,479   $2,292
          

The following is a summary of the stock option activity during the three months ended March 31, 2022.2023.

 

 

Number of
Shares

 

 

Weighted-Average
Exercise Price

 

 

Weighted-Average
Remaining
Contractual
Term (In Years)

 

 

Aggregate
Intrinsic
Value (1)

 

Outstanding at December 31, 2022

 

 

1,419,767

 

 

$

9.39

 

 

3.55

 

 

$

4.00

 

Granted

 

 

1,563,688

 

 

 

7

 

 

 

 

 

 

 

Exercised

 

 

—

 

 

 

—

 

 

 

 

 

 

—

 

Canceled

 

 

(4,707

)

 

 

11.15

 

 

 

 

 

 

 

Outstanding at March 31, 2023

 

 

2,978,748

 

 

$

8.13

 

 

 

6.79

 

 

 

—

 

Exercisable at March 31, 2023

 

 

1,299,755

 

 

$

9.13

 

 

 

2.91

 

 

$

—

 

(1)
The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on March 31, 2023 of $4.45 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.
   
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   (58,236)    11.78           
                     
Outstanding at March 31, 2022   1,607,341   $9.54    5.72   $461,756 
                     
Exercisable at March 31, 2022   1,195,855   $9.05    5.14   $456,686 
                     
12
Table of Contents
(1)
The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on March 31, 2022 of $7.80 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 three months ended March 31, 2022:2023:

 

 

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, 2022

 

 

4,538,349

 

 

$

8.19

 

 

 

672,858

 

 

$

8.62

 

 

 

5,211,207

 

 

$

6.66

 

Granted

 

 

2,249,151

 

 

 

4.69

 

 

 

—

 

 

 

—

 

 

 

2,249,151

 

 

 

4.69

 

Vested and issued

 

 

(548,368

)

 

 

7.66

 

 

 

—

 

 

 

—

 

 

 

(548,368

)

 

 

7.66

 

Canceled

 

 

(203,631

)

 

 

8.49

 

 

 

(155,688

)

 

 

10.14

 

 

 

(359,319

)

 

 

9.21

 

Unvested at March 31, 2023

 

 

6,035,501

 

 

$

6.92

 

 

 

517,170

 

 

$

8.45

 

 

 

6,552,671

 

 

$

7.04

 

   
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   1,943,905   7.24    —     —      1,943,905   7.24 
Vested and issued   (72,113)   10.33    —     —      (72,113)   10.33 
Canceled   (198,389)   10.62    (188,732)   12.96    (387,121)   11.76 
                            
Unvested at March 31, 2022   4,589,123  $8.34    832,440  $10.61    5,421,563  $9.97 
                            

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 March 31, 20222023 and December 31, 2021,2022, based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax

12

Table of Contents

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$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 AcquisitionLabs, Inc. (“Wicket Acquisition”), 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 March 31, 2022,2023, 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.

13
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 March 31, 20222023 and there were
0no borrowings outstanding as of March 31, 2022.2023.

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Table of Contents

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 March 31,

 

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

North America

 

$

29,101

 

 

$

29,461

 

Europe

 

 

8,187

 

 

 

9,105

 

Japan

 

 

5,196

 

 

 

7,261

 

Asia Pacific

 

 

6,494

 

 

 

7,436

 

Other

 

 

85

 

 

 

116

 

Total revenue

 

$

49,063

 

 

$

53,379

 

   
Three Months Ended March 31,
 
   
2022
   
2021
 
Revenue:          
North America  $29,461   $30,386 
Europe   9,105    8,923 
Japan   7,261    7,708 
Asia Pacific   7,436    7,659 
Other   116    141 
           
Total revenue  $53,379   $54,817 
           

North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was $27.7$26.9 million and $28.5$27.7 million for the three months ended March 31, 2023 and 2022, and 2021, respectively.

Other than the United States and Japan, no other country contributed more than 10%10% of the Company’sCompany's total revenue duringfor the three months ended March 31, 20222023 and 2021.

As of March 31, 2022 and December 31, 2021, property and equipment at locations outside the U.S. was not material.2022.

1
1
. Business Combinations
Other Business Combinations
On February 1, 2022, the Company acquired 100% of 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.
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 intangible assets acquired and liabilities assumed based upon the 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.
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11. Restructuring

During the three months ended March 31, 20222023, the Company incurred $

0.6 
million of merger-related costs relatedtook an action to the Wicket Acquisition.
The excessrestructure certain parts of the purchase price over the estimated amounts of net assets as of the effective date of the acquisition was allocated to goodwill in accordanceCompany with the accounting guidance. The factors contributing to the recognitionintent 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 expandaligning skills with the Company’s offeringsstrategy and facilitating cost efficiencies and savings. As a result certain headcount reductions were necessary. The Company has incurred approximately $0.4 million 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   13,936 
Deferred revenue   (1,033) 
Deferred tax liabilities   (1,009) 
Other liabilities   (96)
      
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
 
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 approachrestructuring charges 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 remaining 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 three months ended March 31, 2022 were 2023. The restructuring charges reflect post-employment benefits, and the Company does not expect to incur any additional restructuring charges related to this action. As of March 31, 2023, the restructuring charges are reflected in the Condensed Consolidated Statements of Operations as follows: $0.2 million - General and Administrative; $0.1 million – Research and Development; and $0.1 million – Sales and Marketing. The Company paid the entire amount by March 31, 2023.

On April 28, 2023, the Company authorized a restructuring that is designed to reduce operating costs, improve operating margins and focus on key growth and strategic priorities (the "Plan"). The Plan includes a reduction of the Company's current workforce by approximately 10%. The Company estimates it will incur between $2.0 million and $2.2 million in restructuring charges in the three months ended June 30, 2023 in connection with the Plan. The restructuring charges will primarily reflect post-employment benefits and will be reflected in the Condensed Consolidated Statements of Operations. The Company expects to pay the amounts due as a result of the Plan by September 30, 2023, with the majority expected to be made before June 30, 2023.

15

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Balance as of January 1, 2022  $60,902 
Wicket acquisition   13,936 
      
Balance as of March 31, 2022  $74,838 
      
1
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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, 2021.
2022.

Company Overview

We are a leading global provider of cloud-based streaming services for video.with a mission to be the most trusted streaming technology company in the world. 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 fivesix core video products that help our customers use video to further their businesses in meaningful ways: (1) Brightcove Video Cloud™, or Video Cloud, our flagship product and the world’s leading online video streaming platform, enables our customers to quickly and easily distribute high-quality video to Internet-connected devices; (2) Brightcove Live,Live™, our industry-leading solution for live streaming, delivers high-quality viewer experiences at scale; (3) Brightcove Beacon,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,Player™, an exceptionally fast, cloud-based technology for creating and managing video experiences; and (5) Zencoder,Zencoder®, a powerful, cloud-based video encoding technology.

technology; and (6) Brightcove Audience Insights™, a business intelligence platform that provides actionable intelligence on viewers and subscribers.

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;SSAI™; (2) efficient publicationimproving their ad monetization strategies to earn more revenue through the use of videos tothe Brightcove Ad Monetization™; (3) efficiently managing their video presence across social networks, including Facebook, Twitter, YouTube, and YouTubeLinkedIn, through the use of Brightcove Social; (3)Social™; (4) an app for creating marketing campaigns with insightful data and industry benchmarks through Brightcove Campaign; and (4) createCampaign™; (5) creating branded video experience by accessing templates

with built-in
best practices through Brightcove Gallery.
Gallery™; and (6) providing tools that enable our customers to make their video experiences interactive for their viewers with interaction options through Brightcove Interactivity.

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 Marketing Studio™, which includes Brightcove Video Marketing Suite,Suite™, enables marketers to use video to drive brand awareness, engagement and conversion; (3)(2) Brightcove Communications Studio™, which includes Brightcove Enterprise Video Suite™, or Enterprise Video Suite, provides an enterprise-class platform for internal communications, employee training, live streaming, marketing and ecommerce videos; and (4)(3) Brightcove CorpTV
™
,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.
companies; and (4) Brightcove Virtual Events™ helps brands transform events into bespoke virtual experiences.

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 March 31, 20222023 and 20212022 we had 678736 and 652678 employees, respectively.

We generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenue decreased from $54.8 million in the three months ended March 31, 2021 to $53.4$51.6 million in the three months ended March 31, 2022 to $47.1 million in the three months ended March 31, 2023, due to a decrease in professional servicessubscription and othersupport revenue.

This decrease was due to a decrease in the average annual subscription revenue per premium customer during the three months ended March 31, 2023 as compared to the prior period and a decrease in premium offering customers.

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Included in the consolidated net loss for the three months ended March 31, 20222023 was merger-related expense, stock-based compensation expense, and amortization of acquired intangible assets, and restructuring expense of $0.1 million, $3.5 million, $1.0 million, and $817,$0.4 million, respectively. Included in the consolidated net income for the three months ended March 31, 20212022 was merger-related expense, stock-based compensation expense and amortization of acquired intangible assets of $2.3$0.6 million, $3.5 million, and $766,$0.8 million, respectively.

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For the three months ended March 31, 20222023 and 2021,2022, our revenue derived from customers located outside North America was 45%41% and 44%45%, respectively. We expect the percentage of total net revenue derived from outside North America to increaseremain relatively unchanged or decrease in future periods as we continuedue to expand our international operations.

fluctuations in exchange rates and a decrease in usage-based fees.

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:


 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Customers (at period end)

 

 

 

 

 

 

Premium

 

 

2,180

 

 

 

2,299

 

Volume

 

 

559

 

 

 

832

 

Total customers (at period end)

 

 

2,739

 

 

 

3,131

 

Net revenue retention rate

 

 

93.7

%

 

 

97.8

%

Recurring dollar retention rate

 

 

88.4

%

 

 

91.0

%

Average annual subscription revenue per premium customer,
   excluding Starter edition customers (in thousands)

 

$

89.4

 

 

$

96.5

 

Average annual subscription revenue per premium customer
   for Starter edition customers only (in thousands)

 

$

3.9

 

 

$

4.6

 

Total backlog, excluding professional services engagements (in millions)

 

$

181.3

 

 

$

159.2

 

Total backlog to be recognized over next 12 months, excluding
   professional services engagements (in millions)

 

$

129.3

 

 

$

128.7

 

•
   
Three Months Ended March 31,
 
   
2022
  
2021
 
Customers (at period end)
   
Premium
   2,299   2,273 
Volume
   832   1,039 
  
 
 
  
 
 
 
Total customers (at period end)
   3,131   3,312 
  
 
 
  
 
 
 
Net revenue retention rate
   97.8%   98.8% 
Recurring dollar retention rate
   91%   85% 
Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands)
  $96.5  $97.0 
Average annual subscription revenue per premium customer for Starter edition customers only (in thousands)
  $4.6  $4.3 
Total backlog, excluding professional services engagements (in millions)
  $159.2  $147.6 
Total backlog to be recognized over next 12 months, excluding professional services engagements (in millions)
  $128.7  $117.1 

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 Brightcove Virtual Event ExperienceEvents customers, our VideoBrightcove Marketing SuiteStudio customers, our Enterprise Video SuiteBrightcove Communications Studio customers, our Brightcove Beacon customers, our Brightcove EngageEngage™ customers, our Brightcove CorpTV,
™
customers, and our Brightcove CampaignCampaign™ 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 in the three months ended March 31, 2023 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.solutions. 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 20222023 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

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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.
•
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R
ecurringRecurring Dollar Retention Rate.
We assess our ability to retain customers using a metric we refer to as our recurring dollar retention rate. We calculate the recurring dollar retention rate by dividing the retained recurring value of subscription revenue for a period by the previous recurring value of subscription revenue 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.

Silicon Valley Bank

On March 10, 2023 the Federal Deposit Insurance Corporation ("FDIC") took Silicon Valley Bank ("SVB") into receivership due to SVB's failure. We immediately contacted all our customers who paid us through SVB to halt payments to SVB and to update their remittance information to our other banking partner, Bank of America. Due to standard confirmation procedures and customer payment processes this transition caused a delay in collections of customer invoices as our accounts receivables, net, increased to $40.6 million as of March 31, 2023 as compared to $26.0 million, $31.9 million, $32.6 million and $34.0 million as of December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively. As of March 31, 2023 substantially all of our customers who paid us via SVB had received and/or updated their banking information. We estimate that between $8 and $10 million of receivables that were due as of March 10, 2023 through March 31, 2023 were delayed due to the transition. As of the date of this filing we have collected the majority of receivables due through March 31, 2023. This estimate is based on comparing our historical days-sales-outstanding over the past two years, which ranged between a low of 49 and a high of 57 for an average of 53 days to the days-sales-outstanding of 75 for the three months ended March 31, 2023. Collection activity has resumed at historical levels. As the FDIC fully guaranteed depositors we incurred no losses from the SVB failure. In April 2023 SVB announced that its United States based operations had been acquired by First Citizens Bank. We are currently assessing our overall banking structure and relationships and plan to have a new line of credit established before the current line's maturity in December 2023.

COVID-19

and Geopolitical Events

While the future trendsimplications of

the COVID-19 pandemic
remain uncertain, we have not experienced a significant disruption during the pandemic. We willplan to continue to monitor
COVID-19’s
effectmake investments to support business growth. We believe that the growth of our business is dependent on many factors, including our employees,ability to expand our customer base, increase adoption of our product offerings within existing customers, vendorsdevelop new products and applications to extend the regionsfunctionality of our products and provide a high level of customer service. We expect to invest in sales and marketing to support customer growth. We also expect to invest in research and development as we operate in.
continue to introduce new products and applications to extend the functionality of our products. We intend to maintain a high level of customer service and support which we consider critical for our continued success. We also expect to continue to incur general and administrative expenses to support our business and to maintain the infrastructure required to be a public company. We expect to use our cash flow from operations and, if necessary, our credit facility to fund operations.

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 the invasion, the U.S. and other countries imposed economic sanctions against officials, individuals, regions, and industries in Russia, Ukraine and Belarus. We do not have operations or customers in Russia or Ukraine and none of our material vendors source their services to us from Russia or Ukraine. We will continue to monitor the situation and comply with any sanctions and restrictions imposed by the U.S. government.

government

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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.

Brightcove 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 Brightcove 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 Brightcove Virtual Events, Experience, Brightcove Live and Brightcove Player customers for an additional fee. The pricing for these products is based on the value of our software, as well as, the number of users, accounts and usage. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.

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

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.
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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. In 2022, we also discontinued the lower pricing option for our Starter edition. 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.

Brightcove Audience Insights is offered to customers on a subscription basis, with varying levels of functionality and entitlements. Customer arrangements are typically one-year contracts, and include basic support and an initial integration of the platform with third party data sources identified by the customer. Customers can choose to activate a module focusing on active viewers of their content, active subscribers to their service, or both. The pricing for Brightcove Audience Insights is based on module(s) selected and is based on the number of active viewers and/or active subscribers. Should a customer's usage exceed the

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contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.

All Brightcove Beacon, Brightcove CorpTV,

™
, OTT Flow, Brightcove Campaign, Brightcove Live, SSAI, Player, Brightcove Audience Insights, Brightcove 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 three months of 20212022 to the first three months of 2022.2023. 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 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.
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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.

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

Other (Expense) Income,Expense, net

Other (expense) incomeexpense 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, 2021.2022. We maintain net deferred tax liabilities for temporary differences related to our Japanese subsidiary.

During the three months ended March 31, 2022,2023, 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 March 31, 20222023 and 2021,2022, we recorded $3.5 million and $2.3$3.5 million, respectively, of stock-based compensation expense. We expect stock-based compensation expense to increase in absolute dollars in future periods.

Foreign Currency Translation

With regard to our international operations, we frequently enter into transactions in currencies other than the U.S. dollar. As a result, our revenue, expenses and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro, British pound, Australian dollar, and Japanese yen. 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 three months ended March 31, 2023, 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.

21

20

Table of Contents

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, 2021,2022, which we filed with the Securities and Exchange Commission on February 18, 2022.
23, 2023.

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, 2021.
   
Three Months Ended March 31,
 
   
2022
   
2021
 
    
        
   
(in thousands, except share and per share data)
 
Revenue:
          
Subscription and support revenue
  $51,601   $50,839 
Professional services and other revenue
   1,778    3,978 
   
 
 
   
 
 
 
Total revenue
   53,379    54,817 
Cost of revenue:
          
Cost of subscription and support revenue
   16,982    15,678 
Cost of professional services and other revenue
   1,998    3,490 
   
 
 
   
 
 
 
Total cost of revenue
   18,980    19,168 
   
 
 
   
 
 
 
Gross profit
   34,399    35,649 
Operating expenses:
          
Research and development
   8,237    8,284 
Sales and marketing
   18,288    16,149 
General and administrative
   8,089    7,059 
Merger-related
   594    —   
Other (benefit) expense
   1,149    (1,965) 
   
 
 
   
 
 
 
Total operating expenses
   36,357    29,527 
   
 
 
   
 
 
 
(Loss) income from operations
   (1,958)    6,122 
Other (expense), net

   (387)    (735) 
   
 
 
   
 
 
 
(Loss) income before income taxes
   (2,345)    5,386 
(Benefit) provision for income
   (708)    257 
   
 
 
   
 
 
 
Net (loss) income
  $(1,637)   $5,130 
Net (loss) income per share—basic and diluted
          
Basic
  $(0.04)   $0.13 
Diluted
  $(0.04)   $0.12 
Weighted-average shares—basic and diluted
          
Basic
   41,436    40,154 
Diluted
   41,436    42,480 
2022.

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands, except share and per share data)

 

Revenue:

 

 

 

 

 

 

Subscription and support revenue

 

$

47,102

 

 

$

51,601

 

Professional services and other revenue

 

 

1,961

 

 

 

1,778

 

Total revenue

 

 

49,063

 

 

 

53,379

 

Cost of revenue:

 

 

 

 

 

 

Cost of subscription and support revenue

 

 

18,265

 

 

 

16,982

 

Cost of professional services and other revenue

 

 

2,002

 

 

 

1,998

 

Total cost of revenue

 

 

20,267

 

 

 

18,980

 

Gross profit

 

 

28,796

 

 

 

34,399

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

9,866

 

 

 

8,237

 

Sales and marketing

 

 

19,465

 

 

 

18,288

 

General and administrative

 

 

10,064

 

 

 

8,089

 

Merger-related

 

 

145

 

 

 

594

 

Other expense

 

 

—

 

 

 

1,149

 

Total operating expenses

 

 

39,540

 

 

 

36,357

 

Loss from operations

 

 

(10,744

)

 

 

(1,958

)

Other expense, net

 

 

(543

)

 

 

(387

)

Loss before income taxes

 

 

(11,287

)

 

 

(2,345

)

Provision (benefit) for income taxes

 

 

427

 

 

 

(708

)

Net loss

 

$

(11,714

)

 

$

(1,637

)

Net loss per share—basic and diluted

 

 

 

 

 

 

         Basic

 

$

(0.28

)

 

$

(0.04

)

         Diluted

 

$

(0.28

)

 

$

(0.04

)

Weighted-average shares—basic and diluted

 

 

 

 

 

 

         Basic

 

 

42,528

 

 

 

41,436

 

         Diluted

 

 

42,528

 

 

 

41,436

 

Overview of Results of Operations for the Three Months Ended March 31, 20222023 and 2021

2022

Total revenue decreased by 3%8%, or $1.4$4.3 million, in the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 due to a decrease in subscription and support revenue of 9% or $4.5 million, primarily due to a decrease in professionalrevenue from our premium offerings. Our revenue from premium offerings decreased by $4.0 million, or 8%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Professional services and other revenue increased by 55%10%, or $2.2 million.$0.2 million, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.

22

21

Table of Contents
Subscription and support revenue remained relatively unchanged. Our revenue from premium offerings decreased by $1.3 million, or 2%, in the three months ended March 31, 2022 compared to the three months ended March 31, 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, British Pound 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 March 31, 20222023 would have been approximately $54.6$50.3 million. The majority of the effect of revenue in constant currency was in revenues denominated in Japanese Yen of $0.7 million, Euro of $0.2 million, and EuroBritish Pound of $0.3 million. 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 decreased by $1.3$5.6 million, or 4%16%, in the three months ended March 31, 20222023 compared to the three months ended March 31, 2021,2022, primarily due to a decrease in subscription and support revenue, andas well as an increase in the cost of subscription and support revenue.amortization expense related to our capitalized internal-use software. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

Loss from operations was $10.7 million in the three months ended March 31, 2023 compared to a loss of $2.0 million in the three months ended March 31, 2022 compared2022. This is primarily due to an increase in operating expenses of $3.2 million, and a net income from operationsdecrease in gross profit of $6.1$5.6 million in the three months ended March 31, 2021. This is primarily due to a decrease in revenue of $1.4 million, the decrease in gross profit of $1.7 million and an increase in operating expenses in the three months ended March 31, 20222023 compared to the three months ended March 31, 2021. The increase in operating expenses is primarily the result of the current period’s merger-related and other expenses, in aggregate, of $1.3 million as compared to a benefit of approximately $2.0 million in the prior year.

2022.

Revenue

   
Three Months Ended March 31,
       
   
2022
  
2021
  
Change
 
Revenue by Product Line
  
Amount
   
Percentage of

Revenue
  
Amount
   
Percentage of

Revenue
  
Amount
  
%
 
    
                     
   (in thousands, except percentages) 
Premium
  $52,772    99%  $54,022    99%  $(1,250)   (2)% 
Volume
   607    1   795    1   (188)   (24) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $53,379    100%  $54,817    100%  $(1,438)   (3)% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Revenue by Product Line

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Premium

 

$

48,736

 

 

 

99

%

 

$

52,772

 

 

 

99

%

 

$

(4,036

)

 

 

(8

)%

Volume

 

 

327

 

 

 

1

 

 

 

607

 

 

 

1

 

 

 

(280

)

 

 

(46

)

Total

 

$

49,063

 

 

 

100

%

 

$

53,379

 

 

 

100

%

 

$

(4,316

)

 

 

(8

)%

During the three months ended March 31, 2022,2023, revenue decreased by $1.4$4.3 million, or 3%8%, compared to the three months ended March 31, 2021,2022, primarily due to a decrease in revenue from our premium offerings. The decrease in premium revenue of $1.3$4.0 million, or 2%8%, is primarily the result of a 55% decrease in professional servicesthe number of our customers and other revenue.in the average revenue per premium customer. The decrease in average revenue per premium customer is due to a decrease in usage-based fees outside of North America. In the three months ended March 31, 2022,2023, volume revenue decreased by $188,$0.3 million, or 24%46%, compared to the three months ended March 31, 2021,2022, as we continue to focus on the market for our premium solutions.

   
Three Months Ended March 31,
       
   
2022
  
2021
  
Change
 
Revenue by Type
  
Amount
   
Percentage of

Revenue
  
Amount
   
Percentage of

Revenue
  
Amount
  
%
 
    
                     
   (in thousands, except percentages) 
Subscription and support
  $51,601    97%  $50,839    93%  $762   1% 
Professional services and other
   1,778    3   3,978    7   (2,200)   (55) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $53,379    100%  $54,817    100%  $(1,438)   -3% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Revenue by Type

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Subscription and support

 

$

47,102

 

 

 

96

%

 

$

51,601

 

 

 

97

%

 

$

(4,499

)

 

 

(9

)%

Professional services and other

 

 

1,961

 

 

 

4

 

 

 

1,778

 

 

 

300

%

 

 

183

 

 

 

10

 

Total

 

$

49,063

 

 

 

100

%

 

$

53,379

 

 

 

100

%

 

$

(4,316

)

 

 

-8

%

During the three months ended March 31, 2022,2023, subscription and support revenue remained relatively unchangeddecreased compared to the three months ended March 31, 2021. In addition, professional2022. Professional services and other revenue decreasedincreased by $2.2$0.2 million, or 55%10%, 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 March 31,
       
   
2022
  
2021
  
Change
 
Revenue by Geography
  
Amount
   
Percentage of
Revenue
  
Amount
   
Percentage of
Revenue
  
Amount
  
%
 
   (in thousands, except percentages) 
North America
  $29,461    55%  $30,386    56%  $(925)   (3)% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Europe
   9,105    17   8,923    16   182   2 
Japan
   7,261    14   7,708    14   (447)   (6) 
Asia Pacific
   7,436    14   7,659    14   (223)   (3) 
Other
   116    —     141    —     (25)   (18) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
International subtotal
   23,918    45   24,431    44   (513)   (2) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $53,379    100%  $54,817    100%  $(1,438)   (3)% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
23

22

Table of Contents

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Revenue by Geography

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

North America

 

$

29,101

 

 

 

59

%

 

$

29,461

 

 

 

55

%

 

$

(360

)

 

 

(1

)%

Europe

 

 

8,187

 

 

 

17

 

 

 

9,105

 

 

 

17

 

 

 

(918

)

 

 

(10

)

Japan

 

 

5,196

 

 

 

11

 

 

 

7,261

 

 

 

14

 

 

 

(2,065

)

 

 

(28

)

Asia Pacific

 

 

6,494

 

 

 

13

 

 

 

7,436

 

 

 

14

 

 

 

(942

)

 

 

(13

)

Other

 

 

85

 

 

 

—

 

 

 

116

 

 

 

—

 

 

 

(31

)

 

 

(27

)

International subtotal

 

 

19,962

 

 

 

41

 

 

 

23,918

 

 

 

45

 

 

 

(3,956

)

 

 

(17

)

Total

 

$

49,063

 

 

 

100

%

 

$

53,379

 

 

 

100

%

 

$

(4,316

)

 

 

(8

)%

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 March 31, 2022,2023, total revenue for North America decreased $925,by $360, or 3%1%, compared to the three months ended March 31, 2021. In2022. During the three months ended March 31, 2022,2023, total revenue outside of North America decreased $513,by $4.0 million, or 2%17%, compared to the three months ended March 31, 2021.2022. The decrease in revenue from international regions is primarily related to decrease in revenue in Japan which was dueprimarily driven by a decrease in average revenue per premium customer as customer usage-based fees were less in the current period and, to unfavorable changesa lesser extent, non-recurring customer events that occurred in exchange rates as compared to the prior year period of comparison.

period. The decreases in Asia Pacific and Europe were due equally to a decrease in customers and a decrease in average revenue per premium customer as usage-based fees decreased.

Cost of Revenue

   
Three Months Ended March 31,
       
   
2022
  
2021
  
Change
 
Cost of Revenue
  
Amount
   
Percentage of

Related

Revenue
  
Amount
   
Percentage of

Related

Revenue
  
Amount
  
%
 
    
                     
   
(in thousands, except percentages)
 
Subscription and support
  $16,982    33%  $15,678    31%  $1,304   8% 
Professional services and other
   1,998    112   3,490    88   (1,492)   (43) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $18,980    36%  $19,168    35%  $(188)   (1)% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Cost of Revenue

 

Amount

 

 

Percentage of
Related
Revenue

 

 

Amount

 

 

Percentage of
Related
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Subscription and support

 

$

18,265

 

 

 

39

%

 

$

16,982

 

 

 

33

%

 

$

1,283

 

 

 

8

%

Professional services and other

 

 

2,002

 

 

 

102

 

 

 

1,998

 

 

 

112

 

 

 

4

 

 

 

—

 

Total

 

$

20,267

 

 

 

41

%

 

$

18,980

 

 

 

36

%

 

$

1,287

 

 

 

7

%

In the three months ended March 31, 2022,2023, cost of subscription and support revenue increased by $1.3 million, or 8%, compared to the three months ended March 31, 2021.2022. The increase resulted primarily from an increase in employee-related expenses, amortization of capitalized internal-use software expenses, and network hosting services of $180, $1.3 million, and $690, respectively. These increases were offset by a decrease in content delivery network and third-party software expenses comparedof $968. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $100.

In the three months ended March 31, 20222023, cost of professional services and other revenue did not change materially compared to the three months ended March 31, 2021. In2022.

Gross Profit

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Gross Profit

 

Amount

 

 

Percentage of
Related
Revenue

 

 

Amount

 

 

Percentage of
Related
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Subscription and support

 

$

28,837

 

 

 

61

%

 

$

34,619

 

 

 

67

%

 

$

(5,782

)

 

 

(17

)%

Professional services and other

 

 

(41

)

 

 

(2

)

 

 

(220

)

 

 

(12

)

 

 

179

 

 

 

(81

)%

Total

 

$

28,796

 

 

 

59

%

 

$

34,399

 

 

 

64

%

 

$

(5,603

)

 

 

(16

)%

23

Table of Contents

The overall gross profit percentage was 59% and 64% for the three months ended March 31, 2023 and 2022, cost of professional servicesrespectively. The decrease in gross profit percentage was due to the aforementioned decreases in subscription and other revenuesupport revenue. Subscription and support gross profit decreased by $1.5$5.8 million, or 43%17%, compared to the three months ended March 31, 2021. This decrease corresponds to the 55% decrease professional services and other revenue in the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Gross Profit
   
Three Months Ended March 31,
       
   
2022
  
2021
  
Change
 
Gross Profit
  
Amount
  
Percentage of

Related

Revenue
  
Amount
   
Percentage of

Related

Revenue
  
Amount
  
%
 
                     
   
(in thousands, except percentages)
 
Subscription and support
  $34,619   67%  $35,161    69%  $(542)   (2)% 
Professional services and other
   (220)   (12)   488    12   (708)   (145)% 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $34,399   64%  $35,649    65%  $(1,250)   (4)% 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
The overall gross profit percentage was 64% for the three months ended March 31, 2022 compared to 65% for the three months ended March 31, 2021. Subscription and support gross profit remained relatively unchanged compared to the three months ended March 31, 2021.2022. Professional services and other gross profit decreased $708, or 145%. The decrease in gross profit dollars for professional services and other revenue was due to the 55% decrease in professional services and other revenue.
24
Table of Contents
Operating Expenses
   
Three Months Ended March 31,
       
   
2022
  
2021
  
Change
 
Operating Expenses
  
Amount
   
Percentage of

Revenue
  
Amount
  
Percentage of

Revenue
  
Amount
  
%
 
                     
   
(in thousands, except percentages)
 
Research and development
  $8,237    15%  $8,284   15%  $(47)   (1)% 
Sales and marketing
   18,288    34   16,149   29   2,139   13 
General and administrative
   8,089    15   7,059   13   1,030   15 
Merger-related
   594    1   —     —     594   N/A 
Other (benefit) expense
   1,149    2   (1,965)   (4)   3,114   (158) 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
  $36,357    68%  $29,527   54%  $6,830   23% 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Research and Development
.
 In the three months ended March 31, 2022, research and development remained relatively unchanged compared to the three months ended March 31, 2021. We expect our research and development expense as a percentage of revenue to remain relatively unchanged.
Sales and Marketing
.
In the three months ended March 31, 2022, sales and marketing expense increased by $2.1$0.2 million, or 13%81%, compared to the three months ended March 31, 2021, primarily2022. It is likely that gross profit, as a percentage of revenue, will fluctuate quarter by quarter due to an increase in employee-related, contractor,the timing and rent expensesmix of $1.5 million, $282,subscription and $305, respectively. We expect that our sales and marketing expense will increase in absolute dollars for the remainder of 2022 as compared to the prior period as we will continue to invest in these activities to support revenue growth.
General and Administrative
professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.

Operating Expenses

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

Operating Expenses

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

Percentage of
Revenue

 

 

Amount

 

 

%

 

 

 

(in thousands, except percentages)

 

Research and development

 

$

9,866

 

 

 

20

%

 

$

8,237

 

 

 

15

%

 

$

1,629

 

 

 

20

%

Sales and marketing

 

 

19,465

 

 

 

40

 

 

 

18,288

 

 

 

34

 

 

 

1,177

 

 

 

6

 

General and administrative

 

 

10,064

 

 

 

21

 

 

 

8,089

 

 

 

15

 

 

 

1,975

 

 

 

24

 

Merger-related

 

 

145

 

 

 

—

 

 

 

594

 

 

 

1

 

 

 

(449

)

 

 

(76

)

Other expense (benefit)

 

 

—

 

 

 

—

 

 

 

1,149

 

 

 

2

 

 

 

(1,149

)

 

NM

 

Total

 

$

39,540

 

 

 

81

%

 

$

36,357

 

 

 

68

%

 

$

3,183

 

 

 

9

%

Research and Development.

In the three months ended March 31, 2022, general2023, research and administrativedevelopment expense increased by $1.0$1.6 million , or 15%20%, compared to the three months ended March 31, 2021,2022 primarily due to an increase in employee-related expenses and amortization of $1.4 million and $181, respectively. We expect research and development costs in absolute dollars to decrease in the second half of 2023.

Sales and Marketing. In the three months ended March 31, 2023, sales and marketing expense increased by $1.2 million, or 6%, compared to the three months ended March 31, 2022 primarily due to an increase in employee-related expenses of $1.5 million. These increases were offset by a decrease in commissions of $207 and various other expenses that, in aggregate, decreased by approximately $100. We expect sales and marketing expense in absolute dollars to decrease in the second half of 2023.

General and Administrative. In the three months ended March 31, 2023, general and administrative increased by $2.0 million or 24%, compared to the three months ended March 31, 2022 primarily due to increases in agency, employee-related andexpenses, stock-based compensation, recruiting expenses, consultants expenses, contractor expenses, and computer maintenance and support expenses of $212, $285,$600, $111, $120, $426, $479, and $330,$142, respectively. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $200. In future periods, we$125. We expect general and administrative expenseexpenses in absolute dollars to remain relatively unchanged.

decrease in the second half of 2023.

Merger-Related

.
In the three months ended March 31, 2022,2023, merger-related expense increasedexpenses decreased by $594 primarily$449 due to costs incurred in connection with the Wicket Acquisition. There was no merger-related expenseAcquisition in the three months ended March 31, 2021.
2022.

Other expense (benefit).

On March 28, 2022 our CEO retired. Pursuant to a Transition Agreement that was entered into by the previous CEO and the Company 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 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 isalso reflected in Accrued Expenses on the Company’s
Condensed Consolidated Balance Sheets
. The $1.1 million in expense also reflects $0.2 million of stock-based compensation expense as a result of the modification of certain awards pursuant to the Transition Agreement.
On Of the total annual base compensation and bonus accrued, no balance remains unpaid as of 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”). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain employee retention credits.31, 2023. In the first quarter of 2021, we recognized a benefit of $2.0 million from the CARES Act related to employee retention credits. The benefit was recorded as Other (benefit) expense.
(Benefit) Provision for Income Taxes.
 We recorded an income tax benefit of $708 in the three months ended March 31, 2022 as compared to income tax expense of $257 in the prior period. The benefit is due to the release of $1.0 million of our valuation allowance as a result of deferred tax liabilities resulting from the Wicket Acquisition, which was a
non-tax
deductible transaction. The benefit of $1.0 million was offset by state and foreign tax expense provisions.
2023, we did not incur additional other expenses.

Liquidity and Capital Resources

Cash and cash equivalents.

Our cash and cash equivalents at March 31, 20222023 were held for working capital purposes and were invested primarily in cash. We do not enter into investments for trading or speculative purposes. At March 31, 20222023 and December 31, 2021,2022, we had $13.0$9.2 million and $13.8$12.1 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
25
subject to

24

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subject to

foreign withholding taxes. On February 1, 2022,During the quarter ended March 31, 2023, 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 $1.8paid $1.7 million of the cash consideration was held back to secure paymentsellers for the satisfaction of any claims of indemnification for breaches or inaccuracies in the Sellers’certain representations and warranties covenants and agreements.in relation to the Wicket Acquisition. 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.

   
Three Months Ended March 31,
 
Condensed Consolidated Statements of Cash Flow Data
  
2022
   
2021
 
         
   
(in thousands)
 
Cash flows used in operating activities
  $(690)   $(604) 
Cash flows used in investing activities
  $(17,942)   $(1,522) 
Cash flows provided by financing activities
  $100   $533 

 

 

Three Months Ended March 31,

 

Condensed Consolidated Statements of Cash Flow Data

 

2023

 

 

2022

 

 

 

(in thousands)

 

Cash flows used in operating activities

 

$

(12,632

)

 

$

(690

)

Cash flows used in investing activities

 

$

(4,882

)

 

$

(17,942

)

Cash flows (used in) provided by financing activities

 

$

(1,925

)

 

$

100

 

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 byused in operating activities.

Cash provided byused in operating activities consists primarily of net incomeloss adjusted for

certain non-cash items
including depreciation and amortization, stock-based compensation expense, the provision for bad debts and the effect of changes in working capital and other activities. Cash used in operating activities during the three months ended March 31, 20222023 was $690.$12.6 million. The cash used in operating activities primarily resulted from net lossnon-cash charges of $1.6$7.6 million and net changes in our operating assets and liabilities of $4.7$8.5 million, offset byand a net
non-cash
charges loss of $5.6$11.7 million. Net
non-cash
expenses mainly consisted of $2.1$3.9 million for depreciation and amortization and $3.5 million for stock-based compensation. Cash outflows resulting from changes in our operating assets and liabilities consisted primarily of an increaseincreases in accounts receivable, of $3.8 million, and increase in prepaid expenses and other current assets, of $1.6 million,accounts payable, and a decrease in accrued expenses of $2.0 million, offset by an increase in deferred revenue of $1.5$14.7 million, an increase$1.0 million, $1.0 million, and $10.0 million, respectively, offset by decreases in other assets, accrued expenses, and operating leases of $705,$0.3 million, $4.0 million, and an$0.1 million, respectively. The primary reason why cash flow from operations decreased was the increase in accounts payable of $347. In summary, cash used in operating activities has increased when comparedreceivable, net, due to the prior period due to a net loss, and decreases in working capital.
SVB transition.

Cash flows used in investing activities.

Cash used in investing activities during the three months ended March 31, 20222023 was $17.9$4.9 million, consisting primarily of $13.2 million for cash paid for the acquisition of Wicket Labs, $2.9$3.9 million for the capitalization of

internal-use
software costs and $1.9$1.0 million in capital expenditures to support the business.

Cash flows provided byused in financing activities.

Cash provided byused in financing activities for the three months ended March 31, 20222023 was $100, consisting of proceeds$1.9 million, primarily from the exercise of stock options.

deferred acquisition payments and other financing activities.

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 March 31, 2022.2023. As we have not currently drawn on the Line of Credit, there are no amounts outstanding as of March 31, 2022.

2023.

Net operating loss carryforwards.

As of December 31, 2021,2022, we had federal and state net operating losses of approximately $161.8$164.0 million and $89.2$82.8 million, respectively, which are available to offset future taxable income, if any, through 2037 and 2041, respectively. We had federal and state net operating losses of approximately $37.6$45.7 million and $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 $9.0$9.8 million and $5.5$6.0 million, respectively,

25

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which expire in various amounts through 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.

26
Table of Contents

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 March 31, 20222023 and December 31, 2021.

2022.

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, 20212022 are summarized in our Annual Report on Form

10-K
for the year ended December 31, 2021.
2022.

Restructuring

On April 28, 2023, we authorized a restructuring that is designed to reduce operating costs, improve operating margins and focus on key growth and strategic priorities (the "Plan"). The Plan includes a reduction of our current workforce by approximately 10%. The foregoing discussion and analysis reflects our current estimate as to what the effect of the Plan will be. Please see Note 11 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

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.
27
Table of Contents

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.

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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.

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 March 31,

 

 

 

2023

 

 

2022

 

Revenues generated in locations outside the United States

 

 

45

%

 

 

48

%

Revenues in currencies other than the United States dollar (1)

 

 

27

%

 

 

29

%

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 months ended March 31, 2023 and 2022:
   
Three Months Ended March 31,
 
   
2022
  
2021
 
Revenues generated in locations outside the United States
   48%   48% 
Revenues in currencies other than the United States dollar (1)
   29%   29% 
Expenses in currencies other than the United States dollar (1)
   16%   17% 
(1)
Percentage of revenues and expenses denominated in foreign currency for the three ended March 31, 2022 and 2021:
   
Three Months Ended
March 31, 2022
  
Three Months Ended
March 31, 2021
 
   
Revenues
  
Expenses
  
Revenues
  
Expenses
 
Euro
   7%   0%   7%   0% 
British pound
   5   6   6   6 
Japanese Yen
   14   2   14   3 
Other
   3   8   2   8 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total
   29%   16%   29%   17% 

 

 

Three Months Ended March 31, 2023

 

 

Three Months Ended March 31, 2022

 

 

 

Revenues

 

 

Expenses

 

 

Revenues

 

 

Expenses

 

Euro

 

 

7

%

 

 

0

%

 

 

7

%

 

 

0

%

British pound

 

 

6

 

 

 

6

 

 

 

5

 

 

 

6

 

Japanese Yen

 

 

11

 

 

 

2

 

 

 

14

 

 

 

2

 

Other

 

 

3

 

 

 

9

 

 

 

3

 

 

 

8

 

Total

 

 

27

%

 

 

17

%

 

 

29

%

 

 

16

%

As of March 31, 20222023 and December 31, 2021,2022, we had $7.8$7.1 million and $8.3$6.9 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, 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.

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 three months ended March 31, 2023 the U.S. dollar has strengthened approximately 9%, 4%, and 12% compared to the British pound, euro and Japanese Yen, respectively, compared to the three months ended March 31, 2022. Relative to foreign currency exposures existing at March 31, 2022,2023, a 10%further 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 three months ended March 31, 2022,2023, we estimated that a 10%20% unfavorable movement in

28
Table of Contents
foreign currency exchange rates would have decreased revenues by $1.6$2.6 million, decreased expenses by $900$2.0 million and decreased operating income by $700.$0.5 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 March 31, 2022.
2023.

Interest rate risk

We had cash and cash equivalents totaling $26.7$12.5 million at March 31, 2022.2023. 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 March 31, 2022.

27

Table of Contents

2023. An unfavorable movement of 10% in the interest rate on the Line of Credit would not have had a material effect on interest expense.

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 March 31, 2022,2023, 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 March 31, 2022,2023, 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

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

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

10-K
for the fiscal year ended December 31, 2021,2022, 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.
Weakened global economic conditions may harm

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our industry, business and its financial condition and results of operations.

Our overall performance depends in part on worldwide economic conditions. Global

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial developments and downturns seemingly unrelated to usinstitutions, transactional counterparties or the 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, weaknesscompanies in the banking sector, uncertainty over the futurefinancial services industry generally, or concerns or rumors about any events of the Euro zone and volatility in the value of the pound sterling and the Euro, including instability surrounding Brexit, and instability resulting from the ongoing conflict between Russia and Ukraine. The effect of the conflict between Russia and Ukraine, including any resulting sanctions, export controlsthese kinds or other restrictive actions that may be imposed against governmental or other entities in, for example, Russia,similar risks, have in the past contributedled and may in the future contributelead to disruption,market-wide liquidity problems. On March 10 and March 12, 2023, the Federal Deposit Insurance Corporation (“FDIC”) took control and was appointed receiver of

28

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Silicon Valley Bank (“SVB”) and Signature Bank, respectively, after each bank was unable to continue its operations. We are unable to predict the extent or nature of the impacts of the failures of SVB and Signature Bank and related circumstances at this time. Similarly, we cannot predict the impact that the high market volatility and instability of the banking sector more broadly could have on economic activity and volatilityour business in particular. The failure of other banks and financial institutions and measures taken, or not taken, by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

If the financial institutions with which we do business enter receivership or become insolvent in the global markets.future, there is no guarantee that the Department of the Treasury, the Federal Reserve and the FDIC will intercede to provide us and other depositors with access to balances in excess of the $250,000 FDIC insurance limit, that we would be able to access our existing cash, cash equivalents and investments, that we would be able to maintain any required letters of credit or other credit support arrangements, or that we would be able to adequately fund our business for a prolonged period of time or at all, any of which could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. If any of our lenders or counterparties to any such instruments were to be placed into receivership, we may be unable to access such funds. We are party to an amended and restated loan and security agreement with SVB providing for up to a $30.0 million asset-based line of credit. In addition, if any parties with which we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to continue to fund their business and perform their obligations to us could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

Changes in our business and operations, as well as currentorganizational changes, have placed, and potential new customers in Europe. If economic conditions in Europe and other key markets for our platformmay continue to remain uncertainplace, significant demands on our management and infrastructure. If we fail to manage these changes effectively and successfully recruit additional highly-qualified employees, we may be unable to execute our business plan, maintain high levels of service or deteriorate further, it could adversely affectaddress competitive challenges adequately.

Our business, headcount and operations have grown, both domestically and internationally, since our customers’ ability or willingness to subscribeinception. In addition, we have seen organizational changes during that time, including the addition of several new members to our platform, delay prospective customers’ purchasing decisions,senior leadership team in the past several years, including our CEO. These organizational changes have placed, and will continue to place, a significant strain on our management, administrative, operational and financial infrastructure. While we expect to continue to grow headcount and operations over the long-term, on April 28, 2023, we authorized a restructuring that is designed to reduce operating costs, improve operating margins and focus on key growth and strategic priorities (the "Plan"). The Plan includes a reduction of the value or duration of their subscriptions or affect renewal rates, all ofCompany's workforce by approximately 10%. We may be unable to effectively manage the organizational changes we are making in connection with the Plan, which could harm our operating results.

More recently, inflation rates in the U.S. have increased to levels not seen in several years, which may result in decreased demand fordifficulty or delays in delivering our products and services to customers, declines in quality or customer satisfaction, increases in our operating costs, including our labor costs, constrained creditdifficulties in introducing new products and liquidity, reduced government spendingservices or enhancing existing products and volatilityservices, reputational harm, difficulty in financial markets. The Federal Reserve has raised,attracting new talent and may again raise, interest ratesretaining existing employees, loss of customers, or operational difficulties in response to concerns over inflation risk. There continues to be uncertainty in the changing market and economic conditions, including the possibilityexecuting sales strategies, any of additional measures that could be taken by the Federal Reserve and other government agencies, related to the COVID-19 pandemic and concerns over inflation risk. A sharp rise in interest rates could have an adverse impact on the fair market value of certain securities in our portfolio, which could adversely affect our business performance and operating results. Our success will depend in part upon the ability of our senior leadership team to manage the Company effectively. To do so, we must continue to recruit, hire, train, manage and integrate a significant number of qualified managers, technical personnel and employees in specialized roles within our company, including in technology, sales and marketing. If our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating these new employees, or retaining these or our existing employees, our business may suffer.

In addition, to manage the future growth of our business, headcount, operations and geographic expansion, we will need to continue to improve our information technology infrastructure, operational, financial results.

and management systems and procedures. Our expected capital investments and future headcount increases will increase our costs, which will make it more difficult for us to address any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage organizational changes or future growth we will be unable to successfully execute our business plan, which could have a negative impact on our business, financial condition or results of operations.

Our Plan and associated organizational changes may not adequately reduce our operating costs or improve operating margins, may lead to additional workforce attrition, and may cause operational disruptions.

On April 28, 2023, the Company approved the Plan. The Plan includes a reduction of the Company’s current workforce by approximately 10%. The Company estimates that it will incur charges of approximately $2.0 million to $2.2 million in connection with the Plan, consisting primarily of cash expenditures related to employee severance costs.

The estimates of the charges and expenditures that we expect to incur in connection with the Plan, and timing thereof, are subject to a number of assumptions, including local law requirements in various jurisdictions, and we may experience delays and incur costs that are greater than we currently expect in connection with the Plan.

The Plan may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, employee attrition beyond our intended reduction in force, a reduction in morale among our remaining employees, greater-than-anticipated costs incurred in connection with implementing the Plan, and the risk that we may not achieve the benefits from the Plan to the extent or as

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quickly as we anticipate, all of which may have a material adverse effect on our results of operations or financial condition. These restructuring initiatives could place substantial demands on our management and employees, which could lead to the diversion of our management’s and employees’ attention from other business priorities. In addition, while certain positions have been eliminated in connection with the Plan, certain functions necessary to our reduced operations remain, and we may be unsuccessful in distributing the duties and obligations of departed employees among our remaining employees or to external service providers, which could result in disruptions to our operations. We may also discover that the workforce reduction and other restructuring efforts will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses. We may further discover that, despite the implementation of our Plan, we may require additional capital to continue expanding our business, and we may be unable to obtain such capital on acceptable terms, if at all. Our failure to successfully accomplish any of the above activities and goals may have a material adverse impact on our business, financial condition, and results of operations.

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,Kristin Frank has entered into a trading plan in accordance with
Rule 10b5-1 and
our policy governing transactions in our securities. Ms. Frank’s plan is intended to enable her to manage the tax implications associated with the vesting of restricted stock units in 2023. 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.

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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.

10.1 (4)

31.1

Employment Agreement, dated February 8, 2022 by and between the Company and Marc DeBevoise

31.1Certification 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.
(4)
Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 9, 2022, and incorporated herein by reference.
^
Furnished herewith.
(2)
31
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.

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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: April 27, 2022May 3, 2023

By:

/s/ Marc DeBevoise

Marc DeBevoise

Chief Executive Officer

(Principal Executive Officer)

Date: April 27, 2022May 3, 2023

By:

/s/ Robert Noreck

Robert Noreck

Chief Financial Officer

(Principal Financial Officer)

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