Summary of Significant Accounting Policies (Policy) | 12 Months Ended |
Dec. 31, 2013 |
Use of Estimates and Uncertainties | ' |
Use of Estimates and Uncertainties |
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts expensed during the reporting period. Actual results could differ from those estimates. |
Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition and revenue reserves, allowances for doubtful accounts, contingent liabilities, expensing and capitalization of research and development costs for internal-use software, intangible asset valuations, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets, the determination of the fair value of stock awards issued, stock-based compensation expense, and the recoverability of the Company's net deferred tax assets and related valuation allowance. |
Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management's estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. |
The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customer concentration, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals. |
Principles of Consolidation | ' |
Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and non-controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation. |
Non-controlling interest in 2012 represents the minority stockholders' proportionate share (37%) of the Company's majority-owned subsidiary, Brightcove KK, a Japanese joint venture, which was formed on July 18, 2008. The non-controlling interest in Brightcove KK is reported as a separate component of stockholders' equity in the accompanying consolidated financial statements. The portion of net income attributable to non-controlling interest prior to the remaining acquisition in 2013 is presented as net income attributable to non-controlling interest in consolidated subsidiary in the consolidated statements of operations, and the portion of other comprehensive loss of this subsidiary is presented in the consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit) and statements of comprehensive loss. See Note 8 for further discussion. |
On January 8, 2013, the Company acquired the remaining 37% interest in Brightcove KK. The purchase price of the remaining interest of Brightcove KK was approximately $1.1 million and was funded by cash on hand. The Company owned a 63% interest in the Brightcove KK joint venture since its formation in 2008. Brightcove KK is now 100% owned by the Company. The purchase was accounted for as an equity transaction and, as such, the Company has continued to consolidate Brightcove KK for financial reporting purposes; however, commencing on January 8, 2013, the Company no longer records non-controlling interest in its consolidated financial statements. |
Subsequent Events Considerations | ' |
Subsequent Events Considerations |
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that, other than as reported herein and described below, there are no material recognized or unrecognized subsequent events. |
On January 31, 2014, the Company acquired substantially all of the assets of Unicorn Media, Inc. and certain of its subsidiaries, or Unicorn, a provider of cloud video ad insertion technology, in exchange for 2,850,547 unregistered shares of the Company's common stock and approximately $9.5 million of cash. Based on a $10.74 price per share of the Company's common stock at the date of closing, the transaction is valued at approximately $40.1 million. Pursuant to the purchase agreement, 1,285,715 shares were placed into an escrow account. The acquisition was accounted for as a purchase transaction, and as such the results of operations of Unicorn will be consolidated with the Company beginning on January 31, 2014, the closing date of the acquisition. In connection with the acquisition of Unicorn, the Company incurred $429 of merger and integration-related costs during 2013, which the Company recorded as an expense in its consolidated statements of operations for the year ended December 31, 2013. At this time, the Company has not completed its evaluation of the purchase accounting related to this transaction. |
Reclassification | ' |
Reclassification |
The Company previously reported in its consolidated balance sheet Deferred revenue and Deferred revenue, net of current portion of $18,961 and $255, respectively, in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. In its Annual Report on Form 10-K for the year ended December 31, 2013, the Company reclassified $142 for the year ended December 31, 2012 from Deferred revenue, net of current portion to Deferred revenue. This reclassification had no impact on the previously reported results of operations or cash flows. |
Foreign Currency Translation | ' |
Foreign Currency Translation |
The reporting currency of the Company is the U.S. dollar. The functional currency of the Company's foreign subsidiaries is the local currency of each subsidiary. All assets and liabilities in the balance sheets of entities whose functional currency is a currency other than the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (1) asset and liability accounts at period-end rates, (2) income statement accounts at weighted-average exchange rates for the period, and (3) stockholders' equity accounts at historical exchange rates. The resulting translation adjustments are excluded from income (loss) and reflected as a separate component of stockholders' equity. Foreign currency transaction gains and losses are included in net loss for the period. The Company may periodically have certain intercompany foreign currency transactions that are deemed to be of a long-term investment nature; exchange adjustments related to those transactions are made directly to a separate component of stockholders' equity. |
Cash, Cash Equivalents and Investments | ' |
Cash, Cash Equivalents and Investments |
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Investments not classified as cash equivalents with maturities less than one year from the balance sheet date, are classified as short-term investments, while investments with maturities in excess of one year from the balance sheet date are classified as long-term investments. Management determines the appropriate classification of investments at the time of purchase, and re-evaluates such determination at each balance sheet date. |
Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value. Investments primarily consist of certificates of deposit, commercial paper and corporate debentures. At December 31, 2013 and 2012, the Company classified its investments as held-to-maturity as it is the Company's intention to hold such investments until they mature. As such, investments were recorded at amortized cost at December 31, 2013 and 2012. |
Cash, cash equivalents and investments as of December 31, 2013 consist of the following: |
| | | | | | | | |
| | 31-Dec-13 |
Description | | Contracted Maturity | | Amortized Cost | | Fair Market Value | | Balance Per Balance Sheet |
Cash | | | Demand | | | $ | 19,250 | | | $ | 19,250 | | | $ | 19,250 | |
Money market funds | | | Demand | | | | 13,797 | | | | 13,797 | | | | 13,797 | |
Total cash and cash equivalents | | | | | | $ | 33,047 | | | $ | 33,047 | | | $ | 33,047 | |
Certificates of deposit | | | 110 - 163 days | | | $ | 960 | | | $ | 961 | | | $ | 960 | |
Corporate debentures | | | 23 - 96 days | | | | 2,101 | | | | 2,102 | | | | 2,101 | |
Total short-term investments | | | | | | $ | 3,061 | | | $ | 3,063 | | | $ | 3,061 | |
Cash and cash equivalents as of December 31, 2012 consist of the following: |
| | | | | | | | |
| | 31-Dec-12 |
Description | | Contracted Maturity | | Amortized Cost | | Fair Market Value | | Balance Per Balance Sheet |
Cash | | | Demand | | | $ | 15,275 | | | $ | 15,275 | | | $ | 15,275 | |
Money market funds | | | Demand | | | | 6,433 | | | | 6,433 | | | | 6,433 | |
Total cash and cash equivalents | | | | | | $ | 21,708 | | | $ | 21,708 | | | $ | 21,708 | |
Certificates of deposit | | | 111 - 290 days | | | $ | 1,200 | | | $ | 1,200 | | | $ | 1,200 | |
Commercial paper | | | 52 - 100 days | | | | 1,397 | | | | 1,399 | | | | 1,397 | |
Corporate debentures | | | 21 - 342 days | | | | 5,667 | | | | 5,673 | | | | 5,667 | |
Total short-term investments | | | | | | $ | 8,264 | | | $ | 8,272 | | | $ | 8,264 | |
Certificates of deposit | | | 475 - 528 days | | | $ | 960 | | | $ | 962 | | | $ | 960 | |
Corporate debentures | | | 388 - 461 days | | | | 2,109 | | | | 2,118 | | | | 2,109 | |
Total long-term investments | | | | | | $ | 3,069 | | | $ | 3,080 | | | $ | 3,069 | |
Restricted Cash | ' |
Restricted Cash |
At December 31, 2013 and 2012, restricted cash was $322,000 and $303,000, respectively, and was held in certificates of deposit as collateral for letters of credit related to the contractual provisions of the Company's corporate credit cards and the contractual provisions with a customer. Additionally, a portion of the restricted cash balance at December 31, 2012 was associated with the lease agreement for the Company's office in Seattle, Washington. Upon renegotiation of the lease agreement during 2013, the restricted cash obligation expired and the collateral was released. |
Disclosure of Fair Value of Financial Instruments | ' |
Disclosure of Fair Value of Financial Instruments |
The carrying amounts of the Company's financial instruments, which include cash, cash equivalents, accounts receivable, accounts payable and accrued expenses, approximated their fair values at December 31, 2013 and 2012, due to the short-term nature of these instruments. See Note 5 for discussion on the determination of the fair value of the Company's long-term investments. |
The Company has evaluated the estimated fair value of financial instruments using available market information and management's estimates. The use of different market assumptions and/or estimation methodologies could have a significant impact on the estimated fair value amounts. See Note 5 for further discussion. |
Revenue Recognition | ' |
Revenue Recognition |
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 Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the collection of fees is probable; and (4) the amount of fees to be paid by the customer is fixed or determinable. |
The Company's subscription arrangements provide customers the right to access its hosted software applications. Customers do not have the right to take possession of the Company's software during the hosting arrangement. Accordingly, the Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 605, Revenue Recognition. Contracts for premium customers generally have a term of one year and are non-cancellable. These contracts generally provide the customer with a maximum annual level of usage, and provide the rate at which the customer must pay for actual usage above the annual allowable usage. For these services, the Company recognizes the annual fee ratably as revenue each month. Should a customer's usage of the Company's services exceed the annual allowable level, revenue is recognized for such excess in the period of the usage. Contracts for volume customers are generally month-to-month arrangements, have a maximum monthly level of usage and provide the rate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage fees are recognized as revenue during the period in which the related cash is collected. |
Revenue recognition commences upon the later of when the application is placed in a production environment, or when all revenue recognition criteria have been met. |
Professional services and other revenue sold on a stand-alone basis are recognized as the services are performed, subject to any refund or other obligation. |
Deferred revenue includes amounts billed to customers for which revenue has not been recognized, and primarily consists of the unearned portion of annual software subscription and support fees, and deferred initiation and professional service fees. |
Revenue is presented net of any taxes collected from customers. |
Multiple-Element Arrangements |
The Company periodically enters into multiple-element service arrangements that include platform subscription fees, support fees, initiation fees, and, in certain cases, other professional services. |
Initiation fees and other professional services charged when services are first activated are recorded as deferred revenue, and recognized as revenue ratably over a term beginning upon go-live of the software application and extending through the contract term. |
The Company assesses arrangements with multiple deliverables under Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements - a Consensus of the FASB Emerging Issues Task Force, which amended the previous multiple-element arrangements accounting guidance. Pursuant to ASU 2009-13, objective and reliable evidence of fair value of the undelivered elements is no longer required in order to account for deliverables in a multiple-element arrangement separately. Instead, arrangement consideration is allocated to deliverables based on their relative selling price. The new guidance also eliminates the use of the residual method. |
In order to treat deliverables in a multiple-element arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. If the deliverables have stand-alone value upon delivery, the Company accounts for each deliverable separately. Subscription services have stand-alone value as such services are often sold separately. In determining whether professional services have stand-alone value, the Company considers the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer's satisfaction with the professional services work. To date, the Company has concluded that all of the professional services included in multiple-element arrangements executed have stand-alone value, with the exception of initiation and activation fees. |
When multiple deliverables included in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. The Company determines the relative selling price for a deliverable based on its vendor-specific objective evidence of fair value (VSOE), if available, or its best estimate of selling price (BESP), if VSOE is not available. The Company has determined that third-party evidence of selling price (TPE) is not a practical alternative due to differences in its service offerings compared to other parties and the availability of relevant third-party pricing information. The amount of revenue allocated to delivered items is limited by contingent revenue, if any. |
The Company has not established VSOE for its offerings due to the lack of pricing consistency, the introduction of new services and other factors. Accordingly, the Company uses its BESP to determine the relative selling price. The Company determines BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company's discounting practices, the size and volume of the Company's transactions, the geographic area where services are sold, price lists, its go-to-market strategy, historical contractually stated prices and prior relationships and future subscription service sales with certain classes of customers. |
The determination of BESP is made through consultation with and approval by the Company's management, taking into consideration the go-to-market strategy. As the Company's go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in selling prices, including both VSOE and BESP. The Company plans to analyze the selling prices used in its allocation of arrangement consideration, at a minimum, on an annual basis. Selling prices will be analyzed on a more frequent basis if a significant change in the Company's business necessitates a more timely analysis or if the Company experiences significant variances in its selling prices. |
Cost of Revenue | ' |
Cost of Revenue |
Cost of revenue primarily consists of costs related to supporting and hosting the Company's product offerings and delivering professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of the Company's data centers, customer support team and the Company's professional services staff, in addition to third-party service provider costs such as data center and networking expenses, allocated overhead, amortization of capitalized internal-use software development costs and intangible assets and depreciation expense. |
Allowance for Doubtful Accounts | ' |
Allowance for Doubtful Accounts |
The Company offsets gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable and is based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions for allowances for doubtful accounts are recorded in general and administrative expense. |
Below is a summary of the changes in the Company's allowance for doubtful accounts for the years ended December 31, 2013, 2012 and 2011: |
| | | | | | | | |
| | Balance at Beginning of Period | | Provision | | Write-offs | | Balance at |
End of Period |
Year ended December 31, 2013 | | $ | 338 | | | $ | 449 | | | $ | (326 | ) | | $ | 461 | |
Year ended December 31, 2012 | | | 266 | | | | 137 | | | | (65 | ) | | $ | 338 | |
Year ended December 31, 2011 | | | 298 | | | | 52 | | | | (84 | ) | | | 266 | |
Off-Balance Sheet Risk and Concentration of Credit Risk | ' |
Off-Balance Sheet Risk and Concentration of Credit Risk |
The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments and trade accounts receivable. The Company maintains its cash and cash equivalents and investments principally with accredited financial institutions of high credit standing. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. The Company routinely assesses the creditworthiness of its customers. The Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company's accounts receivable. |
For the years ended December 31, 2013, 2012 and 2011, no individual customer accounted for more than 10% of total revenue. |
As of December 31, 2013 and 2012, no individual customer accounted for more than 10% of net accounts receivable. |
Concentration of Other Risks | ' |
Concentration of Other Risks |
The Company is dependent on certain content delivery network providers who provide digital media delivery functionality enabling the Company's on-demand application service to function as intended for the Company's customers and ultimate end-users. The disruption of these services could have a material adverse effect on the Company's business, financial position, and results of operations. |
Software Development Costs | ' |
Software Development Costs |
Costs incurred to develop software applications used in the Company's on-demand application services consist of (a) certain external direct costs of materials and services incurred in developing or obtaining internal-use computer software, and (b) payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management, with the relevant authority, authorizes and commits to the funding of the software project, it is probable the project will be completed, the software will be used to perform the functions intended and certain functional and quality standards have been met. Qualified costs incurred during the operating stage of the Company's software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades and enhancements to, internal-use software are expensed as incurred. These capitalized costs are amortized on a straight-line basis over the expected useful life of the software, which is estimated to be three years. Capitalized internal-use software development costs are classified as "Software" within "Property and Equipment, net" in the accompanying consolidated balance sheets. |
During the years ended December 31, 2013, 2012 and 2011, the Company capitalized $1,065, $24 and $354, respectively, of internal-use software development costs. The Company recorded amortization expense associated with its capitalized internal-use software development costs of $312, $542 and $886 for the years ended December 31, 2013, 2012 and 2011, respectively. |
In addition to the software development costs described above, the Company incurs costs to develop computer software to be licensed or otherwise marketed to customers. Costs incurred in the research, design and development of software for sale to others are charged to expense until technological feasibility is established. The Company capitalizes eligible computer software development costs upon achievement of technological feasibility subject to net realizable value considerations. Thereafter, software development costs are capitalized until the product is released and amortized to product cost of sales on a straight-line basis over the lesser of three years or the estimated economic lives of the respective products. The Company has determined that technological feasibility is established at the time a working model of software is completed. Because the Company believes its current process for developing software will be essentially completed concurrently with the establishment of technological feasibility, no costs have been capitalized to date. |
Property and Equipment | ' |
Property and Equipment |
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation, are removed from the accounts, and any resulting gain or loss is included in the determination of net income or loss in the period of retirement. |
Property and equipment consists of the following: |
| | | | | | | | | | |
| | Estimated Useful Life (in Years) | | December 31, | | | | |
| | 2013 | | 2012 | | | | |
Computer equipment | | | 3 | | | $ | 14,275 | | | $ | 11,804 | | | | | |
Software | | | 3 - 6 | | | | 8,473 | | | | 6,618 | | | | | |
Furniture and fixtures | | | 5 | | | | 1,721 | | | | 1,606 | | | | | |
Leasehold improvements | | | Shorter of lease term or | | | | 737 | | | | 672 | | | | | |
the estimated useful life | | | | |
| | | | | | | 25,206 | | | | 20,700 | | | | | |
Less accumulated depreciation and amortization | | | | | | | 16,411 | | | | 12,300 | | | | | |
| | | | | | $ | 8,795 | | | $ | 8,400 | | | | | |
Depreciation and amortization expense, which includes amortization expense associated with capitalized internal-use software development costs, for the years ended December 31, 2013, 2012 and 2011 was $4,148, $4,022 and $2,992, respectively. |
Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions to property and equipment. The Company reviews its property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable. In these instances, the Company recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the asset. |
Long-Lived Assets | ' |
Long-Lived Assets |
The Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During this review, the Company re-evaluates the significant assumptions used in determining the original cost and estimated lives of long-lived assets. Although the assumptions may vary from asset to asset, they generally include operating results, changes in the use of the asset, cash flows, and other indicators of value. Management then determines whether the remaining useful life continues to be appropriate, or whether there has been an impairment of long-lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the assets' recovery. If impairment exists, the Company adjusts the carrying value of the asset to fair value, generally determined by a discounted cash flow analysis. |
For the years ended December 31, 2013, 2012 and 2011, the Company has not identified any impairment of its long-lived assets. |
Intangible Assets and Goodwill | ' |
Intangible Assets and Goodwill |
Intangible assets that have finite lives are amortized over their useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During this review, the Company re-evaluates the significant assumptions used in determining the original cost and estimated lives of long-lived assets. Although the assumptions may vary from asset to asset, they generally include operating results, changes in the use of the asset, cash flows and other indicators of value. Management then determines whether the remaining useful life continues to be appropriate or whether there has been an impairment of long-lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the assets' recovery. If impairment exists, the Company would adjust the carrying value of the asset to fair value, generally determined by a discounted cash flow analysis. |
Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. |
In assessing the recoverability of goodwill, the Company must make assumptions regarding the estimated future cash flows, and other factors, to determine the fair value of these assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges against these assets in the reporting period in which the impairment is determined. The Company has determined, based on its organizational structure, that it had one reporting unit as of December 31, 2013 and 2012. |
For goodwill, the impairment evaluation includes a comparison of the carrying value of the reporting unit to the fair value of the reporting unit. If the reporting unit's estimated fair value exceeds the reporting unit's carrying value, no impairment of goodwill exists. If the fair value of the reporting unit does not exceed its carrying value, then further analysis would be required to determine the amount of the impairment, if any. |
In 2011, the Company adopted ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350) Testing Goodwill for Impairment. Under ASU 2011-08, the Company has the option to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount to determine whether further impairment testing is necessary. Based on the results of the qualitative review of goodwill performed as of December 31, 2013 and 2012, the Company did not identify any indicators of impairment. As such, the two-phase process described above was not necessary. |
Comprehensive Income (Loss) | ' |
Comprehensive Income (Loss) |
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Accumulated other comprehensive income (loss) is presented separately on the consolidated balance sheets and consists entirely of cumulative foreign translation adjustments as of December 31, 2013 and 2012. |
Net Loss per Share | ' |
Net Loss per Share |
The Company calculates basic and diluted net loss per common share by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The Company has excluded (a) all unvested restricted shares that are subject to repurchase and (b) the Company's other potentially dilutive shares, which include redeemable convertible preferred stock in 2012 and 2011, warrants to purchase redeemable convertible preferred stock in 2012 and 2011, warrants to purchase common stock and outstanding common stock options, from the weighted-average number of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses. The Company's redeemable convertible preferred stock were deemed to be participating securities as defined by ASC 260-10, Earnings Per Share, but were excluded from the earnings per share calculation as they do not have an obligation to share in the Company's net losses. |
A reconciliation of the number of shares used in the calculation of basic and diluted net loss per share is as follows: |
| | | | | | | | | | |
| | Year Ended December 31, | | | | |
| | 2013 | | 2012 | | 2011 | | | | |
| | (in thousands, except per share data) | | | | |
Computation of basic and diluted net loss per share: | | | | | | | | | | | | | | | | |
Net loss applicable to common stockholders | | $ | (10,262 | ) | | $ | (13,919 | ) | | $ | (23,274 | ) | | | | |
Weighted-average shares of common stock outstanding | | | 28,351 | | | | 24,662 | | | | 4,997 | | | | | |
Less: weighted-average number of unvested restricted common shares outstanding | | | - | | | | 36 | | | | 97 | | | | | |
Weighted-average number of common shares used in calculating net loss per common share | | | 28,351 | | | | 24,626 | | | | 4,900 | | | | | |
Net loss per share applicable to common stockholders | | $ | (0.36 | ) | | $ | (0.57 | ) | | $ | (4.75 | ) | | | | |
The following potentially dilutive common shares have been excluded from the computation of weighted-average shares outstanding as of December 31, 2013, 2012 and 2011, as their effect would have been antidilutive: |
| | | | | | | | | | |
| | Year Ended December 31, | | | | |
| | 2013 | | 2012 | | 2011 | | | | |
| | (in thousands) | | | | |
Redeemable convertible preferred stock | | | - | | | | 2,162 | | | | 16,151 | | | | | |
Options outstanding | | | 3,331 | | | | 3,894 | | | | 4,092 | | | | | |
Restricted stock units outstanding | | | 1,398 | | | | 384 | | | | - | | | | | |
Unvested restricted shares | | | - | | | | 36 | | | | 97 | | | | | |
Warrants | | | 28 | | | | 34 | | | | 47 | | | | | |
Income Taxes | ' |
Income Taxes |
The Company accounts for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. |
The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interest and penalties, if applicable, related to uncertain tax positions would be recognized as a component of income tax expense. The Company has no recorded liabilities for uncertain tax positions as of December 31, 2013 or 2012. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
At December 31, 2013, the Company had three stock-based compensation plans: the Amended and Restated 2004 Stock Option and Incentive Plan, the 2012 Stock Incentive Plan and the Brightcove Inc. 2012 RSU Inducement Plan. Additionally, during March 2009, Brightcove KK adopted the Brightcove KK Stock Option Plan. As discussed in Note 1, on January 8, 2013 the Company acquired the remaining 37% of Brightcove KK. The Brightcove KK Stock Option Plan was terminated in conjunction with the acquisition. These plans are more fully described in Note 7. |
For stock options issued under the Company's stock-based compensation plans, the fair value of each option grant is estimated on the date of grant, and an estimated forfeiture rate is used when calculating stock-based compensation expense for the period. For restricted stock awards issued under the Company's stock-based compensation plans, the fair value of each grant is calculated based on the Company's stock price on the date of grant. For service-based options, the Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. |
Given the absence of an active market for the Company's common stock prior to the completion of the Company's initial public offering (IPO) on February 17, 2012, the Board of Directors (the Board), the members of which the Company believes have extensive business, finance, and venture capital experience, were required to estimate the fair value of the Company's common stock at the time of each option grant. The Board considered numerous objective and subjective factors in determining the value of the Company's common stock at each option grant date, including the following factors: (1) prices for the Company's preferred stock, which the Company had sold to outside investors in arm's-length transactions, and the rights, preferences, and privileges of the Company's preferred stock and common stock; (2) valuations performed by an independent valuation specialist; (3) the Company's stage of development and revenue growth; (4) the fact that the option grants involved illiquid securities in a private company; and (5) the likelihood of achieving a liquidity event for the shares of common stock underlying the options, such as an initial public offering or sale of the Company, given prevailing market conditions. The Company believes this to have been a reasonable methodology based upon the Company's internal peer company analyses, and based on several arm's-length transactions involving the Company's preferred stock, supportive of the results produced by this valuation methodology. Prior to the Company's common stock being actively traded, the determination of fair value involved assumptions, judgments and estimates. If different assumptions were made, stock-based compensation expense, net loss and consolidated net loss per share could have been significantly different. |
The fair value of each option grant issued under the Company's stock-based compensation plans was estimated using the Black-Scholes option-pricing model that used the assumptions noted in the following table. As there was no public market for its common stock prior to February 17, 2012, the effective date of the Company's IPO, and as the trading history of the Company's common stock was limited through December 31, 2013, the Company determined the volatility for options granted based on an analysis of reported data for a peer group of companies that issued options with substantially similar terms. The expected volatility of options granted has been determined using an average of the historical volatility measures of this peer group of companies. The expected life of options has been determined utilizing the "simplified method". The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. In addition, based on an analysis of the historical actual forfeitures, the Company applied an estimated forfeiture rate of approximately 15%, 14% and 13% for the years ended December 31, 2013, 2012 and 2011, respectively, in determining the expense recorded in the accompanying consolidated statements of operations. |
The weighted-average fair value of options granted during the years ended December 31, 2013, 2012 and 2011, was $5.34, $7.74 and $5.28 per share, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table: |
| | | | | | | | | | |
| | Year Ended December 31, | | | | |
| | 2013 | | 2012 | | 2011 | | | | |
Risk-free interest rate | | | 1.8 | % | | | 1.25 | % | | | 2.62 | % | | | | |
Expected volatility | | | 54 | % | | | 57 | % | | | 57 | % | | | | |
Expected life (in years) | | | 6.2 | | | | 6.2 | | | | 6.2 | | | | | |
Expected dividend yield | | | - | | | | - | | | | - | | | | | |
As of December 31, 2013, there was $12,133 of total unrecognized stock-based compensation expense related to unvested employee stock options, restricted stock awards and restricted stock units issued under the Company's stock-based compensation plans that is expected to be recognized over a weighted-average period of 2.81 years. The total unrecognized stock-based compensation expense will be adjusted for future changes in estimated forfeitures. |
The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of such services received, or of the equity instruments issued, whichever is more reliably measured. The Company determines the total stock-based compensation expense related to non-employee awards using the Black-Scholes option-pricing model. Additionally, in accordance with ASC 505, Equity-Based Payments to Non-Employees, the Company accounts for awards to non-employees prospectively, such that the fair value of the awards is remeasured at each reporting date until the earlier of (a) the performance commitment date or (b) the date the services required under the arrangement have been completed. |
For the years ended December 31, 2013, 2012 and 2011, the Company recorded stock-based compensation expense for stock options granted to non-employees in the accompanying consolidated statements of operations of $6, $35 and $234, respectively. |
For the years ended December 31, 2013, 2012 and 2011, total stock-based compensation expense, including expense related to stock-based awards granted under the Brightcove KK Plan, was $6,401 $5,843 and $4,197, respectively. |
See Note 7 for a summary of the stock option activity under the Company's stock-based compensation plans for the year ended December 31, 2013. |
Advertising Costs | ' |
Advertising Costs |
Advertising costs are charged to operations as incurred. The Company incurred advertising costs of $3,215, $3,881 and $3,630 for the years ended December 31, 2013, 2012 and 2011, respectively. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In February 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (AOCI) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The ASU is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have a significant impact on the Company's results of operations or financial position. |
In March 2013, the FASB issued ASU 2013-05, Foreign Currency Matters, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard is effective for the Company for fiscal years beginning after December 15, 2013. The Company adopted this guidance effective January 1, 2014. The Company does not expect the adoption of ASU 2013-05 to significantly impact its consolidated financial statements. |
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). ASU 2013-11 requires that unrecognized tax benefits be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. When those circumstances exist, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The Company has adopted this guidance effective January 1, 2014. The Company does not expect the adoption of ASU 2013-11 to significantly impact its consolidated financial statements. |