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BRIGHTCOVE INC (BCOV)·Q4 2023 Earnings Summary

Executive Summary

  • Returned to top-line growth with revenue of $50.2M (+2% YoY) and second consecutive quarter of double-digit adjusted EBITDA margin (11%), alongside positive free cash flow; results were above the midpoint of guidance and EBITDA near the high end .
  • Profitability improved: non-GAAP operating income of $2.1M vs a non-GAAP operating loss in Q4 2022; non-GAAP diluted EPS of $0.04 vs $(0.02) in Q4 2022 .
  • Backlog strengthened: 12‑month backlog +6% YoY to $127.3M; total backlog +19% YoY to $183.0M, the highest in company history, supported by more multiyear contracts and larger deals .
  • 2024 outlook prioritizes profitability and cash generation: adjusted EBITDA guide $14–$16M with 40–50% FCF conversion; sequential revenue dip expected in Q2’24 from an M&A‑related customer loss in Asia .
  • S&P Global Wall Street consensus estimates were unavailable via our feed for BCOV; accordingly, estimate comparisons cannot be provided at this time.

What Went Well and What Went Wrong

What Went Well

  • “Return to top-line growth” in Q4 with revenue $50.2M and adjusted EBITDA $5.5M; positive free cash flow of $1.4M; CEO emphasized “successful conclusion to an important transformational year” .
  • Backlog and deal quality improved: total backlog reached $183.0M (+19% YoY), and average annual subscription revenue per premium customer rose 8% YoY to $96,200, reflecting larger contracts and more multiyear agreements .
  • Strategic wins and product momentum: notable logos (Yahoo, NHL, PGA of America, MotoAmerica, Saudi Pro League) and AI-driven features (Analytics & Insights, Context Aware Encoding cutting storage/bandwidth 25–50%) were highlighted as drivers of value .

What Went Wrong

  • Overages were a major headwind: management cited a ~$7M revenue drag in 2023; overages hit lowest level since 2012 .
  • Add-on sales softness persisted, pressuring net revenue retention; NRR was 95% in Q4, with commentary noting lower add-on performance and an effort to develop non‑entitlement upgrade paths .
  • Services gross margin turned negative in Q4 due to project delivery timing; management does not expect this to recur but it weighed on mix in the quarter .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Total Revenue ($USD Millions)$51.0 $51.0 $50.2
Subscription & Support Revenue ($USD Millions)$49.0 $48.6 $47.8
Professional Services & Other Revenue ($USD Millions)$2.0 $2.4 $2.4
GAAP Gross Profit ($USD Millions)$32.5 $31.7 $30.8
GAAP Gross Margin (%)64% 62% 61%
Non-GAAP Gross Profit ($USD Millions)$33.4 $32.5 $31.6
Non-GAAP Gross Margin (%)66% 64% 63%
GAAP Operating Income (Loss) ($USD Millions)$(6.3) $(2.3) $(2.3)
Adjusted EBITDA ($USD Millions)$3.6 $5.5 $5.5
GAAP Diluted EPS ($USD)$(0.14) $(0.06) $(0.06)
Non-GAAP Diluted EPS ($USD)$0.01 $0.05 $0.04

Segment revenue breakdown:

Revenue MixQ2 2023Q3 2023Q4 2023
Subscription & Support ($USD Millions)$49.0 $48.6 $47.8
Professional Services & Other ($USD Millions)$2.0 $2.4 $2.4
Total ($USD Millions)$51.0 $51.0 $50.2

KPIs and operating metrics:

KPIQ2 2023Q3 2023Q4 2023
12‑Month Backlog ($USD Millions)$124.8 $121.1 $127.3
Total Backlog ($USD Millions)$176.7 $174.2 $183.0
Avg Annual Subscription Revenue per Premium Customer ($USD)$94,800 $95,900 $96,200
Customer Count (Total / Premium)2,691 / 2,131 2,618 / 2,077 2,559 / 2,028
Net Revenue Retention (%)95% 93% 95%
Recurring Dollar Retention (%)——94%
Geographic Mix (% of Q4 revenue)——NA 60% / Int’l 40%; Europe 17% / Japan & APAC 23%
Cash from Operations ($USD Millions)$10.8 $2.1 $4.2
Free Cash Flow ($USD Millions)$7.1 $(2.2) $1.4
Cash & Equivalents ($USD Millions)$19.1 $16.4 $18.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2023$49.0–$51.0 Actual: $50.2 N/A (actual vs guide)
Adjusted EBITDA ($USD Millions)Q4 2023$4.0–$6.0 Actual: $5.5 N/A (actual vs guide)
Non-GAAP Diluted EPS ($USD)Q4 2023$0.00–$0.05 Actual: $0.04 N/A (actual vs guide)
Revenue ($USD Millions)Q1 2024—$49.0–$50.0 (incl. ~$2.4M PS, ~$0.8M overages) New
Non-GAAP Op Income ($USD Millions)Q1 2024—$0.0–$1.0 (excl. SBC ~$2.8M, restructuring ~$1.7M, amort. intangibles ~$1.0M) New
Adjusted EBITDA ($USD Millions)Q1 2024—$4.0–$5.0 New
Non-GAAP Diluted EPS ($USD)Q1 2024—$(0.01)–$0.02; WA shares ~44.2M New
Revenue ($USD Millions)FY 2024—$195.0–$198.0 (incl. ~$9M PS, ~$3.0M overages) New
Non-GAAP Op Loss ($USD Millions)FY 2024—$(3.0)–$(1.0) New
Adjusted EBITDA ($USD Millions)FY 2024—$14.0–$16.0; D&A ~$16.9M New
Non-GAAP Diluted EPS ($USD)FY 2024—$(0.10)–$(0.05); WA shares ~45.6M New
Free Cash Flow ($USD Millions)FY 2024—$5.6–$8.0 (40–50% of EBITDA); CapEx+capitalized software ≈$10M New

Notes:

  • Management flagged an expected sequential revenue decline in Q2 2024 due to an M&A‑related customer loss in Asia in Q1 .
  • Expense linearity: Q2 step-up due to timing of merit increases; D&A expected to peak in 2024 then taper in 2025–2026 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2023)Current Period (Q4 2023)Trend
AI/Technology InitiativesLaunched Ad Insights; PubMatic partnership; platform enhancements; recognized as “Leader” by IDC/Aragon Embedding AI across Analytics & Insights; Context Aware Encoding cuts costs by 25–50%; workflow automation and smart transcription Expanding AI adoption and productization
New Business / Deal Quality“Super‑serving” larger customers (Yahoo, NHL); continued strength in new business and larger deal sizes New sports logos (PGA, MotoAmerica, Saudi Pro League); renewals/add‑ons with blue chips; ARPU +8% YoY Stronger mix of larger, multiyear deals
OveragesPersistent YoY decline; lower add‑on sales pressuring growth Overages down ~$7M in 2023; expected smaller $1–$2M headwind in 2024 Headwind moderating in 2024
Backlog12‑month backlog up 3–6% YoY in Q2/Q3; total backlog up 16–21% YoY 12‑month backlog $127.3M (+6% YoY); total backlog $183.0M (+19% YoY), highest ever Improving; supports visibility
Cost Structure / Profit FocusDelivered EBITDA; cash flow; restructuring and cost optimization 2nd consecutive quarter of double-digit EBITDA margin; EBITDA guide +25% YoY; FCF conversion 40–50% Intensified focus on profitability
Channel PartnershipsPubMatic for ad monetization; social distribution expansions “Still early” in scaling revenue-driving channel partners; focus on lower-end enterprise via partners Early; potential upside later
GeographyGlobal logos; strength in Americas Q4 mix: NA 60%, Int’l 40% (Europe 17%, Japan/APAC 23%); stronger Americas execution Americas leading; APAC risk (M&A loss)

Management Commentary

  • CEO: “Our fourth quarter results were highlighted by a return to top-line growth, substantial adjusted EBITDA growth, our second consecutive quarter of double-digit adjusted EBITDA margins, and positive free cash flow” .
  • CEO on strategy: “We have validated our strategy and have a clear view of the areas we need to prioritize… expect to generate significant growth in adjusted EBITDA and cash flow while continuing to invest in our most promising growth opportunities” .
  • CFO: “Adjusted EBITDA was $5.5 million, representing an adjusted EBITDA margin of 11% and a 366% increase year-over-year… second consecutive quarter of double-digit EBITDA margins, driven by cost savings initiatives” .
  • CEO on add-ons/overages: “Overage declines were one of our largest issues… delivering a $7 million drag to revenue this year… expected to be a much smaller $1 million to $2 million headwind in 2024” .
  • Operations: “Depreciation and amortization… will peak in 2024 and then start to run off… as we get into 2025, 2026” .

Q&A Highlights

  • Backlog vs 2024 revenue guide: Despite +6% 12‑month backlog, guide embeds an M&A‑related customer loss in Asia and conservatism on timing of large deals, channels, and add‑on recovery .
  • Growth vs margin balance: Management believes the business should grow given market position, while maintaining a correctly sized cost base and prioritizing profitability until top-line growth is more consistent .
  • Regional execution: Operational changes and staffing rebalanced; strongest execution in North America with expectation of improved progress across territories in 2024 .
  • Services margin timing: Negative services margin in Q4 tied to project delivery timing; not expected to persist .
  • OpEx path: Q1 OpEx roughly in line to slightly under Q4; step-up in Q2 due to timing of merit increases .

Estimates Context

  • S&P Global Wall Street consensus estimates for BCOV were unavailable via our data feed; therefore, comparisons to consensus EPS and revenue estimates cannot be provided at this time.
  • Given the lack of consensus, performance was assessed against management guidance: revenue, adjusted EBITDA, and non‑GAAP EPS landed within guided ranges for Q4 2023 .

Key Takeaways for Investors

  • Profitability and cash generation are the 2024 focus; management guides adjusted EBITDA of $14–$16M with 40–50% free cash flow conversion and lower CapEx/capitalized software (~$10M), providing downside protection if top-line growth remains lumpy .
  • Backlog strength and larger/multiyear deals (record total backlog $183.0M) underpin revenue visibility; watch conversion pace amid longer sales cycles and channel partner build‑out .
  • Overages headwinds are moderating materially ($1–$2M in 2024 vs ~$7M in 2023), reducing volatility in reported revenue and improving predictability .
  • Add-on sales recovery is a key swing factor; early signs in Q4 (enterprise upgrades, entitlement growth at larger media customers) suggest potential improvement through 2024 .
  • APAC M&A‑related customer loss creates near-term revenue pressure; monitor Q2 sequential dip and subsequent quarters for stabilization .
  • AI enablement (Analytics & Insights, Context Aware Encoding) is an important differentiator with measurable customer ROI (25–50% storage/bandwidth savings), supporting pricing power and expansion opportunities .
  • Management turnover with CFO transition is planned and staged; new CRO/CMO/COO structure centralizes data and operations, aiming to improve execution in 2024 .