Brightcove Inc. (BCOV) reported a loss of 7 cents per share in the third quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 14 cents. However, the reported loss was wider than the loss of a penny reported in the year-ago quarter.
Revenues
Revenues jumped 10.5% from the year-ago quarter to $31.5 million, slightly higher than the Zacks Consensus Estimate of $30 million. Revenues also came ahead of management’s guided range of $28 million to $28.5 million. The year-over-year increase was primarily driven by a 14.8% surge in Subscription and Support revenues.
Brighcove’s revenues from premium offerings jumped 12% year over year to $28.9 million. Premium refers to Brighcove’s traditional video cloud customers, the enterprise edition of app cloud and Zencoder customers on annual contracts. Revenues from volume offerings increased 2% year over year to $2.6 million.
Brightcove ended the quarter with 5,899 customers, which included a net increase of 14 premium customers. During the quarter, Brightcove’s products were chosen by new customers including the likes of The Nation, MediaWorks NZ, Excite Japan, IBC, One Fighting Championship, Tesla, Lenovo, Maxim Integrated Products (MXIM), Baker and McKenzie, Eaton Corporation, Delhaize and Waters Corporation.
Region wise, revenues from North America (61% of total revenue) increased 13% year over year to $19.3 million. Europe (23% of total revenue) jumped 5% year over year to $7.4 million. Asia-Pacific including Japan (16% of total revenue) soared 9% from the year-ago quarter to $4.8 million.
Margins
Gross margin declined 12 basis points (bps) on a year-over-year basis to 67.3 % in the reported quarter.
Operating expenses increased 330 bps in the reported quarter. This year-over-year increase was primarily due to higher research & development and sales & marketing expenses, which increased 310 bps and 20 bps, respectively.
Loss from operations (including stock-based compensation) was $1.67 million, wider than $0.5 million reported in the year-ago quarter. Net loss (including stock-based compensation) was $2.4 million or 7 cents per share compared to loss of $0.4 million or a penny reported in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Brightcove had cash, cash equivalents and investments of $21.7 million compared with $20.4 million at the end of the prior quarter. Brightcove’s cash flow from operations was $2.6 million in the third quarter. Free cash flow was $1.5 million in the quarter.
Outlook
For the fourth quarter, Brightcove expects revenues in the range of $30.3 million to $30.8 million while the Zacks Consensus Estimate for the same is pegged at $30 million.
Non-GAAP operating loss is expected to be between $2.2 million to $2.5 million. Non-GAAP loss is expected in the range of 8 cents to 9 cents per share while the Zacks Consensus Estimate for the same is pegged at a loss of 14 cents.
For fiscal 2014, Brightcove expects it revenues to range between $123.9 million to $124.4 million. Net loss is expected in the range of 17 cents to 18 cents per share whereas the Zacks Consensus Estimate stands at a loss of 46 cents per share.
Recommendation
We believe that strong demand for cloud-based solutions, security and mobile products, and online videos along with strategic acquisitions are the positives for the stock over the long term. Moreover, the continuous customer wins will drive growth, going forward.
However, intense competition from Akamai Technologies (AKAM) and Limelight Networks Inc. (LLNW) and sluggish macro-economic environment are the near-term headwinds.
Currently, Brightcove has a Zacks Rank #3 (Hold).
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