Brightcove Inc. (NASDAQ:BCOV) Q3 2023 Earnings Call Transcript

It’s important to note that from the second quarter to the fourth quarter this year, we will have generated approximately $6 million in free cash flow. And that on a go-forward basis, we would expect trailing 12 months free cash flow to be consistently positive once we anniversary the first quarter of 2023, where the timing of collections was severely impacted by the SVB failure and our banking shift. Let me close by saying we are pleased that revenue excluding overages returned to growth in the third quarter, and we expect that to continue in the fourth quarter and into next year. Similarly, we are proud of the significant improvement in adjusted EBITDA we’ve delivered in the third quarter and the structural improvements we have made to our cost profile.

Our current expectation is for modest growth in 2024. We are confident the changes we have made to the business will support faster growth in the long term, but we have limited visibility and the timing of when the steps we are taking to increase add-on sales or deliver on our large deal pipeline will materially impact the business. Regardless, it is our intention to grow both adjusted EBITDA and free cash flow year-over-year in 2024. We remain committed to running this business in a consistently profitable manner, and are confident we can fund our growth priorities and expand profitably. With that, we will now take your questions. Please give us a moment to shift to Q&A.

A – Rob Noreck: Thank you, everyone, for joining us today. We’ll begin our Q&A with Steve Frankel from Rosenblatt Securities. Steve?

Steve Frankel: Good afternoon, and congratulations on the progress that we saw on the bottom line. But let’s talk about the top-line. We’re still stuck in this mode where you do a little better in the quarter. But sequentially, revenue is still going down. Is it – so where are we in the add-on issue? Will we get through most of that by the end of Q4? Or is that something that’s going to take a little longer to burn through?

Marc DeBevoise: Why don’t I start from a business perspective and Rob can jump in on the numbers. I think we’re still seeing that same add-on concern that we’ve had throughout the year, which is a lowering of the overages that typically drives that add-on conversation with customers, and we’re definitely facing that challenge on a continued basis. We’ve seen it somewhat improved in certain ways, but we don’t have a pure visibility to when we sort of lapped that comp. We think it comes in the next few quarters, but we certainly don’t have a visibility to commit to it at any certain given time. read news is, new business is up in a big, big way. And especially revenue excluding overages being up marginally year-over-year, but growing. That’s a return to growth and something we expect to see in the coming quarters as well. But Rob, I don’t know if you’d add specifics.

Rob Noreck: Yes. Steve, to Marc’s point, as we think about when that add-on business recovers, we really need to lap through that sales cycle where they started coming down. We think that happens in the middle part of next year, second quarter, third quarter of next year.

Steve Frankel: Okay. And then maybe some color on the 8-K this afternoon about arranging a $30 million line of credit. What kinds of businesses would you think about acquiring if that’s what the money is for?

Rob Noreck: Yes. Steve, the $30 million line of credit was just really an extension of our existing line of credit with SVB. It’s really just an operating safety net as we go forward. That said, we continue to think of M&A as a critical part of our strategy going forward.

Steve Frankel: Okay. And then I think one last one. How about an update on Ad Monetization, which looked promising a few quarters ago, then you said it would take a little longer. So what does it look like today? When does that start to generate revenue?