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

Brightcove Inc. (NASDAQ:BCOV) Q3 2023 Earnings Call Transcript November 1, 2023

Brightcove Inc. beats earnings expectations. Reported EPS is $0.05, expectations were $0.02.

Operator: Good afternoon, and welcome to Brightcove’s Third Quarter 2023 Earnings Presentation. Today, we’ll discuss the results announced in our press release issued after the market closed. During today’s presentation, we will make statements related to our business that may be considered forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning our financial guidance for the fourth fiscal quarter of 2023 and the full year 2023, expected profitability and free cash flow, our position to execute on our go-to-market and growth strategy, our ability to expand our leadership position, our ability to maintain and upsell existing customers, as well as our ability to acquire new customers.

Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations, including the effect of macroeconomic conditions currently affecting the global economy. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our most recently filed annual report on Form 10-K and as updated by our other SEC filings. Also during the course of today’s presentation, we will refer to certain non-GAAP financial measures.

There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after market closed today, which can be found on our website at www.brightcove.com.

Marc DeBevoise: Thank you all for joining. I’m Marc DeBevoise, CEO here at Brightcove. And with me today is Rob Noreck, Brightcove’s CFO. We’re pleased to be streaming this to you to discuss our third quarter results, provide an update on our strategic progress and share our view on our future. I’ll begin with a quick overview of the strong financial results we delivered in Q3. Total revenue for Q3 was $51 million at the high end of our guidance range. And adjusted EBITDA was $5.5 million, exceeding the high end of our guidance range, growing 12% year-over-year and delivering double-digit margins at a 11%. We are pleased to have delivered financial results that met or exceeded our outlook. Importantly, revenue excluding overages, which represents the vast majority of our revenue, grew year-over-year in Q3 as expected to do so in Q4 as well.

This is an important indication of the strategic plan we have been executing against is headed in the right direction. We are focused on building upon this to deliver improved and more consistent financial results over time. We are equally, if not more pleased with our adjusted EBITDA performance in the quarter, which returned to double-digit margins and grew double digits year-over-year. This performance reflects the structural changes and cost savings initiatives we instituted in Q2, and is a clear demonstration of our commitment to run this business in a consistently profitable manner. We are highly focused on the things that we can control, including identifying ways to improve our cost structure going forward while continuing to invest in those key growth areas that we believe can drive consistent results.

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Q&A Session

It’s our intention to sustain similar adjusted EBITDA margins going forward, keeping in mind some natural seasonality and fluctuations in expenses over the course of the year. I’ll now discuss our in-quarter business results, which were similar to the trends we saw in the first half of the year. I’ll break down the positive trends of continued strength in new business, the breadth of that new business across our end markets and in striking more multiyear deals helping our long-term business. I’ll also discuss the continued challenges in overages and add-on entitlements and the things we’re doing to improve results in those areas as well. As in the first half of 2023, new business in Q3 continued to be a strength, growing more than 65% year-over-year with average contract values up 2x to 3x versus the year ago quarter.

This is consistent with what we have seen throughout the year, with new business up over 140% overall year-to-date and 35% excluding the impact of the large Yahoo transaction in Q1. I’ll note that this new business strength is primarily being driven by performance in our Americas region, where we are furthest along in implementing and executing our strategic priorities. The key focus in the coming quarters is extending the learnings and success we are having in new business in the Americas to our other global markets. We’re also pleased with the end market breadth of new business performance in the quarter and year-to-date. In particular, we’re seeing strength in our enterprise new business in addition to the media strength we’ve noted previously.

This breadth is important because it reflects strong demand for our enterprise use cases, which I will discuss in more detail later, and positions potentially future larger media wins as a source of upside as we continue to execute on our strategy to win and super serve strategically large accounts. This strength in new business performance is the catalyst that has returned our revenue, excluding overages, back to gross in the quarter. Not only does this represent the vast majority of our business, but it’s also what we have the most control over, and it is what we are laser-focused on growing. Our positive results in new business have been offset in the near term, largely by the continued weakness in overages and the typically associated entitlements business – entitlement-based add-on business that comes with them.

Overages, which are not specifically indicative of the underlying health of our business and typically reflect our customers’ new content strategies, unpredictable consumer demand or conservative customer usage assumptions, these remain on track to be approximately $5 million this year. This is over $7 million lower than overages were in 2022, giving us a meaningful nearly 4% headwind to overall revenue growth in 2023. We’re getting closer to working our way through this overhang by partnering with customers to more accurately gauge their usage and sign them to multiyear contracts that provide improved visibility for both parties. With a focus on this in the last two quarters, we’ve now signed 20% to 25% more multiyear contracts in 2023 than either of the previous two years.

We believe this will deliver a better long-term financial model for us and our customers, delivering us more predictable revenues and then more predictable costs. In Q3, this lower overage activity continued to push our year-over-year add-on business performance down, as a significant portion of our historical add-on business was for the additional entitlements associated with higher overages. This is similar to what we experienced in the first half of the year, and we are continuing to shift our add-on focus away from predominantly entitlement field growth. While we expect to be able to sell additional entitlements to our growing customers, especially our media customers, we are focused on enabling a customer journey that more effectively enables add-on sales of products and services as well.

In order to drive more new business and improved add-on sales performance, we have made important changes to our go-to-market and product development initiatives over the course of the year. We expect to see the positive impact of these changes continue over time, especially as we wrap up 2023 and over the course of 2024. For example, from a go-to-market perspective, at the beginning of the year, we shifted our approach from individual reps focusing on both existing and new customers in a specific territory or end market to now having reps specifically dedicated to new business, and other reps specifically dedicated to renewals and add-on sales as part of our territory or end market approach. We also reallocated resources to expand our strategic sales coverage and demand generation towards strategically large customers, many in media, a market segment the company focused less on in recent years.

From a product perspective, we’ve been focused on increasing the velocity of new product introductions. We now have numerous new opportunities for our go-to-market teams to push to both new and existing customers. For our enterprise customer base, this is delivered via two use case-focused product suites, Communication Studio and Marketing Studio. We’ve received terrific feedback from customers on how the enhanced capabilities of these newer offerings can improve efficiency, effectiveness, engagement and results. We have a sizable installed base of customers who use Brightcove Video Cloud, our more general product suite, for marketing communication-specific use cases that are obvious candidates to upgrade to these newer offerings over time.

We’re seeing strong early success with customer adoption of these new products, and they represented a meaningful portion of our enterprise add-on business in Q3. For our media customer base, we focused on the rollout of our Analytics and Insights Suite, including subscription and Ad Monetization, Content and Engagement and Quality of Experience. Also, our Ad Monetization service, the cost savings, Context Aware Encoding improvements and our Playout and FAST capabilities and partners. These products are definitely helping us have the right conversations with our media customers and as they expand, we expect to grow with them in these areas. Additionally, we’ve pointed our go-to-market teams to focus on services as an additional form of potential add-on sale.

Historically, we’ve done more services selling with new customers, same customizations, new apps, those types of things. This focus has returned our services revenue to growth in 2023, with year-to-date growth at 18% and Q3 at 13% year-over-year, with an opportunity to hopefully accelerate this going forward. We have more work to do to improve our go-to-market efforts, and I am confident our approaches will deliver positive results. During the quarter, our CRO left the company. I am overseeing global sales directly while we search for a new CRO. We are actively recruiting for this role and have been pleased with the quality of initial candidates, filling this role with a world-class leader as soon as possible is a top priority. My confidence that improved sales execution will generate faster top-line growth is driven in large part by the strength of our value proposition and customer base in our two core markets: enterprise and media.

We have built a strong and resilient enterprise business with a highly differentiated value proposition that gives us the true right to win with these customers. Our two primary enterprise use cases, marketing and communications, are areas of global business being fundamentally changed by streaming. With Brightcove, enterprises using us for marketing can increase awareness, attract new customers, improve customer engagement and ultimately increase conversions and revenue. Those using us for communications can more deeply engage with employees, partners and other constituents for numerous reasons. Ultimately, streaming is at the core of these functions now. Given today’s hybrid remote and execute and deliver from anywhere world, our solutions are getting the awareness and credit they deserve now as we were named the winner of the Best Overall Marketing Campaign Management Solution in the Sixth Annual MarTech Breakthrough Awards program this quarter.

Also built an enviable enterprise customer base of more than 1,500 logos. One of the most exciting parts of our enterprise opportunity is that much of our success to date has been in the Americas, where enterprise customers have been early to adopt streaming use cases. Highly focused on developing our global enterprise business further to help us make it substantially larger than it is today. A great example of the global opportunity in Enterprise was a new customer win this quarter with HDFC, one of India’s largest banks and a top global financial institution signing up. In media, Brightcove is the clear market leader, especially for leading regional media companies around the globe and streamers that require an outsourced solution versus being large enough to want to rely on a pure do-it-themselves solution.

The breadth and quality of our platform and the long-term cost advantages that can provide make Brightcove’s value proposition incredibly compelling for any media or content provider that wants to leverage streaming but does not have the scale or desire to build and operate it themselves. A great example of this in the quarter is In The Black Network, a new OTT company focused on streaming content that showcases Black storytellers and culture, which we signed in Q3 and has already successfully launched this new streaming service powered by Brightcove’s industry-leading technology. In addition, ITBN will be using Brightcove’s Ad Monetization service to help maximize its ad revenue opportunities as well. At the same time, the ongoing focus on profitability and rationalizing costs for larger streaming providers and our excellence throughout the streaming stack is opening up exciting opportunities for us to win upmarket.

I’m thrilled to announce that both Yahoo and the NHL are now live on the Brightcove platform. We are in a number of active dialogues with other large streaming providers who are looking to outsource more and more of their streaming technology stack. And there is a virtuous cycle here that we expect to see as we sign more large deals, which will increase our capabilities and cost advantage as we gain greater scale, which in turn will increase the total cost of ownership benefits we can pass along to those large customers. I’d now like to spend a moment highlighting some of our other new customer wins and renewals in the quarter. In media, we were pleased to sign a number of new mid-market customers in addition to In The Black Network, including DogTV and Carnegie Hall.

Carnegie Hall is a great example of our strength with art spaces and organizations, including other leading groups like the Metropolitan Opera, who renewed this quarter, the Melbourne Symphony, the Seattle Symphony and the Lincoln Center Chamber Music Association. We also signed meaningful wins with larger regional media companies to solve their streaming needs, like SBT, 1 of the largest broadcast media companies in Brazil, and JCOM, Japan’s largest cable provider. These ones are also notable because they are more traditional content aggregators and reflect the opportunity we have outside of the typical streaming content supplier. In enterprise, we’re seeing growing traction in the technology vertical, notably Acquia were added during the quarter.

Acquia, the digital experience leader with Drupal at its core, selected us to power its video marketing strategy, enabling them to better reach current and prospective customers with market and technology trends that will increase engagement and ultimately, conversion. Other new business wins included Agustin Institute, a faith-based streamer; Build-A-Bear; D League, a Japanese professional dance league; CNC Technologies, an aviation technology company; HARMAN, a connected device company and also a subsidiary of Samsung; and Tyson Foods. On the renewal front, we had an incredible list of customers that renewed or expanded their business with Brightcove in Q3. This included leading media entities like the CBS Television Network, Funny or Die, Raycom Sports, the Academy of Motion Picture Arts & Sciences and Coupang, which is one of our largest customers and renewed at 100% in the quarter.

It’s also included tech companies like ServiceNow, Palo Alto Networks, Autodesk, VMware and DocuSign. It included large financial and corporate services entities, like Bain & Company, Blackstone and Navy Federal Credit Union. And it included consumer and retail companies like Chick-Fil-A, Estee Lauder and AMC Theaters, which increased their entitlement package to support the trailer for Taylor Swift’s Eras Tour release. As mentioned earlier, an important focus and trend in both our new business and renewal signings is the success we’re having signing multiyear deals. This is helping drive better engagement with customers and increasing the visibility we have in the business. As Rob will highlight, our multiyear backlog is growing this year, and that means the percent of our revenue that is committed for 2024 will be greater compared to the start of 2023.

This should give us a strong and stable quarter for our business to build off of going forward and reduce revenue at risk for downgrades and churn. Let me close by reiterating that we are pleased with the progress we’ve made during the quarter, particularly returning growth in revenue, excluding overages, and delivering growing adjusted EBITDA at double-digit margins. We believe these changes and investments we are making in our go-to-market efforts and product development initiatives will position us to further improve our performance and eventually enable us to deliver on our long-term targets of double-digit revenue growth and 20%-plus adjusted EBITDA margins. We operate in somewhat volatile and challenging macroeconomic times. We believe the continued evolution of the streaming market is strengthening our competitive positioning and will provide an increasing number of growth opportunities in the long term.

We are focused and working aggressively to ensure we fully capitalize on this as soon as possible and increase the value we deliver to our customers and shareholders. We have more work to do to get the business where it needs to be. And we are committed to executing on our strategic priorities in doing so thoughtfully and as quickly as possible. With that, I’m going to turn the call over to Rob for a deeper dive on Q3 and the numbers, and I’ll be back for Q&A.

Rob Noreck: Thank you, Marc, and good afternoon, everyone. I will begin with a detailed review of our third quarter, and then I will finish with our outlook for the fourth quarter and the full year 2023. Total revenue in the third quarter was $51 million, which is at the high end of our guidance range. Breaking revenue down further if we exclude overages of $1.4 million in the quarter, revenue was $49.6 million, up 1% year-over-year. Subscription and support revenue, which includes overages, was $48.6 million. And professional services revenue was $2.4 million, down 6% and up 13% year-over-year, respectively. 12-month backlog, which we define as the aggregate amount of committed subscription revenue related to future performance obligations in the next 12 months was $121.1 million.

This represents a 6% year-over-year increase. Total backlog was $174.2 million, up 21% year-over-year. As Marc mentioned, we are seeing good success increasing the mix of our new business and renewals towards multiyear contracts. This is positively impacting our total backlog and improving the predictability of the business. On a geographic basis, we generated 60% of our revenue in North America during the quarter and 40% internationally. Breaking down international revenue a little more, Europe generated 16% of our revenue, and Japan and Asia Pacific generated 24% of revenue during the quarter. Let me now turn to the supplemental metrics we share on a quarterly basis. Net revenue retention in the quarter was 93%, which compares to 95% in the second quarter of 2023 and 93% in the third quarter of 2022.

This is largely in line with recent quarters and continues to reflect the impact from the lower add-on sales performance in the year. We expect that as we continue to expand our add-on sales capabilities, make improvements in our renewals business and increase our focus on multiyear deals, this metric will improve over time. Recurring gallery retention rate in the third quarter was 85%. As we continue our strategic focus on multiyear deals, this metric becomes less meaningful, as it only captures renewals in the quarter and upsells at the time of renewal and does not factor in the impact of multiyear deals. Our customer count at the end of the third quarter was 2,618, of which 2,077 were classified as premium customers. Looking at our ARPU within our premium customer base, our annualized revenue per premium customer was $95,900 and excludes our entry-level pricing for starter customers, which averaged $3,800 in annualized revenue.

This compares to $95,900 in the third quarter of 2022. As a reminder, this metric includes overages, which are down $3.3 million year-over-year. Looking at our results on a GAAP basis, our gross profit was $31.7 million, operating loss was $2.3 million and net loss per share was $0.06 for the quarter. Turning to our non-GAAP results. Our non-GAAP gross profit in the third quarter was $32.5 million, compared to $34.5 million in the year ago period and represented a gross margin of 64%, which was consistent with the third quarter of 2022. Non-GAAP operating income was $2.3 million in the third quarter compared to $2.8 million in the third quarter of 2022. Adjusted EBITDA was $5.5 million, representing an adjusted EBITDA margin of 11% and an increase of 12% compared to positive $4.9 million in the year ago period and above our guidance range.

The strong margin performance in the quarter is a reflection of the cost initiatives we undertook in the second quarter and our ongoing commitment to expense discipline. Non-GAAP diluted net income per share was $0.05, based on 43.4 million weighted average shares outstanding. This compares to net income per share of $0.05 on 42.1 million weighted average shares outstanding in the year ago period. Turning to the balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $16.4 million. We generated $2.1 million in cash flow from operations, and free cash flow was negative $2.2 million after taking into account $4.3 million of capital expenditures and capitalized internal use software. Cash flow performance reflected two key factors.

First, we have seen customers seeking to move to monthly or quarterly billing terms versus annual in advance, which has altered and effectively slows our collections. We are generally willing to work with customers and be flexible on payment terms in order to maintain customer value and commitments. And second, we have seen our large vendors get more aggressive in their collections efforts, lowering our expected AP balance. I would like to finish by providing our guidance for the fourth quarter and the full year 2023. For the fourth quarter, we are targeting revenue of $49 million to $51 million, including approximately $900,000 of overages and approximately $2.6 million of professional services revenue. From a profitability perspective, we expect non-GAAP operating income to be $300,000 to $2.3 million and adjusted EBITDA to be between $4 million and $6 million.

Non-GAAP net income per share is expected to be a range of breakeven to $0.05, based on 43.7 million weighted average shares outstanding. For the full year, we are now targeting revenue of $200 million to $202 million, including $4.8 million of overages and approximately $8.9 million of professional services revenue. From a profitability perspective, we expect non-GAAP operating loss of $2.5 million to $500,000 and adjusted EBITDA to be between $10.4 million and $12.4 million. Non-GAAP net loss per share is expected to be in a range of $0.09 to $0.04, based on 43 million weighted average shares outstanding. We are now targeting positive free cash flow in the fourth quarter and free cash flow of approximately negative $11 million for the full year due to the factors I mentioned previously.

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?

Marc DeBevoise: Yes. I think we have small amounts of revenue today. What we’ve learned is that as we dive in with a lot of our, what I would call mid-market customers or international customers, we’re being very helpful to them, growing their businesses, but it’s a challenge to drive enough volume through that customer base to really have an impact on our revenue line, Steve. So where we’re focused is how we can support those larger customers, and we’re having some good dialogue with a few of those now. And then also selling our ad support effectively as a services business, right, how do we go in and sell our capabilities, our talent and our knowledge into those companies more like services. And we’ve started that pivot sort of as we’ve entered here in the second half. We’ll have more information on that, I would say, by the end of the year and into Q1.

Steve Frankel: Great. Thank you. I’ll jump back into the queue.

Rob Noreck: And with that, we’ll take questions from Mike Latimore, Northland Securities.

Mike Latimore: Thanks. Yes. Thanks very much. So on the – it seems like you’re a little more positive on the enterprise business. Can you just elaborate on kind of what transpired there? I mean, a lot of the focus – sales and new products has been media. So why would enterprise, you pick it up as media focus or lesser?

Marc DeBevoise: Yes. Look, I think what we did when I joined the company about 18 months ago and repositioned the strategy by the middle of last year was effectively bring the company back to a more 50-50 stance between enterprise and media in terms of our focus on both product development and go-to-market. I think what we’re seeing now early in the year, obviously, with the larger deal in Q1 and a number of other deals. We saw new business in media do very, very well, right? That was driving a lot of that new business growth. But what we’ve seen in the last two quarters, especially here in Q3 is the strength in the enterprise new business delivery. And that’s great news. That makes us feel like the end market breadth of that new business is deep.

It’s broad. It goes through both segments. And so we’re very excited about what that means for our long-term prospects. You’re still going to see, I think, media be chunkier wins for us. Obviously, there’s the potential for larger wins in that space. But we are feeling that the product suite we’ve come out with Comm Studio [ph] on top of marketing studios, a second use case, and we’re thinking about others is really going to help us hunt for new business in the enterprise as well. And the last point I’ll make which I made earlier is, it’s really a strength in Americas enterprise, and so we think there’s a real opportunity to scale that outside of the Americas over time, right? We need to transfer that knowledge, how we were able to do those types of things for customers and be able to do those on a broader scale.

Mike Latimore: And then I see, on new business bookings growth looks very strong again. I guess in a more balanced environment between new and upsell, like what would be a normal bookings mix for you guys? What would you have to see between new and upsell bookings?

Marc DeBevoise: Not committed – I’d like to see it all very growing in a big way. But what I would say is, historically, our business – and Rob, you could correct me here – has been 70%, 80% add-on business and probably 20% to 30% new business. This year, we’re seeing that probably a little bit more – it’s not perfectly even, but we’re seeing in quarters, it’d be a little bit more weighted to the new business side. And so especially that first quarter where we had a very large new business transaction. So, I think what we’re hoping is in the long run, we get back to real growth on the add-on side, which is what’s held us back. And if we can do that on top of the new business growth we’re seeing, I think you’re going to have a tremendous story for the future.

Mike Latimore: I think the last quarter, you gave a number – like a number of deals over $500,000 in the pipeline or something like that. Or a – just kind of a large deal pipeline. Any quantification or update on that?

Marc DeBevoise: Yes. We’re not disclosing big quantifications here. What I would say is, we have a meaningful large deal pipeline. We qualified to $750,000 or greater. It is a meaningful portion of our current and future pipeline. We’re excited about what that means. They are longer sales cycles for sure, on those larger deals. But I think we have line of sight to a number of things that are there that we’re excited about that should be there for us in the future. And we continue to build it, right? It’s been building over the course of the year. I think it’s going to be a great opportunity going into 2024.

Mike Latimore: All right, great. Thanks very much.

Rob Noreck: Thanks, Mike. And with that, we’ll take questions from Max Michaelis, Lake Street Capital.

Max Michaelis: Hey, guys, thanks for taking my question. Just quick on the multiyear contracts. I was just wondering, given the current macro, if you’re facing any pushback from customers about committing to multiyear contracts.

Rob Noreck: No, not really. We’re actually seeing a good uptick from our customers. I think what they’re liking about it is we tend to lock in price over multiple years. So they’re able to see some price certainty, as Marc talked about, over that term, and it works for both parties, right? We get the consistency and the predictability of the business, and they get their costs locked in for a number of years.

Max Michaelis: Okay. And then gross margin for the quarter, down almost 200 basis points. Can you touch on that? Maybe what was the reason for that?

Rob Noreck: Yes. I think the way you really need to look at those two is you need to take a look at those without depreciation and amortization, and you need to strip that out because we’re actually improving. A big piece of the dip is related to the incremental depreciation and amortization related to some of the new products that we’ve been launching over the course of the first half of this year.

Max Michaelis: Okay. That’s it for me. Thanks guys.

Rob Noreck: Excellent. Thanks Max.

Marc DeBevoise: Yes. Thank you, Max. First, we appreciate all of you joining us today. To our investors, we appreciate your support to our customers and partners. We appreciate your business. And to our employees, we really appreciate your incredible smart and hard work. We operate in challenging times, both in the world and in parts of our industry. We continue to believe deeply in the long-term growth opportunity here at Brightcove. And we are committed to delivering on that opportunity and doing so while growing adjusted EBITDA and free cash flow. I believe our current valuation, which is a meaningful discount to other streaming technology companies and other SaaS companies with similar financial profiles, provides investors a compelling opportunity.

And we are confident that as we deliver on our strategic goals and improve our financial and operational performance, that will be reflected in our share price. With that, we thank you. We look forward to seeing you next quarter.