UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2020~~2021

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number:

001-35429

BRIGHTCOVE INC.

(Exact name of registrant as specified in its charter)


Delaware		20-1579162
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

290 Congress Street

Boston, MA 02210

(Address of principal executive offices)

(888)

882-1880

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	~~Trading~~ ~~Symbol(s)~~	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	BCOV	The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ ~~(Do~~ (Do not check if a smaller reporting company)	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

Yes

☐

No ☒

As of July

~~, 2020~~22, 2021 there were ~~39,414,408~~40,812,422 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Table of Contents

BRIGHTCOVE INC.

Table of Contents


	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020		4

Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020		5

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020		6

Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and six~~ months ended June 30, ~~2020~~2021 and ~~2019~~2020		7

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020		8

Notes to Condensed Consolidated Financial Statements		9


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
28

Item 4. Controls and Procedures		32
30

PART II. OTHER INFORMATION		32
30

Item 1. Legal Proceedings		32
30

Item 1A. Risk Factors		33
30

Item 5. Other Information		35
31

Item 6. Exhibits		36
32

Signatures		37 33

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form

10-Q

that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements related to adding employees; statements related to potential benefits of acquisitions; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in Item 1A of Part I of this Quarterly Report on Form

10-Q,

and the risks discussed in our other Securities and Exchange Commission, or SEC, filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Forward-looking statements in this Quarterly Report on Form

10-Q

may include statements about:

•

our ability to achieve profitability;

•

our competitive position and the effect of competition in our industry;

•

our ability to retain and attract new customers;

•

our ability to penetrate existing markets and develop new markets for our services;

•

our ability to retain or hire qualified accounting and other personnel;

•

~~our ability to successfully integrate acquired businesses, including the online video platform assets of Ooyala, Inc. and certain of its subsidiaries that we acquired during 2019;~~

our ability to successfully integrate acquired businesses;

•

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

•

our ability to maintain the security and reliability of our systems;

•

our estimates with regard to our future performance and total potential market opportunity;

•

~~our expectations regarding the potential impact~~

our estimates regarding our anticipated results of ~~the~~

~~COVID-19~~

~~pandemic on our business,~~ operations, future revenue, bookings growth, capital requirements and our needs for additional financing; and ~~the markets in which we and our partners and customers operate;~~

•

~~our estimates regarding our anticipated results of operations, future revenue, bookings growth, capital requirements and our needs for additional financing;~~

our goals and strategies, including those related to revenue and bookings growth.

•

~~our goals and strategies, including those related to revenue and bookings growth.~~

Table of Contents

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

ITEM 1. FINANCIAL STATEMENTS

Brightcove Inc.

Condensed Consolidated Balance Sheets

(unaudited)

June 30, 2020

December 31, 2019

(in thousands, except share
and per share data)

Assets

Current assets:

Cash and cash equivalents
$
27,753
$
22,759

Accounts receivable, net of allowance of $651 and $904 at June 30, 2020 and December 31, 2019, respectively

26,794

31,181

Prepaid expenses

8,986

5,171

Other current assets

8,340

6,713

Total current assets

71,873

65,824

Property and equipment, net

14,726

12,086

Operating lease
right-of-use
asset

13,340

16,912

Intangible assets, net

12,090

13,875

Goodwill

60,902

60,902

Other assets

3,524

3,268

Total assets
$
176,455
$
172,867

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable
$
11,283
$
9,917

Accrued expenses

20,556

20,925

Operating lease liability

5,687

6,174

Deferred revenue

54,647

49,260

Total current liabilities

92,173

86,276

Operating lease liability, net of current portion

8,618

11,701

Debt

5,000

—

Other liabilities

1,100

767

Total liabilities

106,891

98,744

Commitments and contingencies
(Note 10)

Stockholders’ equity:

Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued

—

—

Common stock, $0.001 par value; 100,000,000 shares authorized; 39,543,991 and 39,042,787 shares issued at June 30, 2020 and December 31, 2019, respectively

39

39

Additional
paid-in
capital

281,255

276,365

Treasury stock, at cost; 135,000 shares

(871
)
(871
)
Accumulated other comprehensive loss

(1,086
)
(785
)
Accumulated deficit

(209,773
)
(200,625
)

Total stockholders’ equity

69,564

74,123

Total liabilities and stockholders’ equity
$
176,455
$
172,867


	June 30, 2021			December 31, 2020
	(in thousands, except share and per share data)
Assets
Current assets:

Cash and cash equivalents	$	40,387		$	37,472
Accounts receivable, net of allowance of $738 and $648 at June 30, 2021 and December 31, 2020, respectively		31,445			29,305
Prepaid expenses		9,563			5,760
Other current assets		11,483			12,978

Total current assets		92,878			85,515
Property and equipment, net		17,460			15,968
Operating lease right-of-use asset		6,749			8,699
Intangible assets, net		8,956			10,465
Goodwill		60,902			60,902
Other assets		6,236			5,254
Total assets	$	193,181		$	186,803

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,001		$	10,456
Accrued expenses		20,779			25,397
Operating lease liability		2,734			4,346
Deferred revenue		62,433			58,741

Total current liabilities		96,947			98,940
Operating lease liability, net of current portion		4,200			5,498
Other liabilities		889			2,763

Total liabilities	$	102,036			107,201
Commitments and contingencies (Note 8)		0			0
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued		0—			0—
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,946,572 and 40,152,021 shares issued at June 30, 2021 and December 31, 2020, respectively		41			40
Additional paid-in capital		292,775			287,059
Treasury stock, at cost; 135,000 shares		(871	)		(871	)
Accumulated other comprehensive loss		(362	)		(188	)
Accumulated deficit		(200,438	)		(206,438	)

Total stockholders’ equity		91,145			79,602

Total liabilities and stockholders’ equity	$	193,181		$	186,803

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

(in thousands, except share and
per share data)

Revenue:

Subscription and support revenue
$
45,617
$
44,891
$
90,275
$
83,768

Professional services and other revenue

2,309

2,691
$
4,304

5,650

Total revenue

47,926

47,582

94,579

89,418

Cost of revenue:

Cost of subscription and support revenue

17,807

19,381

34,555

33,551

Cost of professional services and other revenue

2,092

2,228

3,986

4,804

Total cost of revenue

19,899

21,609

38,541

38,355

Gross profit

28,027

25,973

56,038

51,063

Operating expenses:

Research and development

9,131

7,629

17,984

15,023

Sales and marketing

13,383

16,827

27,557

31,083

General and administrative

6,407

5,979

12,939

11,240

Merger-related

259

2,620

5,768

5,552

Total operating expenses

29,180

33,055

64,248

62,898

Loss from operations

(1,153
)
(7,082
)
(8,210
)
(11,835
)
Other (expense) income, net

(27
)
19

(495
)
(36
)

Loss before income taxes

(1,180
)
(7,063
)
(8,705
)
(11,871
)
Provision for income taxes

115

175

443

350

Net loss
$
(1,295
) $
(7,238
) $
(9,148
) $
(12,221
)

Net loss per share
-
basic and diluted
$
(0.03
) $
(0.19
) $
(0.23
) $
(0.33
)

Weighted-average number of common shares used in computing net loss per share

39,291,649

37,966,207

39,136,394

37,322,646


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands, except share and per share data)
Revenue:

Subscription and support revenue	$	48,602		$	45,617		$	99,441		$	90,275
Professional services and other revenue		2,870			2,309			6,848			4,304

Total revenue		51,472			47,926			106,289			94,579
Cost of revenue:
Cost of subscription and support revenue		14,756			17,807			30,434			34,555
Cost of professional services and other revenue		2,468			2,092			5,958			3,986

Total cost of revenue		17,224			19,899			36,392			38,541

Gross profit		34,248			28,027			69,897			56,038
Operating expenses:
Research and development		7,855			9,131			16,139			17,984
Sales and marketing		18,130			13,383			34,279			27,557
General and administrative		7,418			6,407			14,477			12,939
Merger-related		255			259			255			5,768
Other (benefit) expense		—			—			(1,965	)		—

Total operating expenses		33,658			29,180			63,185			64,248

Income (loss) from operations		590			(1,153	)		6,712			(8,210	)
Other expense, net		117			(27	)		(618	)		(495	)

Income (loss) before income taxes		707			(1,180	)		6,094			(8,705	)
Provision for income taxes		(163	)		115			94			443

Net income (loss)	$	870		$	(1,295	)	$	6,000		$	(9,148	)
Net income (loss) per share—basic and diluted
Basic	$	0.02		$	(0.03	)	$	0.15		$	(0.23	)
Diluted	$	0.02		$	(0.03	)	$	0.14		$	(0.23	)
Weighted-average shares—basic and diluted
Basic		40,615,149			39,291,649			40,385,866			39,136,394
Diluted		42,208,933			39,291,649			42,390,641			39,136,394

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021			2020
	(in thousands)

Net income (loss)	$	870	$	(1,295	)	$	6,000		$	(9,148	)
Other comprehensive income:
Foreign currency translation adjustments		35		158			(174	)		(301	)

Comprehensive income (loss)	$	905	$	(1,137	)	$	5,826		$	(9,449	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Brightcove Inc.

Condensed Consolidated Statements of ~~Comprehensive Loss~~Stockholders’ Equity

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

(in thousands)

Net loss
$
(1,295
) $
(7,238
) $
(9,148
) $
(12,221
)
Other comprehensive income:

Foreign currency translation adjustments

158

39

(
301
)
60

Comprehensive loss
$
(1,137
) $
(7,199
) $
(9,449
) $
(12,161
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands, except share data)
Shares of common stock issued

Balance, beginning of period		40,412,577			39,105,853			40,152,021			39,042,787
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units		533,995			438,138			794,551			501,204

Balance, end of period		40,946,572			39,543,991			40,946,572			39,543,991

Shares of treasury stock
Balance, beginning of period		(135,000	)		(135,000	)		(135,000	)		(135,000	)

Balance, end of period		(135,000	)		(135,000	)		(135,000	)		(135,000	)

Par value of common stock issued
Balance, beginning of period	$	40		$	39		$	41		$	39
Issuance of common stock upon exercise of stock options		0			0			0			0
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units		1			0			0			0

Balance, end of period	$	41		$	39		$	41		$	39

Value of treasury stock
Balance, beginning of period	$	(871	)	$	(871	)	$	(871	)	$	(871	)

Balance, end of period	$	(871	)	$	(871	)	$	(871	)	$	(871	)

Additional paid-in capital
Balance, beginning of period	$	290,403		$	279,114		$	287,059		$	276,365
Issuance of common stock upon exercise of stock options and pursuant to restricted stock units, net of tax		(378	)		(38	)		631			(2	)
Stock-based compensation expense		2,750			2,179			5,085			4,892

Balance, end of period	$	292,775		$	281,255		$	292,775		$	281,255

Accumulated deficit
Balance, beginning of period	$	(201,308	)	$	(208,478	)	$	(206,438	)	$	(200,625	)
Net income (loss)		870			(1,295	)		6,000			(9,148	)

Balance, end of period	$	(200,438	)	$	(209,773	)	$	(200,438	)	$	(209,773	)

Accumulated other comprehensive loss
Balance, beginning of period	$	(397	)	$	(1,244	)	$	(188	)	$	(785	)
Foreign currency translation adjustment		35			158			(174	)		(301	)

Balance, end of period	$	(362	)	$	(1,086	)	$	(362	)	$	(1,086	)

Total stockholders’ equity	$	91,145		$	69,564		$	91,145		$	69,564

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

~~Brightcove Inc.~~

~~Condensed Consolidated Statements of Stockholders’ Equity~~

~~(unaudited)~~

~~(in thousands, except share data)~~

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

(in thousands, except share data)

Shares of common stock issued

Balance, beginning of period

39,105,853

36,908,051

39,042,787

36,752,469

Common stock issued upon acquisition

—

1,056,763

—

1,056,763

Issuance of common stock upon exercise of stock options and pursuant to restricted stock units

438,138

255,029

501,204

410,611

Balance, end of period

39,543,991

38,219,843

39,543,991

38,219,843

Shares of treasury stock

Balance, beginning of period

(135,000
)
(135,000
)
(135,000
)
(135,000
)

Balance, end of period

(135,000
)
(135,000
)
(135,000
)
(135,000
)

Par value of common stock issued

Balance, beginning of period
$
39
$
37
$
39
$
37

Common stock issued upon acquisition

—

1

—

1

Issuance of common stock upon exercise of stock options and pursuant to restricted stock units

—

—

—

—

Balance, end of period
$
39
$
38
$
39
$
38

Value of treasury stock

Balance, beginning of period
$
(871
) $
(871
) $
(871
) $
(871
)

Balance, end of period
$
(871
) $
(871
) $
(871
) $
(871
)

Additional
paid-in
capital

Balance, beginning of period
$
279,114
$
253,244
$
276,365
$
251,122

Common stock issued upon acquisition

—

8,865

—

8,865

Withholding tax on restricted stock units vesting

(396
)
—

(396
)
—

Issuance of common stock upon exercise of stock options and pursuant to restricted stock units

358

1,218

394

1,843

Stock-based compensation expense

2,179

1,438

4,892

2,935

Balance, end of period
$
281,255
$
264,765
$
281,255
$
264,765

Accumulated deficit

Balance, beginning of period
$
(208,478
) $
(183,705
) $
(200,625
) $
(178,722
)
Net loss

(1,295
)
(7,238
)
(9,148
)
(12,221
)

Balance, end of period
$
(209,773
) $
(190,943
) $
(209,773
) $
(190,943
)

Accumulated other comprehensive loss

Balance, beginning of period
$
(1,244
) $
(931
) $
(785
) $
(952
)
Foreign currency translation adjustment

158

39

(301
)
60

Balance, end of period
$
(1,086
) $
(892
) $
(1,086
) $
(892
)

Total stockholders’ equity
$
69,564
$
72,097
$
69,564
$
72,097

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

Brightcove Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six Months Ended June 30,

2020

2019

(in thousands)

Operating activities

Net loss
$ (9,148 ) $
(12,221
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

4,357

3,934

Stock-based compensation

4,716

2,783

Provision for reserves on accounts receivable

401

253

Changes in assets and liabilities:

Accounts receivable

4,055

(7,688
)
Prepaid expenses and other current assets

(5,357
)
(1,892
)
Other assets

(300
)
(435
)
Accounts payable

2,038

58

Accrued expenses

(577
)
7,924

Operating leases

3

(162
)
Deferred revenue

5,112

3,565

Net cash provided by (used in) operating activities

5,300

(3,881
)
Investing activities

Purchases of property and equipment

(1,197
)
(401
)
Cash paid for acquisition, net of cash acquired

—

(3,300
)
Capitalized
internal-use
software costs

(3,839
)
(2,372
)

Net cash used in investing activities

(5,036
)
(6,073
)
Financing activities

Proceeds from exercise of stock options

394

1,843

Proceeds from debt

10,000

—

Debt paydown (5,000 ) —
Other financing activities

(429
)
(117
)

Net cash provided by financing activities

4,965

1,726

Effect of exchange rate changes on cash and cash equivalents

(235
)
131

Net increase (decrease) in cash and cash equivalents

4,994

(8,097
)

Cash and cash equivalents at beginning of period

22,759

29,306

Cash and cash equivalents at end of period
$

27,753
$
21,209

Supplemental disclosure of
non-cash
investing activities

Fair value of shares issued for acquisition of a business
$
—
$
8,866

Supplemental disclosure of cash flow information

Cash paid for operating lease liabilities
$
3,561
$

3,718


	Six Months Ended June 30,
	2021			2020
	(in thousands)
Operating activities

Net income (loss)	$	6,000		$	(9,148	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,278			4,357
Stock-based compensation		4,901			4,716
Provision for reserves on accounts receivable		276			401
Changes in assets and liabilities:
Accounts receivable		(2,634	)		4,055
Prepaid expenses and other current assets		(1,337	)		(5,357	)
Other assets		(1,000	)		(300	)
Accounts payable		105			2,038
Accrued expenses		(6,053	)		(577	)
Operating leases		(960	)		3
Deferred revenue		3,801			5,112

Net cash provided by operating activities		7,377			5,300
Investing activities
Purchases of property and equipment		(808	)		(1,197	)
Capitalized internal-use software costs		(2,977	)		(3,839	)

Net cash used in investing activities		(3,785	)		(5,036	)
Financing activities
Proceeds from exercise of stock options		1,980			394
Deferred acquisition payments		(475	)		—
Proceeds from debt		—			10,000
Debt paydown		—			(5,000	)
Other financing activities		(1,348	)		(429	)

Net cash provided by financing activities		157			4,965
Effect of exchange rate changes on cash and cash equivalents		(834	)		(235	)

Net increase in cash and cash equivalents		2,915			4,994
Cash and cash equivalents at beginning of period		37,472			22,759

Cash and cash equivalents at end of period	$	40,387		$	27,753

Supplemental disclosure of cash flow information
Cash paid for operating lease liabilities	$	3,165		$	3,561

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Brightcove Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(in thousands, except share and per share data, unless otherwise noted)

1. Business Description and Basis of Presentation

Business Description

Brightcove Inc. (the Company) is a leading global provider of cloud services for video which enable its customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner.

The Company is headquartered in Boston, Massachusetts and was incorporated in the state of Delaware on August 24, 2004.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~2020.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, ~~other than the changes to accounting for credit losses as described in Note 13,~~ the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, ~~2019~~2020 contained in the Company’s Annual Report on Form

10-K

and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s ~~condensed consolidated~~ financial ~~statements~~position for the three ~~and six~~ months ended June 30, ~~2020~~2021 and ~~2019.~~2020. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

2. Quarterly Update to Significant Accounting Policies

Stock-Based Compensation

On March 25, 2021, the Board adopted, the Brightcove Inc. 2021 Stock Incentive Plan (the “2021 Plan”) which was approved by the shareholders on May 11, 2021. The maximum number of shares of stock reserved and available for issuance under the 2021 Plan

is 6,200,000

shares. Any awards under the Plan and under the Company’s existing 2012 Stock Incentive Plan (the “2012 Plan”) and the Company’s Amended and Restated 2004 Stock Option and Incentive Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the shares of stock available for issuance under the 2021 Plan and may be issued as awards thereunder.

The 2021 Plan is designed to enable the flexibility to grant equity awards to our officers, employees,

non-employee

directors and consultants and to ensure that we can continue to grant equity awards to eligible recipients at levels determined to be appropriate by the Board and/or the Compensation Committee. The 2021 Plan replaces the 2012 Plan and therefore there will

be 0

future grants issued under the 2012

lan.

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Allowance for Doubtful Accounts

The following details the changes in the Company’s reserve allowance for estimated credit losses for accounts receivable for the period:


	Allowance for Credit Losses
	(in thousands)

Balance as of December 31, 2020	$	648
Current provision for credit losses		233
Write-offs against allowance		(135	)
Recoveries		(8	)
Balance as of June 3 0 , 2021	$	738

Estimated credit losses for unbilled trade accounts receivable were not material.

Other (Benefit) Expense.

Other (benefit) expense, reflects other operating costs (or benefits) that do not directly relate to research and development, sales and marketing, general and administrative, and merger related.

On March 27, 2020, in response to the

COVID-19

pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act which was amended by the Consolidated Appropriations Act in December of 2020 (the “CARES Act”). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain refundable employee retention credits. In the first quarter of 2021, the Company recognized a benefit of $1,965 from the CARES Act related to employee retention credits. The Company ~~considers events or transactions~~recognizes such government relief when it is reasonably assured that ~~occur after~~it qualifies for the ~~balance sheet date but prior to~~relief, the ~~issuance of the financial statements to provide additional evidence for certain estimates or to identify matters~~underlying expense has been incurred and it is probable that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, other than those disclosed in this Report on Form

~~10-Q.~~

~~As described in Note 13,~~ the Company ~~implemented~~will receive it. Credits associated with government relief are recognized in profit or loss on a ~~significant accounting policy upon~~systematic basis over the ~~adoption of~~periods in which the Company recognizes as expense the related costs for which the relief is intended to compensate.

Recently Issued and Adopted Accounting ~~Standards Update (“ASU”)~~

~~2016-13,~~Pronouncements

~~Financial Instruments — Credit Losses~~

ASU

2019-12—Income

Taxes (Topic ~~326)~~740): ~~Measurement of Credit Losses on Financial Instruments~~Simplifying the Accounting for Income Taxes

(“

In December 2019, the FASB issued ASU

2019-12,

“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU

2019-12

amends ASC ~~326”). As of June 30, 2020, other than the changes~~740 to simplify the accounting for ~~credit losses, the Company’s significant accounting policies~~income taxes by removing certain exceptions for investments, intraperiod allocations and ~~estimates, which are detailed~~interim calculations, and adding guidance to reduce complexity in the ~~Company’s Annual Report~~accounting standard under the FASB’s simplification initiative. Upon adoption, the amendments in ASU

2019-12

are applied on ~~Form~~

~~10-K~~

~~for~~a prospective basis to all periods presented. The Company adopted the ~~year ended December 31, 2019, have not changed.~~new guidance under ASU

2019-12

in the first quarter of 2021 with no material impact.

2.3. Revenue from Contracts with Customers

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 following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers.

Accounts
Receivable, net

Contract Assets
(current)

Deferred
Revenue
(current)

Deferred
Revenue
(non-current)

Total Deferred
Revenue

Balance at December 31, 2019
$
31,181
$
1,871
$
49,260
$
299
$
49,559

Balance at June 30, 2020

26,794

2,017

54,647

92

54,739

~~Table of Contents~~


	Accounts Receivable, net		Contract Assets (current)		Deferred Revenue (current)		Deferred Revenue (non- current)		Total Deferred Revenue
Balance at December 31, 2020	$	29,305	$	2,078	$	58,741	$	811	$	59,552
Balance at June 30, 2021		31,445		2,077		62,433		434		62,867

Revenue recognized ~~during~~for the three and six months ended June 30, ~~2020~~2021 from amounts included in deferred revenue at the beginning of the period was approximately ~~$13.7~~

$15.5

million and ~~$38.9~~$46.7 million, respectively. During the three and six months ended June 30, ~~2020,~~2021, the Company did not recognize a material amount of revenue from performance obligations satisfied or partially satisfied in previous periods.

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The assets recognized for costs to obtain a contract were ~~$7.4~~$12.6 million as of June 30, ~~2020~~2021 and ~~$5.9~~ $13.3

million as of December 31, ~~2019.~~2020. Amortization expense recognized ~~during~~for the three and six months ended June 30, 2021 related to costs to obtain a contract was $3.2 million and $6.3 million, respectively.

Amortization expense recognized for the three and six months ended June 30, 2020 related to costs to obtain a contract was $1.8 million and $3.4 million, respectively. ~~Amortization expense recognized during the three and six months ended June 30, 2019 related to costs to obtain a contract was $1.8 million and $3.7 million, respecti~~

~~ely.~~

Transaction Price Allocated to Future Performance Obligations

As of June 30, ~~2020,~~2021, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately ~~$136.9~~$152.8 million, of which approximately ~~$108.8~~

$119.8 million is expected to be recognized over the next 12 months. The Company expects to recognize substantially all of the remaining unsatisfied performance obligations by December 2024.

~~3. 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, trade accounts receivable and unbilled trade accounts receivable.

The Company maintains its cash and cash equivalents 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 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.

~~Please~~

~~see~~

~~Note 13 for more detail on how the Company assesses credit risk for trade accounts receivable and unbilled trade accounts receivable under ASC 326.~~

4. ~~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.~~

5. Cash and Cash Equivalents

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. Management determines the appropriate classification of investments at the time of purchase, and

~~re-evaluates~~

such determination at each balance sheet date. The Company did 0t have any short-term or long-term investments at June 30, 2020 or December 31, 2019. The increase in cash and cash equivalents is primarily the result of the Company’s borrowing

~~, net of repayment~~

~~$5.0 million under an existing line of credit, as described in Note 11.~~

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.

Cash and cash equivalents as of June 30, ~~2020~~2021 consist of the following:

June 30, 2020

Description

Contracted
Maturity

Cost

Fair Market
Value

Balance Per
Balance Sheet

Cash

Demand
$
27,712
$
27,712
$
27,712

Money market funds

Demand

41

41

41

Total cash and cash equivalents
$
27,753
$
27,753
$
27,753


	June 30, 2021
Description	Contracted Maturity		Cost		Fair Market Value
Cash		Demand	$	40,346	$	40,346
Money market funds		Demand		41		41

Total cash and cash equivalents			$	40,387	$	40,387

~~Table of Contents~~

Cash and cash equivalents as of December 31, ~~2019~~2020 consist of the following:

December 31, 2019

Description

Contracted
Maturity

Cost

Fair Market
Value

Balance Per
Balance Sheet

Cash

Demand
$
22,718
$
22,718
$
22,718

Money market funds

Demand

41

41

41

Total cash and cash equivalents
$
22,759
$
22,759
$
22,759


	December 31, 2020
Description	Contracted Maturity		Cost		Fair Market Value
Cash		Demand	$	37,431	$	37,431
Money market funds		Demand		41		41

Total cash and cash equivalents			$	37,472	$	37,472

~~6. Net Loss~~5. Earnings (Loss) per Share

The Company calculates basic and diluted ~~net loss~~earnings (loss) per common share by dividing the ~~net loss~~earnings (loss) amount by the number of common shares outstanding during the period. The ~~Company has excluded other potentially dilutive shares, which include warrants to purchase~~calculation of diluted earnings (loss) per common ~~stock and~~share includes the effects of the assumed exercise of any outstanding ~~common~~ stock options and ~~unvested~~the assumed vesting of shares of restricted stock ~~units, from~~awards, where dilutive.

The following table set forth the ~~number~~computations of ~~common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred.~~ basic and diluted earnings per share:


	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2021		2020			2021		2020
Net income (loss)	$	870	$	(1,295	)	$	6,000	$	(9,148	)


Weighted average shares used in computing basic earnings per share		40,615,149		39,291,649			40,385,866		39,136,394

Effect of weighted average dilutive stock-based awards		1,593,784		0			2,004,775		0

Weighted average shares used in computing diluted earnings per share		42,208,933		39,291,649			42,390,641		39,136,394

Net income (loss) per share—basic and diluted
Basic	$	0.02	$	(0.03	)	$	0.15	$	(0.23	)
Diluted	$	0.02	$	(0.03	)	$	0.14	$	(0.23	)

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The following outstanding common shares have been excluded from the computation of dilutive ~~net loss~~earnings (loss) per share as of ~~June 30, 2020 and 2019.~~the periods indicated because such securities are anti-dilutive:

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Options outstanding

2,372

2,624

2,372

2,624

Restricted stock units outstanding

3,580

3,187

3,580

3,187


	Three Months Ended June 30,				Six Months Ended June 30,
(shares in thousands)	2021		2020		2021		2020

Options outstanding		145		2,372		122		2,372
Restricted stock units outstanding		68		3,580		68		3,580

~~7. Fair Value of Financial Instruments~~

~~The Company’s financial instruments carried at fair value were less than $0.1 million as of June 30, 2020 and December 31, 2019~~

8.6. Stock-based Compensation

The weighted-average ~~fair value of options granted during~~assumptions utilized to determine the ~~three months ended June 30, 2020 and 2019 was $3.76 and $4.53 per share, respectively. The~~ weighted-average fair value of options ~~granted during the six months ended June 30, 2020 and 2019 was $3.48 and $4.36 per share, respectively. The weighted-average assumptions utilized to determine such values~~ are presented in the following table:

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Expected life in years

6.3

6.1

6.2

6.2

Risk-free interest rate

0.62
%
2.38
%
1.03
%
2.42
%

Volatility

48
%
44
%
46
%
44
%
Dividend yield

—

—

—

—


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Weighted-average fair value of options granted during the period	$	6.75		$	3.76		$	7.72		$	3.48
Risk-free interest rate		1.22	%		0.62	%		1.16	%		1.03	%
Expected volatility		48	%		48	%		48	%		46	%
Expected life (in years)		6.2			6.3			6.2			6.2
Expected dividend yield		0			0			0			0

As of June 30, ~~2020,~~2021, there was ~~$20.7~~$26.6 million of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of ~~2.08~~2.36 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the three ~~and six~~ months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Stock-based compensation:

Cost of subscription and support revenue
$
123
$
95
$
313
$
214

Cost of professional services and other revenue

90

68

170

152

Research and development

257

269

697

532

Sales and marketing

761

351

1,672

809

General and administrative

867

576

1,864

1,076

$
2,098
$
1,359
$
4,716
$
2,783

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	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock-based compensation:
Cost of subscription and support revenue	$	187	$	123	$	344	$	313
Cost of professional services and other revenue		118		90		186		170
Research and development		531		257		853		697
Sales and marketing		762		761		1,499		1,672
General and administrative		1,011		867		2,019		1,864

	$	2,609	$	2,098	$	4,901	$	4,716

The following is a summary of the stock option activity during the six months ended June 30, ~~2020.~~2021.

Number of
Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual
Term (In Years)

Aggregate
Intrinsic
Value (1)

Outstanding at December 31, 2019

2,479,423
$
8.96

Granted

79,920

7.76

Exercised

(61,096
)
6.48
$
108

Canceled

(126,007
)
9.00

Outstanding at June 30, 2020

2,372,240
$
8.99

6.81
$
852

Exercisable at June 30, 2020

1,368,007
$
8.70

5.67
$
740


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2020		2,110,486		$	9.19
Granted		79,230			16.51
Exercised		(226,525	)		8.74			$	2,616
Canceled		(64,506	)		9.95

Outstanding at June 30, 2021		1,898,685		$	9.54		6.54	$	9,385

Exercisable at June 30, 2021		1,275,816		$	8.93		5.81	$	6,968

(1)	The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on June 30, ~~2020~~2021 of ~~$7.88~~$14.34 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

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The following table summarizes the restricted stock unit activity for our service-based awards

(“S-RSU”)

and our performance-based awards

(“P-RSU”)

during the six months ended June 30, ~~2020:~~

Shares

Weighted
Average Grant
Date Fair Value

Unvested at December 31, 2019

3,626,364
$
9.03

Granted

746,295

7.95

Vested and issued

(438,484
)
8.92

Canceled

(353,932
)
8.52

Unvested at June 30, 2020

3,580,243
$
8.81

2021:

~~The aggregate fair value of vested and issued RSUs for the six months ended June 30, 2020 was $4.2 million.~~


	S-RSU Shares			Weighted Average Grant Date Fair Value		P-RSU Shares			Weighted Average Grant Date Fair Value		Total RSU Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2020		2,000,416		$	10.40		1,587,801		$	10.30		3,588,217		$	10.35
Granted		847,994			14.78		0			0		847,994			14.78
Vested and issued		(345,513	)		8.65		(181,910	)		8.74		(527,423	)		8.68
Canceled		(198,131	)		10.33		(196,840	)		8.76		(394,971	)		9.52

Unvested at June 30, 2021		2,304,766		$	12.26		1,209,051		$	10.79		3,513,817		$	11.75

9.7. Income Taxes

For the three months ended June 30, 2020 and 2019, the Company recorded income tax expense of $115 and $175, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded income tax expense of $443 and $350, respectively. The income tax expense relates principally to the Company’s foreign operations.

The Company is required to compute income tax expense in each jurisdiction in which it operates. This process requires the Company to project its current tax liability and estimate its deferred tax assets and liabilities, including net operating loss (“NOL”) and tax credit carry-forwards. In assessing the ability to realize the net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

The Company has provided a valuation allowance against its remaining U.S. net deferred tax assets as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences.

~~10.~~8. Commitments and Contingencies

Legal Matters

The Company, from time to time, is party to litigation arising in the ordinary course of business. Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company based on the status of proceedings at this time.

~~Table of Contents~~

Guarantees and Indemnification Obligations

The Company typically enters into indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses and costs incurred by the indemnified party, generally the Company’s customers, in connection with patent, copyright, trade secret, or other intellectual property or personal right infringement claims by third parties with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual after execution of the agreement. Based on when customers first subscribe for the Company’s service, the maximum potential amount of future payments the Company could be required to make under certain of these indemnification agreements is unlimited, however, more recently the Company has typically limited the maximum potential value of such potential future payments in relation to the value of the contract. Based on historical experience and information known as of June 30, ~~2020,~~2021, the Company has not incurred any costs for the above guarantees and indemnities. The Company has received requests for indemnification from customers in connection with patent infringement suits brought against the customer by a third party. To date, the Company has not agreed that the requested indemnification is required by the Company’s contract with any such customer.

In certain circumstances, the Company warrants that its products and services will perform in all material respects in accordance with its standard published specification documentation in effect at the time of delivery of the licensed products and services to the customer for the warranty period of the product or service. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial.

~~11.~~9. Debt

On December ~~14, 2018,~~28, 2020, the Company entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providing for up to a $30.0 million ~~asset based~~asset-based line of credit (the “Line of Credit”). ~~Under the Line of Credit, the Company can borrow up to $30.0 million.~~ Borrowings under the Line of Credit are secured by substantially all of the Company’s assets, excluding its intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate as follows: (i) for prime rate advances, the greater of (A) the prime rate and (B) 4%, and (ii) for

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LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points and (B) 4%. Under the Loan Agreement, the Company must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold based on

non-GAAP

operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the lenders under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. The Line of Credit agreement will expire on December 28, 2023. The Company

was

in compliance with all covenants under the Line of Credit as of June 30, ~~2020.~~

~~In March 2020, the Company borrowed $10.0 million on the Line~~2021 and there were 0 borrowings outstanding as of ~~Credit in anticipation of any operating cash needs in light of~~

~~COVID-19.~~

~~In June 2020 the Company~~

~~paid $5.0 million on the Line of Credit~~

~~The effective interest rate for the amounts borrowed on the Line of Credit was~~

~~% for the six months ended~~ June 30, ~~2020. The Line of Credit matures in~~

~~December 2021~~

~~. The fair value of these borrowings,~~

~~net of amounts paid,~~

~~which are classified as Level 2, approximates their carrying value at June 30, 2020 as the instrument carries a variable rate of interest which reflects current market rates.~~

2021.

~~12.~~10. Segment Information

Geographic Data

Total revenue from unaffiliated customers by geographic area, based on the location of the customer, was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenue:

North America
$
26,039
$
25,708
$
51,038
$
47,521

Europe

8,427

8,167

16,888

14,636

Japan

5,554

5,146

11,656

11,334

Asia Pacific

7,714

8,091

14,584

15,363

Other

192

470

413

564

Total revenue
$
47,926
$
47,582
$
94,579
$
89,418


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue:
North America	$	29,398	$	26,039	$	59,784	$	51,038
Europe		9,547		8,427		18,470		16,888
Japan		5,370		5,554		13,078		11,656
Asia Pacific		7,016		7,714		14,675		14,584
Other		141		192		282		413

Total revenue	$	51,472	$	47,926	$	106,289	$	94,579

North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was ~~$23,992~~$27.5 million and ~~$23,966 during~~$24.0 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Revenue from customers

~~Table of Contents~~

located in the United States was ~~$46,962~~$55.9 million and ~~$44,372 during~~$47.0 million for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively.

Other than the United States and Japan, no other country contributed more than 10% of the Company’s total revenue during the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, property and equipment at locations outside the U.S. was not material.

~~13. Recently Issued and Adopted Accounting Standards~~

~~In June 2016, the FASB issued ASU No.~~

~~2016-13,~~

~~which requires measurement and recognition of expected credit losses for financial assets held. Effective January 1, 2019, the Company adopted ASC 326 using the transition method introduced by ASU~~

~~2016-13.~~

~~The adoption of ASC 326 did not result in an adjustment to the estimated allowance as of December 31, 2019.~~

Under ASC 326, the Company changed its policy for assessing credit losses to include consideration of a broader range of information to estimate credit losses over the life of its financial assets. As of June 30, 2020, the financial assets of the Company within the scope of the assessment comprised trade accounts receivable (“AR”) and unbilled trade accounts receivable. Unbilled trade accounts receivable (“UAR”) is reflected in Other Current Assets on the Company’s Condensed Consolidated Balance Sheets and was $2.0 million as of June 30, 2020 and December 31, 2019.

The Company uses the aging method to estimate its expected credit losses on AR and UAR. In order to estimate expected credit losses, the Company assessed recent historical experience, current economic conditions and any reasonable and supportable forecasts to identify risk characteristics that are shared within the financial asset. These risk characteristics are then used to bifurcate the aging method into risk pools. Historical credit loss for each risk pool is then applied to the current period aging as presented in the identified risk pools to determine the needed reserve allowance. In the absence of current economic conditions and/or forecasts that may affect future credit losses, the Company has determined that recent historical experience provides the best basis for estimating credit losses. As of June 30, 2020, the Company estimates the life of its AR as

-6

~~days. This estimate is based on the Company’s historical experience for days sales outstanding (“DSO”).~~

The information obtained from assessing historical experience, current economic conditions and reasonable and supportable forecasts were used to identify risk characteristics that can affect future credit loss experience. The historical analysis yielded one material risk factor, the geographical location of the customer. Specifically, historical experience showed that AR that was due from customers in the Asia Pacific region had experienced more credit losses than the other geographic areas listed in

~~Note~~

12. Europe and Japan had significantly less credit loss experience when compared to Asia Pacific while North America’s credit loss experience was commensurate with the proportion of total AR that North America’s AR comprised. There were no other significant risk characteristics identified in the review of historical experience.

~~The Company’s assessment of current economic conditions and reasonable and supportable forecasts included an assessment of customer industries affected by~~

~~COVID-19.~~

~~Based on available information, the Company identified the following customer industries as being significantly affected by~~

~~COVID-19,~~

in no particular order: restaurants, hospitality, tourism, sports, travel and consumer goods. The Company assessed the relevant and supportable information available and estimated and recorded approximately $0.2 million increase in the provision for credit losses due to

~~COVID-19.~~

~~The Company will continue to assess the~~

~~COVID-19~~

~~risk to its AR for the duration of the pandemic.~~

~~The following details the changes in the Company’s reserve allowance for estimated credit losses for AR for the period:~~

Allowance for Credit Losses

(in thousands)

Balance as of December 31, 2019
$
904

Current provision for credit losses

310

Write-offs against allowance

(563
)
Recoveries

—

Balance as of June 30, 2020
$
651

~~Estimated credit losses for UAR were not material.~~

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Estimating credit losses based on risk characteristics requires significant judgment by the Company. Significant judgments include, but are not limited to: assessing current economic conditions and the extent to which they would be relevant to the existing characteristics of the company’s financial assets, the estimated life of financial assets, and the level of reliance on historical experience in light of economic conditions. The Company will have to continually review and update, when necessary, its historical risk characteristics that are meaningful to estimating credit losses, any new risk characteristics that arise in the natural course of business, and the estimated life of its financial assets.

~~14. Restructuring~~

During the first half of 2020, the Company committed to an action to restructure certain parts of the Company with the intent of aligning skills with the Company’s strategy and facilitating cost efficiencies and savings. As a result, certain headcount reductions were necessary. The Company incurred approximately $1.1

~~million~~

~~and $1.3~~

~~million~~

~~, respectively, in restructuring charges during the three and six months ended June 30, 2020. The restructuring charges reflect post-employment benefits and are reflected in the~~

~~Condensed Consolidated Statements of Operations~~

~~as follows: $1.1~~

~~million – Research and Development; $130~~

~~thou~~

~~and~~

~~General and Administrative; $51~~

~~thousand– Cost of subscription and support:~~

~~and~~

~~thousand– Sales and Marketing. As of June 30, 2020 the Company had accrued~~

~~831~~

~~thousand related to this action, which is expected to be paid in the next three to four months.~~

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in thousands, except share and per share data, unless otherwise noted)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form

10-Q

and our Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~

2020.

Company Overview

We are a leading global provider of cloud-based services for video. We were incorporated in Delaware in August ~~2004~~2004. With our Emmy

-winning technology and award-winning services, we help our ~~headquarters are in Boston, Massachusetts. Our~~customers realize the potential of video to address business-critical challenges. Customers rely on our suite of products, services, and ~~services~~expertise to reduce the cost and complexity associated with publishing, distributing, measuring and monetizing video across devices.

~~Brightcove Video Cloud, or~~We sell five core video products that help our customers use video to further their businesses in meaningful ways: (1) Video Cloud, our flagship product isand the world’s leading online video ~~platform. Video Cloud~~platform, enables our customers to ~~publish~~quickly and easily distribute high-quality video to Internet-connected devices; (2) Brightcove Live, our industry-leading solution for live streaming, delivers high-quality viewer experiences at scale; (3) Brightcove Beacon, a purpose-built application that enables companies to launch premium OTT video experiences quickly and cost effectively, across devices ~~quickly, easily~~ and inwith the flexibility of multiple monetization models; (4) Brightcove Player, an exceptionally fast, cloud-based technology for creating and managing video experiences; and (5) Zencoder, a ~~cost-effective~~powerful, cloud-based video encoding technology.

Customers can complement their use of our core products with modular technologies that provide enhanced capabilities such as (1) innovative ad insertion and ~~high-quality manner.~~video stitching through Brightcove ~~OTT Flow is~~SSAI; (2) efficient publication of videos to Facebook, Twitter, and YouTube through Brightcove Social; (3) an app for creating marketing campaigns with insightful data and industry benchmarks through Brightcove Campaign; (4) simple streaming of video communications to an app through Brightcove Engage; and (5) create branded video experience by accessing templates with

built-in

best practices through Brightcove Gallery.

We have also brought to market several video solutions, which are comprised of a ~~service for media companies~~ suite of video technologies that address specific customer

use-cases

and ~~content owners~~needs: (1) Virtual Events Experience helps brands to ~~rapidly~~

~~deploy high-quality, direct-to-consumer, live and on-demand video services~~

~~across platforms.~~transform events into customized virtual experiences; (2) Brightcove Video Marketing Suite, ~~or Video Marketing Suite, is a comprehensive suite of video technologies designed to address the needs of~~enables marketers to use video to drive brand awareness, engagement and ~~conversion.~~conversion; and (3) Brightcove Enterprise Video Suite, ~~or Enterprise Video Suite, is~~provides an enterprise-class platform for internal communications, employee training, live streaming, marketing and ecommerce videos.

We also have a number of modular solutions for customers, including Brightcove Zencoder, or Zencoder, which is a cloud-based video encoding service. Brightcove SSAI, or SSAI, is an innovative, cloud-based ad insertion and video stitching service that addresses the limitations of traditional online video ad insertion technology. Brightcove Player, or Player, is a cloud-based service for creating and managing video player experiences.

In September 2019, we released Brightcove Beacon, which is a purpose-built app that enables companies to deliver and launch premium OTT video experiences quickly and cost effectively across mobile, web, smart TVs and connected TVs, all with the flexibility of multiple monetization models. In January 2020, we released Brightcove Campaign, which is a purpose-built app that enables marketers to easily create video-driven marketing campaigns that yield insightful data with the ability to compare video performance to a variety of industry benchmarks.

Our philosophy for the next few years will continue to be to invest in our product strategy and development, sales, ~~and~~

and go-to-market activities

~~activities~~ to support our long-term revenue growth. We believe these investments will help us address some of the challenges facing our business such as demand for our products by existing and potential customers, rapid technological change in our industry, increased competition and resulting price sensitivity. These investments include support for the expansion of our infrastructure within our hosting facilities, the hiring of additional technical and sales personnel, the innovation of new features for existing products and the development of new products. We believe this strategy will help us retain our existing customers, increase our average annual subscription revenue per premium customer and lead to the acquisition of new customers. Additionally, we believe customer growth will enable us to achieve economies of scale which will reduce our cost of goods sold, research and development and general and administrative expenses as a percentage of total revenue.

As of June 30, 2021 and 2020 we had 670 and 607 employees, and 3,423 customers, of which 2,279 used our premium offerings and 1,144 used our volume offerings. As of June 30, 2019, we had 547 employees and 3,761 customers, of which 2,350 used our premium offerings and 1,411 used our volume offerings.respectively.

We generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenue grew from ~~$89.4 million in the six months ended June 30, 2019 to~~ $94.6 million in the six months ended June 30, 2020 ~~primarily related~~ to ~~incremental revenue from~~$106.3 million in the ~~Ooyala acquisition that was completed on April 1, 2019 and,~~six months ended June 30, 2021, due to ~~a lesser extent,~~ an increase in ~~sales of our~~the average annual subscription revenue per premium ~~offerings to both new and existing customers. Our~~customer.

Included in the consolidated net ~~loss was $9.1 million and $12.2 million~~income for the six months ended June 30, ~~2020~~2021 was stock-based compensation expense and ~~2019,~~amortization of acquired intangible assets of $4.9 million, and $1.5 million, respectively. Included in the consolidated net loss for the six months ended June 30, 2020 was merger-related expense, stock-based compensation expense, and amortization of acquired intangible assets of $5.8 million, $4.7 million, and $1.8 million, respectively. Included in consolidated net loss for the six months ended June 30, 2019 was merger-related expense, stock-based compensation expense and amortization of acquired intangible assets of $5.6 million, $2.8 million and $1.3 million, respectively.

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For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, our revenue derived from customers located outside North America was ~~46%~~43 and ~~47%,~~46, respectively. We expect the percentage of total net revenue derived from outside North America to increase in future periods as we continue to expand our international operations.

Key Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

The following table includes our key metrics for the periods presented:


	Six Months Ended June 30,
	2021			2020
Customers (at period end)
Premium		2,280			2,279
Volume		983			1,144

Total customers (at period end)		3,263			3,423

Net revenue retention rate		98	%		92	%
Recurring dollar retention rate		86	%		84	%
Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands)	$	92.2		$	86.4
Average annual subscription revenue per premium customer for Starter edition customers only (in thousands)	$	4.5		$	4.5
Total backlog, excluding professional services engagements (in millions)	$	152.8		$	136.9
Total backlog to be recognized over next 12 months, excluding professional services engagements (in millions)	$	119.8		$	108.8

Number of Customers

. We define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue at the end of the quarter. We believe the number of customers is a key indicator of our market penetration, the productivity of our sales organization and the value that our products bring to our customers. We classify our customers by including them in either premium or volume offerings. Our premium offerings include our premium Video Cloud customers (Enterprise and Pro editions), our Zencoder customers (other than Zencoder customers on

month-to-month

contracts and

pay-as-you-go

contracts), our SSAI customers, our Player customers, our OTT Flow customers (OTT Flow is our partner-based OTT platform, which preceded Brightcove Beacon), our Virtual Event Experience customers, our Video Marketing Suite customers, our Enterprise Video Suite customers, our Brightcove Beacon customers, Brightcove Engage customers and our Brightcove Campaign customers. Our volume offerings include our Video Cloud Express customers and our Zencoder customers on

month-to-month

contracts and

pay-as-you-go

contracts.

~~As of June 30, 202~~

0, we had 3,423 customers, of which 2,279 used our premium offerings and 1,144 used our volume offerings. As of June 30, 2019, we had 3,761 customers, of which 2,350 used our premium offerings and 1,411 used our volume offerings. Our

go-to-market

focus and growth strategy is to expand our premium customer base, as we believe our premium customers represent a greater opportunity for our solutions. Premium customers decreased compared to the prior period due to some customers deciding to switch to

in-house

solutions or other third-party solutions and some customers acquired in the Ooyala acquisition deciding not to switch to our solution. V

~~olume~~Volume customers decreased in recent periods primarily due to our discontinuation of the promotional Video Cloud Express offering. As a result, we have experienced attrition of this base level offering without a corresponding addition of customers. We expect customers using our volume offerings to continue to decrease in ~~2020~~2021 and beyond as we continue to focus on the market for our premium solutions.

Net Revenue Retention Rate

. We assess our ability to retain and expand customers using a metric we refer to as our net revenue retention rate. We calculate the net revenue retention rate by dividing: a) the current annualized recurring revenue for premium customers that existed twelve months prior by b) the annualized recurring revenue for all premium customers that existed twelve months prior. We define annualized recurring revenue for premium customers as the aggregate annualized contract value from our premium customer base, measured as of the end of a given period. We typically calculate our net revenue retention rate on a quarterly basis. For annual periods, we report net revenue retention rate as the average of the net revenue retention rate for all fiscal quarters included in the period. By dividing the retained recurring revenue by the base recurring revenue, we measure our success in retaining and growing installed revenue from the specific cohort of customers we served at the beginning of the period. The recurring dollar retention rate focuses on contracts up for renewal in a given quarter and only captures expansion/upsells at time of renewal, and is more susceptible to swings than the net revenue retention rate. Accordingly, we plan to continue to report the net revenue retention rate and discontinue reporting recurring dollar retention rate after December 31, 2021.

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Recurring Dollar Retention Rate

. We assess our ability to retain customers using a metric we refer to as our recurring dollar retention rate. We calculate the recurring dollar retention rate by dividing the retained recurring value of subscription revenue for a period by the previous recurring value of subscription revenue for the same period. We define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renew in a given period, including any increase or decrease in contract value. We define previous recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in that same period. We typically calculate our recurring dollar retention rate on a monthly basis. Recurring dollar retention rate provides visibility into our ongoing revenue. ~~During the six months ended June 30, 2020 and 2019, the recurring dollar retention rate was 84% and 90%, respectively.~~

Average Annual Subscription Revenue Per Premium Customer

. We define average annual subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by the average number of premium customers for that period. We believe that this metric is important in understanding subscription revenue for our premium offerings in addition to the relative size of premium customer arrangements. As our Starter edition has a price point of $199 or $499 per month, we disclose the average annual subscription revenue per premium customer separately for Starter edition customers and all other premium customers.

Backlog

. We define backlog as the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied, excluding professional service engagements. We believe that this metric is important in understanding future business performance. As of June 30, 2020, the total backlog for subscription and support contracts was approximately $136.9 million, of which approximately $108.8 million is expected to be recognized over the next 12 months. As of June 30, 2019, the total backlog for subscription and support contracts was approximately $134.2 million, of which approximately $107.6 million was expected to be recognized over the next 12 months.

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~~The following table includes our key metrics for the periods presented:~~

Six Months Ended June 30,


2020

2019

Customers (at period end)

Premium
   2,279 2,350
Volume
   1,144 1,411


Total customers (at period end)
   3,423 3,761


Recurring dollar retention rate
   84 % 90 %
Average annual subscription revenue per premium customer, excluding Starter edition customers (in thousands)
   $ 86.4 $ 80.8
Average annual subscription revenue per premium customer for Starter edition customers only (in thousands)
   $ 4.5 $ 4.5
Total backlog, excluding professional services engagements (in millions)
   $ 136.9 $ 134.2
Total backlog to be recognized over next 12 months, excluding professional services engagements (in millions)
   $ 108.8 $ 107.6

COVID-19

Update

While the implications of

the COVID-19 pandemic

remain uncertain, we plan to continue to make investments to support business growth. We believe that the growth of our business is dependent on many factors, including our ability to expand our customer base, increase adoption of our product offerings within existing customers, develop new products and applications to extend the functionality of our products and provide a high level of customer service. We expect to invest in sales and marketing to support customer growth. We also expect to invest in research and development as we continue to introduce new products and applications to extend the functionality of our products. We intend to maintain a high level of customer service and support which we consider critical for our continued success. We also expect to continue to incur general and administrative expenses to support our business and to maintain the infrastructure required to be a public company. We expect to use our cash flow from operations and, if necessary, our credit facility to fund operations.

~~See the section titled “Risk Factors” included under Part II, Item 1A below for further discussion of the possible impact of the~~

~~COVID-19~~

~~pandemic on our business.~~

Components of Consolidated Statements of Operations

Revenue

Subscription and Support Revenue

— We generate subscription and support revenue from the sale of our products.

Video Cloud is offered in two product lines. The first product line is comprised of our premium product editions. All premium editions include functionality to publish and distribute video to Internet-connected devices, with higher levels of premium editions providing additional features and functionality. Customer arrangements are typically ~~one year~~

one-year

contracts, which include a subscription to Video Cloud, basic support

and a

pre-determined

amount of video streams, bandwidth, transcoding and storage. We also offer gold, ~~support or~~ platinum and platinum plus support to our premium customers for an additional ~~fee, which includes extended phone support.~~fee. The pricing for our premium editions is based on the value of our software, as well as the number of users, accounts and usage, which is comprised of video streams, bandwidth, transcoding and storage. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. The second product line is comprised of our volume product edition. Our volume editions target

small and

medium-sized

businesses, or

SMBs. The volume editions provide customers with the same basic functionality that is offered in our premium product editions but have been designed for customers who have lower usage requirements and do not typically require advanced features and functionality. We discontinued the lower level pricing options for the Express edition of our volume offering and expect the total number of customers using the Express edition to continue to decrease. Customers who purchase the volume editions generally

enter into

month-to-month agreements.

~~agreements.~~

Volume customers are generally billed on a monthly basis and pay via a credit card.

Virtual Events Experience, Brightcove Live and Brightcove Player are offered to customers on a subscription basis. Customer arrangements are

typically one-year contracts,

which include a subscription to Virtual Events Experience, Brightcove Live or the Brightcove Player, basic support and

a pre-determined amount

of video streams, bandwidth, transcoding, and storage and only video streams for Brightcove Player. We also offer gold, platinum, and platinum plus support to our Virtual Events Experience, Brightcove Live and Brightcove Player customers for an additional fee. The pricing for these products is based on the value of our software, as well as, the number of users, accounts and usage. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.

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Zencoder is offered to customers on a subscription basis, with either committed contracts or

~~contracts or~~ pay-as-you-go

contracts. The

pricing is based on usage, which is comprised of minutes of video processed. The committed contracts include a fixed number of minutes of video processed. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. Zencoder customers are considered premium customers other than Zencoder customers on

on month-to-month contracts

~~contracts or~~

or pay-as-you-go contracts,

~~contracts,~~ which are considered volume customers.

~~SSAI is offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the size and complexity of a customer’s needs.~~

~~Player is offered to customers on a subscription basis. Customer arrangements are typically~~

~~one-year~~

contracts, which include a subscription to Player, basic support and a pre-determined amount of video streams. We also offer gold support or platinum support to our Player customers for an additional fee, which includes extended phone support. The pricing for Player is based on the number of users, accounts and usage, which is comprised of video streams. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements.

~~OTT Flow,~~ Brightcove Beacon and Brightcove Campaign are each offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the size and complexity of a customer’s needs. Customer arrangements are typically

one-year

contracts.

Video Marketing Suite and Enterprise Video Suite are offered to customers on a subscription basis in Starter, Pro and Enterprise editions. The Pro and Enterprise customer arrangements are typically

one-year

contracts, which typically include a subscription to Video Cloud, Gallery, Brightcove Social (for Video Marketing Suite customers) or Brightcove Live (for Enterprise Video Suite customers), basic support and a

pre-determined

amount of video streams or plays (for Video Marketing Suite customers), viewers (for Enterprise Video Suite customers), bandwidth and storage or videos. We also generally offer gold support or platinum support to these customers for an additional fee, which includes extended phone support. The pricing for our Pro and Enterprise editions is based on the number of users, accounts and usage, which is comprised of video streams or plays, viewers, bandwidth and storage or videos. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements, or will require the customer to upgrade its package upon renewal. The Starter edition provides customers with the same basic functionality that is offered in our Pro and Enterprise editions but has been designed for customers who have lower usage requirements and do not typically seek advanced features and functionality. Customers who purchase the Starter edition may enter into

one-year

agreements or

month-to-month

agreements. Starter customers with

month-to-month

agreements are generally billed on a monthly basis and pay via a credit card.

All Brightcove Beacon, OTT Flow, Brightcove Campaign, Brightcove Live, SSAI, Player, ~~OTT Flow,~~Virtual Events Experience, Video Marketing Suite and Enterprise Video Suite customers are considered premium customers.

Professional Services and Other Revenue

— Professional services and other revenue consists of services such as implementation, software customizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the remainder due when the related services have been completed, or on a time and materials basis.

Cost of Revenue

Cost of subscription, support and professional services revenue primarily consists of costs related to supporting and hosting our product offerings and delivering our professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of our data centers, our customer support team and our professional services staff. In addition to these expenses, we incur third-party service provider costs such as data center and content delivery network, or CDN, expenses, allocated overhead, depreciation expense and amortization of

capitalized

internal-use software

~~software~~ development costs and acquired intangible assets. We allocate overhead costs such as rent, utilities and supplies to all departments based on relative headcount. As such, general overhead expenses are reflected in cost of revenue in addition to each operating expense category. The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscription and support services due to the labor costs of providing professional services.

Cost of revenue increased in absolute dollars from the first six months of 2020 to the first six months of 2021. In future periods we expect our cost of revenue will increase in absolute dollars as our revenue increases. Cost of revenue as a percentage of revenue could fluctuate from period to period depending on the number of our professional services engagements and

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any associated costs relating to the delivery of subscription services and the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue, in any particular quarterly or annual period.

Operating Expenses

We classify our operating expenses as follows:

Research and Development

. Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, incentive compensation and stock-based compensation, in addition to the costs associated with contractors and allocated overhead. We have focused our research and development efforts on expanding the

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functionality and scalability of our products and enhancing their ease of use, as well as creating new product offerings. We expect research and development expenses to increase in absolute dollars as we intend to continue to periodically release new features and functionality, expand our product offerings, continue the localization of our products in various languages, upgrade and extend our service offerings, and develop new technologies. Over the long term, we believe that research and development expenses as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing products, features and functionality, as well as changes in the technology that our products must support, such as new operating systems or new Internet-connected devices.

Sales and Marketing

. Sales and marketing expenses consist primarily of personnel and related expenses for our sales and marketing staff, including salaries, benefits, incentive compensation, commissions, stock-based compensation and travel costs, amortization of acquired intangible assets, in addition to costs associated with marketing and promotional events, corporate communications, advertising, other brand building and product marketing expenses and allocated overhead. Our sales and marketing expenses have increased in absolute dollars in each of the last three years. We intend to continue to invest in sales and marketing and expand the sale of our product offerings within our existing customer base, build brand awareness and sponsor additional marketing events. Accordingly, we expect sales and marketing expense to continue to be our most significant operating expense in future periods. Over the long term, we believe that sales and marketing expense as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing customers and from

~~from~~ small, medium-sized and

enterprise

customers, as well as changes in the productivity of our sales and marketing programs.

General and Administrative

. General and administrative expenses consist primarily of personnel and related expenses for executive, legal, finance, information technology and human resources functions, including salaries, benefits, incentive compensation and stock-based compensation. General and administrative expenses also include the costs associated with professional fees, insurance premiums, other corporate expenses and allocated overhead. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.

Merger-related

. Merger-related costs consist of expenses related to mergers and acquisitions, integration costs and general corporate development activities.

Other (Benefit) Expense

. Reflects other operating benefits, costs that do not directly relate to the operating activities listed above.

Other Income (Expense) ~~Income,~~, net

Other income (expense) ~~income~~ consists primarily of ~~interest expense from our credit facility,~~ interest income earned on our cash, cash equivalents, and foreign exchange gains and losses.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We account 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. We have provided a valuation allowance against our existing U.S. net deferred tax assets at December 31, ~~2019.~~2020. We maintain net deferred tax liabilities for temporary differences related to our Japanese subsidiary.

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Stock-Based Compensation Expense

Our cost of revenue, research and development, sales and marketing, and general and administrative expenses include stock-based compensation expense. Stock-based compensation expense represents the grant date fair value of outstanding stock options and restricted stock awards, which is recognized as expense over the respective stock option and restricted stock award service periods. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded ~~$2.1~~$2.6 million and ~~$1.4 million, respectively, of stock-based compensation expense. For the six months ended June 30, 2020 and 2019, we recorded $4.7 million and $2.8~~$2.1 million, respectively, of stock-based compensation expense. We expect stock-based compensation expense to increase in absolute dollars in future periods.

Foreign Currency Translation

With regard to our international operations, we frequently enter into transactions in currencies other than the U.S. dollar. As a result, our revenue, expenses and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly

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changes in the euro, British pound, Australian dollar, and Japanese yen. In periods when the U.S. dollar declines in value as compared to the foreign currencies in which we conduct business, our foreign currency-based revenue and expenses generally increase in value when translated into U.S. dollars. We expect the percentage of total net revenue derived from outside North America to increase in future periods as we continue to expand our international operations.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us 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 of revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We consider the assumptions and estimates associated with revenue recognition, income taxes, business combinations, intangible assets and goodwill to be our critical accounting policies and estimates.

For a detailed explanation of the judgments made in these areas, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form

~~Form~~ 10-K

for

the year ended December 31, ~~2019,~~2020, which we filed with the Securities and Exchange Commission on February ~~27, 2020.~~24, 2021.

2120

Table of Contents

Results of Operations

~~As described above in~~

~~“COVID-19~~

Update”, the ultimate extent of the impact of any epidemic, pandemic, outbreak or other public health crisis on our results of operations will depend on future developments, which are highly uncertain, including new information that may emerge concerning the severity of the

~~current COVID-19 pandemic~~

or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot fully predict the extent to which our business and results of operations will be affected; however we expect

~~the COVID-19 pandemic~~

~~to continue to impact our operations in several ways. Our discussion of these risks is detailed in the section titled “Risk Factors” included under Part II, Item 1A below.~~

The following tables set forth our results of operations for the periods presented. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form

~~Form~~ 10-Q

which,

in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The

~~The~~ period-to-period ~~comparison~~

comparison of financial results is not necessarily indicative of future results. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form

~~Form~~ 10-K

for

the year ended December 31, ~~2019.~~2020.

Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019


(in thousands, except share and
per share data)

Revenue:

Subscription and support revenue
   $ 45,617    $ 44,891    $ 90,275    $ 83,768
Professional services and other revenue
   2,309    2,691    4,304    5,650








Total revenue
   47,926    47,582    94,579    89,418
Cost of revenue:

Cost of subscription and support revenue
   17,807    19,381    34,555    33,551
Cost of professional services and other revenue
   2,092    2,228    3,986    4,804








Total cost of revenue
   19,899    21,609    38,541    38,355








Gross profit
   28,027    25,973    56,038    51,063
Operating expenses:

Research and development
   9,131    7,629    17,984    15,023
Sales and marketing
   13,383    16,827    27,557    31,083
General and administrative
   6,407    5,979    12,939    11,240
Merger-related
   259    2,620    5,768    5,552








Total operating expenses
   29,180    33,055    64,248    62,898








Loss from operations
   (1,153 )    (7,082 )    (8,210 )    (11,835 )
Other (expense) income, net
   (27 )    19    (495 )    (36 )








Loss before income taxes
   (1,180 )    (7,063 )    (8,705 )    (11,871 )
Provision for income taxes
   115    175    443    350








Net loss
   $ (1,295 )    $ (7,238 )    $ (9,148 )    $ (12,221 )








Net loss per share - basic and diluted
   $ (0.03 )    $ (0.19 )    $ (0.23 )    $ (0.33 )








Weighted-average number of common shares used in computing net loss per share
   39,291,649    37,966,207    39,136,394    37,322,646


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands, except share and per share data)
Revenue:
Subscription and support revenue	$	48,602		$	45,617		$	99,441		$	90,275
Professional services and other revenue		2,870			2,309			6,848			4,304

Total revenue		51,472			47,926			106,289			94,579
Cost of revenue:
Cost of subscription and support revenue		14,756			17,807			30,434			34,555
Cost of professional services and other revenue		2,468			2,092			5,958			3,986

Total cost of revenue		17,224			19,899			36,392			38,541

Gross profit		34,248			28,027			69,897			56,038
Operating expenses:
Research and development		7,855			9,131			16,139			17,984
Sales and marketing		18,130			13,383			34,279			27,557
General and administrative		7,418			6,407			14,477			12,939
Merger-related		255			259			255			5,768
Other (benefit) expense		—			—			(1,965	)		—

Total operating expenses		33,658			29,180			63,185			64,248

Income (loss) from operations		590			(1,153	)		6,712			(8,210	)
Other expense, net		117			(27	)		(618	)		(495	)

Income (loss) before income taxes		707			(1,180	)		6,094			(8,705	)
Provision for income taxes		(163	)		115			94			443

Net income (loss)	$	870		$	(1,295	)	$	6,000		$	(9,148	)
Net income (loss) per share—basic and diluted
Basic	$	0.02		$	(0.03	)	$	0.15		$	(0.23	)
Diluted	$	0.02		$	(0.03	)	$	0.14		$	(0.23	)
Weighted-average shares—basic and diluted
Basic		40,615,149			39,291,649			40,385,866			39,136,394
Diluted		42,208,933			39,291,649			42,390,641			39,136,394

Overview of Results of Operations for the Three Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

Total revenue increased by 1%8%, or ~~$344,000,~~$3.5 million, in the three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~2020 due to an increase in subscription and support revenue of 2%7%, or ~~$726,000,~~$3.0 million, primarily due to an increase in average revenue ~~from our~~per premium ~~offerings. This increase was offset by a decrease in professional~~customer of 5.7%. Professional services and other revenue ~~of 14%~~also increased by 24% or ~~$382,000.~~$561.0. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. ~~Our~~In addition, our revenue from premium offerings ~~increased~~grew by ~~$314,000,~~$3.8 million, or 1%8%, in the three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019.~~2020. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.

~~Table of Contents~~

Our gross profit increased by ~~$2.1~~$6.2 million, or 8%22%, in the three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019,~~2020, primarily due to an increase in ~~revenue.~~revenue and our transition of acquired Ooyala customers to our technology during 2020. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

~~Loss~~

Table of Contents

Income from operations was $0.6 million in the three months ended June 30, 2021 compared to a loss from operations of $1.2 million in the three months ended June 30, ~~2020 compared~~2020. This is primarily due to ~~$7.1~~an increase in revenue of $3.5 million and the improvement of gross profit on subscription and support revenue in the three months ended June 30, ~~2019. This is primarily due to a decrease in costs of revenue, sales and marketing, and merger related expenses in the three months ended June 30, 2020~~2021 compared to the three months ended June 30, ~~2019.~~2020.

As of June 30, 2020, we had $27.8 million of unrestricted cash and cash equivalents, an increase of $5.0 million from $22.8 million at December 31, 2019, due primarily to $5.3 million of cash provided by operating activities and $5.0 million in net proceeds from debt. These increases were offset by $3.8 million in

~~capitalized internal-use software~~

~~costs, and $1.2 million in capital expenditures.~~

Revenue

Three Months Ended June 30,


2020

2019

Change

Revenue by Product Line

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
Premium
   $ 46,941    98 % $ 46,627    98 % $ 314    1 %
Volume
   985    2 955    2 30    3








Total
   $ 47,926    100 % $ 47,582    100 % $ 344    1 %


	Three Months Ended June 30,
	2021					2020					Change
Revenue by Product Line	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Premium	$	50,694		98	%	$	46,941		98	%	$	3,753			8	%
Volume		778		2			985		2			(207	)		(21	)

Total	$	51,472		100	%	$	47,926		100	%	$	3,546			8	%

During the three months ended June 30, ~~2020,~~2021, revenue increased by ~~$344,000,~~$3.5 million, or 1%8%, compared to the three months ended June 30, ~~2019,~~2020, primarily due to ~~an increase in revenue from our premium offerings, which consists of subscription and support revenue as well as professional services and other revenue driven by~~ an increase in revenue from our premium offerings. The increase in premium revenue of ~~$314,000,~~$3.8 million, or 1%8%, is primarily the result of ~~a 4% increase in~~increased premium subscription offerings to our customers as the average annual subscription revenue per premium customer ~~during the three months ended June 30, 2020~~increased 5.7% compared to the ~~three months ended June 30, 2019.~~prior period. In the three months ended June 30, ~~2020,~~2021, volume revenue ~~increased~~decreased by ~~$30,000,~~$207, or 3%21%, compared to the three months ended June 30, ~~2019.~~2020, as we continue to focus on the market for our premium solutions.


	Three Months Ended June 30,																Three Months Ended June 30,
	2020					2019					Change						2021					2020					Change
Revenue by Type	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%			Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		%
	(in thousands, except percentages)																(in thousands, except percentages)
Subscription and support	$	45,617		95	%	$	44,891		94	%	$	726			2	%	$	48,602		94	%	$	45,617		96	%	$	2,985		7	%
Professional services and other		2,309		5			2,691		6			(382	)		(14	)		2,870		6			2,309		4			561		24

Total	$	47,926		100	%	$	47,582		100	%	$	344			1	%	$	51,472		100	%	$	47,926		100	%	$	3,546		8	%

~~Table of Contents~~

During the three months ended June 30, ~~2020,~~2021, subscription and support revenue increased by ~~$726,000,~~$3.0 million, or 2%7%, compared to the three months ended June 30, ~~2019.~~2020. The increase was primarily related to ~~a 4%~~an increase in the average annual subscription revenue per premium customer of 5.7% during the three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019.~~2020. In addition, professional services and other revenue ~~decreased~~increased by ~~$382,000,~~$561, or ~~14%~~24%, compared to the corresponding quarter in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.

Three Months Ended June 30,


2020

2019

Change

Revenue by Geography

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
North America
   $ 26,039    54 % $ 25,708    54 % $ 331 1 %
Europe
   8,427    18 8,167    17 260 3
Japan
   5,554    12 5,146    11 408 8
Asia Pacific
   7,714    16 8,091    17 (377 ) (5 )
Other
   192    —   470    1 (278 ) (59 )






International subtotal
   21,887    46 21,874    46 13 0
Total
   $ 47,926    100 % $ 47,582    100 % $ 344 1 %


	Three Months Ended June 30,
	2021					2020					Change
Revenue by Geography	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
North America	$	29,398		57	%	$	26,039		54	%	$	3,359			13	%

Europe		9,547		19			8,427		18			1,120			13
Japan		5,370		10			5,554		12			(184	)		(3	)
Asia Pacific		7,016		14			7,714		16			(698	)		(9	)
Other		141		—			192		—			(51	)		(27	)

International subtotal		22,074		43			21,887		46			187			1

Total	$	51,472		100	%	$	47,926		100	%	$	3,546			8	%

WeFor purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprised of revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending on the timing of new customer contracts, revenue mix from a geographic region can vary from period to period.

During the three months ended June 30, ~~2020,~~2021, total revenue for North America increased ~~$331,000~~$3.4 million, or 13%, compared to the three months ended June 30, 2020. In the three months ended June 30, 2021, total revenue outside of North America increased $187, or 1%, compared to the three months ended June 30, ~~2019.~~ 2020. The increase in revenue from international regions is primarily related to increases in revenue in Japan.

Table of Contents

Cost of Revenue


	Three Months Ended June 30,
	2021					2020					Change
Cost of Revenue	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	14,756		30	%	$	17,807		39	%	$	(3,051	)		(17	)%
Professional services and other		2,468		86			2,092		91			376			18

Total	$	17,224		33	%	$	19,899		42	%	$	(2,675	)		(13	)%

In the three months ended June 30, ~~2020, total~~2021, cost of subscription and support revenue ~~outside of North America did not change~~decreased by ~~a material amount~~$3.1 million, or 17%, compared to the three months ended June 30, ~~2019..~~2020. The decrease resulted primarily from incremental costs from the acquisition of Ooyala in the three months ended June 30, 2020 which did not recur in the three months ended June 30, 2021. In the three months ended June 30, 2021, cost of professional services and other revenue increased by $376, or 18%, compared to the three months ended June 30, 2020. This increase corresponds to an increase in contractor expenses of $270 to support the increase in professional services revenue.

Gross Profit


	Three Months Ended June 30,
	2021					2020					Change
Gross Profit	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount		%
	(in thousands, except percentages)
Subscription and support	$	33,846		70	%	$	27,810		61	%	$	6,036		22	%
Professional services and other		402		14			217		9			185		85	%

Total	$	34,248		67	%	$	28,027		58	%	$	6,221		22	%

The overall gross profit percentage was 67% for the three months ended June 30, 2021 compared to 58% for the three months ended June 30, 2020. Subscription and support gross profit increased $6.0 million, or 22%, compared to the three months ended June 30, 2020. The increase in gross profit dollars for subscription and support revenue was due to incremental costs from the acquisition of Ooyala in the three months ended June 30, 2020 which did not recur in the three months ended June 30, 2021.

Operating Expenses


	Three Months Ended June 30,
	2021					2020					Change
Operating Expenses	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Research and development	$	7,855		15	%	$	9,131		19	%	$	(1,276	)		(14	)%
Sales and marketing		18,130		35			13,383		28			4,747			35
General and administrative		7,418		14			6,407		13			1,011			16
Merger-related		255		—			259		1			(4	)		(2	)

Total	$	33,658		65	%	$	29,180		61	%	$	4,478			15	%

Research and Development

In the three months ended June 30, 2021, research and development expense decreased by $1,276 or 14%, compared to the three months ended June 30, 2020 primarily due to a decrease in employee-related, rent, and contractor expenses of $1,031, $362, and $332 respectively. These decreases were offset by increases in stock-based compensation and amortization expenses of $275 and $146, respectively, as well as various other expenses that, in the aggregate, increased by approximately $29. We expect our research and development expense as a percentage of revenue to remain relatively unchanged.

Table of Contents

Sales and Marketing

In the three months ended June 30, 2021, sales and marketing expense increased by $4.7 million, or 35%, compared to the three months ended June 30, 2020, primarily due to an increase in marketing program, employee-related, and commission expenses of $1,970, $1,665, and $1,456, respectively. These increases were offset by a decrease in rent of $408. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $64. We expect that our sales and marketing expense will increase in absolute dollars for the second half of 2021 as compared to the prior period as we will continue to invest in these activities to support revenue growth.

General and Administrative

In the three months ended June 30, 2021, general and administrative expense increased by $1 million, or 16%, compared to the three months ended June 30, 2020, primarily due to increases in outside professional services, employee- related, and stock-based compensation expenses of $456, $204, and $144, respectively. The remaining increase was due to various other expenses that, in aggregate, increased by approximately $207. In future periods, we expect general and administrative expense to remain relatively unchanged.

Merger-Related

In the three months ended June 30, 2021, merger-related expenses remained relatively unchanged, compared to the three months ended June 30, 2020.

Overview of Results of Operations for the Six Months Ended June 30, 2021 and 2020

Total revenue increased by 12%, or $11.7 million, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to an increase in subscription and support revenue of 10%, or $9.2 million, primarily due to an increase in revenue from our premium offerings. Professional services and other revenue also increased by 59%, or $2.5 million, compared to the corresponding period in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. Our revenue from premium offerings grew by $12.0 million, or 13%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.

Our gross profit increased by $13.9 million, or 25%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due to an increase in revenue and an improvement in subscription and support gross profit. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

Income from operations was $6.7 million in the six months ended June 30, 2021 compared to a loss from operations of $8.2 million in the six months ended June 30, 2020. This is primarily due to the aforementioned increase in revenue of $11.7 million, decreases in costs of revenue of $2.1 million, and decreases in operating expenses of $1.1 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Revenue


	Six Months Ended June 30,
	2021					2020					Change
Revenue by Product Line	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Premium	$	104,716		99	%	$	92,728		98	%	$	11,988			13	%
Volume		1,573		1			1,851		2			(278	)		(15	)

Total	$	106,289		100	%	$	94,579		100	%	$	11,710			12	%

During the six months ended June 30, 2021, revenue increased by $11.7 million, or 12%, compared to the six months ended June 30, 2020, primarily due to an increase in revenue from our premium offerings, which consists of subscription and support revenue as well as professional services. The increase in premium revenue of $12.0 million, or 13%, is primarily the result of a 9% increase in average annual subscription revenue per premium customer during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

During the six months ended June 30, 2021, volume revenue decreased by $278 or 15%, compared to the six months ended June 30, 2020, as we continue to focus on the market for our premium solutions.

Table of Contents


	Six Months Ended June 30,
	2021					2020					Change
Revenue by Type	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		%
	(in thousands, except percentages)
Subscription and support	$	99,441		94	%	$	90,275		95	%	$	9,166		10	%
Professional services and other		6,848		6			4,304		5			2,544		59

Total	$	106,289		100	%	$	94,579		100	%	$	11,710		12	%

During the six months ended June 30, 2021, subscription and support revenue increased by $9.2 million, or 10%, compared to the six months ended June 30, 2020. The increase was primarily related to a 9% increase in average annual subscription revenue per premium customer.

In addition, professional services and other revenue increased by $2.5 million, or 59%, compared to the corresponding period in the prior year. This increase was driven by one particular project that was completed in the three months ended March 31, 2021. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.


	Six Months Ended June 30,
	2021					2020					Change
Revenue by Geography	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
North America	$	59,784		57	%	$	51,038		54	%	$	8,746			17	%

Europe		18,470		17			16,888		18			1,582			9
Japan		13,078		12			11,656		12			1,422			12
Asia Pacific		14,675		14			14,584		16			91			1
Other		282		—			413		—			(131	)		(32	)

International subtotal		46,505		43			43,541		46			2,964			7

Total	$	106,289		100	%	$	94,579		100	%	$	11,710			12	%

During the six months ended June 30, 2021, total revenue for North America increased $8.7 million, or 17%, compared to the six months ended June 30, 2020. The increase was due to revenue from our premium offerings.

During the six months ended June 30, 2021, total revenue outside of North America increased $3.0 million, or 7%, compared to the six months ended June 30, 2020. The increase in revenue from international regions is primarily related to increases in revenue in Japan and Europe.

Cost of Revenue

Three Months Ended June 30,


2020

2019

Change

Cost of Revenue

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%

   (in thousands, except percentages)
Subscription and support
   $ 17,807    39 % $ 19,381    43 % $ (1,574 ) (8 )%
Professional services and other
   2,092    91 2,228    83 (136 ) (6 )






Total
   $ 19,899    42 % $ 21,609    45 % $ (1,710 ) (8 )%


	Six Months Ended June 30,
	2021					2020					Change
Cost of Revenue	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount			%
	(in thousands, except percentages)
Subscription and support	$	30,434		31	%	$	34,555		38	%	$	(4,121	)		(12	)%
Professional services and other		5,958		87			3,986		93			1,972			49

Total	$	36,392		34	%	$	38,541		41	%	$	(2,149	)		(6	)%

In the ~~three~~six months ended June 30, ~~2020,~~2021, cost of subscription and support revenue decreased ~~$1.6~~$4.1 million, or 8%12%, compared to the ~~three~~six months ended June 30, ~~2019.~~2020. The decrease resulted primarily from incremental costs from the ~~transition~~acquisition of ~~acquired~~ Ooyala ~~customers to our technology. Specifically, there were decreases~~ in network hosting services, employee-related expenses, partner commissions and contractor expenses of $2.0 million, $494,000, $110,000 and $107,000, respectively. These decreases were offset by increases in content delivery network, third-party software integrated with our service offering and maintenance expenses of $649,000, $635,000 and $118,000, respectively.

In the ~~three~~six months ended June 30, 2020 which did not recur in the six months ended June 30, 2021.

Table of Contents

In the six months ended June 30, 2021, cost of professional services and other revenue ~~decreased $136,000,~~increased $2.0 million, or 6%49%, compared to the ~~three~~six months ended June 30, ~~2019.~~2020. This ~~decrease~~increase corresponds to ~~a decrease in employee-related expenses of $325,000 offset by~~ an increase in contractor ~~expense~~expenses of ~~$236,000.~~$1.9 million in the six months ended June 30, 2021 compared to the six months ended June 20, 2020.

~~Table of Contents~~

Gross Profit

Three Months Ended June 30,


2020

2019

Change

Gross Profit

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%

   (in thousands, except percentages)
Subscription and support
   $ 27,810    61 % $ 25,510    57 % $ 2,300 9 %
Professional services and other
   217    9 463    17 (246 ) (53 )%






Total
   $ 28,027    58 % $ 25,973    55 % $ 2,054 8 %


	Six Months Ended June 30,
	2021					2020					Change
Gross Profit	Amount		Percentage of Related Revenue			Amount		Percentage of Related Revenue			Amount		%
	(in thousands, except percentages)
Subscription and support	$	69,007		69	%	$	55,720		62	%	$	13,287		24	%
Professional services and other		890		13			318		7			572		180

Total	$	69,897		66	%	$	56,038		59	%	$	13,859		25	%

The overall gross profit percentage was ~~58%~~66% and ~~55%~~59% for the ~~three~~six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Subscription and support gross profit ~~increased $2.3~~decreased $13.3 million, or 9%24%, compared to the ~~three~~six months ended June 30, ~~2019.~~2020. It is likely that gross profit, as a percentage of revenue, will fluctuate quarter by quarter due to the timing and mix of subscription and support revenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.

Operating Expenses

Three Months Ended June 30,


2020

2019

Change

Operating Expenses

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
Research and development
   $ 9,131    19 % $ 7,629    16 % $ 1,502 20 %
Sales and marketing
   13,383    28 16,827    35 (3,444 ) (20 )
General and administrative
   6,407    13 5,979    13 428 7
Merger-related
   259    1 2,620    6 (2,361 ) (90 )






Total
   $ 29,180    61 % $ 33,055    69 % $ (3,875 ) (12 )%

~~Research and Development~~

In the three months ended June 30, 2020, research and development expense increased by $1.5 million, or 20%, compared to the three months ended June 30, 2019 primarily due to increases in employee-related and contractor expenses of $1.2 million and $418,000, respectively. These increases were offset by a decrease in travel related expenses of $145,000. We expect our research and development expense as a percentage of revenue to decrease in the second half of 2020 as a result of restructuring activities taken in the first half of 2020.

~~Sales and Marketing~~

In the three months ended June 30, 2020, sales and marketing expense decreased by $3.4 million, or 20%, compared to the three months ended June 30, 2019 primarily because our annual customer conference, which is normally held in May, was held virtually in May 2020 due

~~to COVID-19.~~

There were decreases in marketing programs, travel-related and employee-related expenses of $2.0 million, $1.4 million and $847,000, respectively. These decreases were offset by increases in stock-based compensation and contractor expenses of $410,000 and $224,000, respectively. We expect that our sales and marketing expense will increase as a percent of revenue and in absolute dollars along with our revenue as we continue to expand sales coverage and build brand awareness through what we believe are cost-effective channels.

~~General and Administrative~~

In the three months ended June 30, 2020, general and administrative expense increased by $428,000 compared to the three months ended June 30, 2019 primarily due to increases in stock-based compensation, employee-related and restructuring expenses of $292,000, $269,000, $125,000, respectively. These increases were offset by decreases in travel-related expenses and outside accounting and legal fees of $124,000 and $110,000, respectively. In future periods, we expect general and administrative expense to remain relatively unchanged.

~~Merger-Related~~

In the three months ended June 30, 2020, merger-related expenses decreased by $2.4 million primarily due to costs incurred during the three months ended June 30, 2019 in connection with costs associated with the transition of acquired customers to our technology and general merger and related activities.

~~Table of Contents~~

~~Overview of Results of Operations for the Six Months Ended June 30, 2020 and 2019~~

Total revenue increased by 6%, or $5.2 million, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 due to an increase in subscription and support revenue of 8%, or $6.5 million, primarily due to the acquired Ooyala customers and, to a lesser extent, due to an increase in revenue from our premium offerings. Substantially all of the revenue from the Ooyala acquisition is subscription and support revenue. This increase was offset by a decrease in professional services and other revenue of 24% or $1.3 million. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process. Our revenue from premium offerings grew by $5.2 million, or 6%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.

Our gross profit increased by $5.0 million, or 10%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to an increase in revenue. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.

Loss from operations was $8.2 million in the six months ended June 30, 2020 compared to $11.8 million in the six months ended June 30, 2019. This is primarily due to a decrease in costs of revenue and sales and marketing expenses in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

~~Revenue~~

Six Months Ended June 30,


2020

2019

Change

Revenue by Product Line

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
Premium
   $ 92,728    98 % $ 87,508    98 % $ 5,220 6 %
Volume
   1,851    2 1,910    2 (59 ) (3 )






Total
   $ 94,579    100 % $ 89,418    100 % $ 5,161 6 %

During the six months ended June 30, 2020, revenue increased by $5.2 million, or 6%, compared to the six months ended June 30, 2019, primarily due to an increase in revenue from our premium offerings, which consists of subscription and support revenue as well as professional services and other revenue driven by customers obtained as part of the Ooyala acquisition. The increase in premium revenue of $5.2 million, or 6%, is primarily the result of a 7% increase in average annual subscription revenue per premium customer during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. In the six months ended June 30, 2020, volume revenue decreased by $59,000, or 3%, compared to the six months ended June 30, 2019, as we continue to focus on the market for our premium solutions.

Six Months Ended June 30,


2020

2019

Change

Revenue by Type

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
Subscription and support
   $ 90,275    95 % $ 83,768    94 % $ 6,507 8 %
Professional services and other
   4,304    5 5,650    6 (1,346 ) (24 )






Total
   $ 94,579    100 % $ 89,418    100 % $ 5,161 6 %

During the six months ended June 30, 2020, subscription and support revenue increased by $6.5 million, or 8%, compared to the six months ended June 30, 2019. The increase was primarily related to the acquired Ooyala customers and a 7% increase in average annual subscription revenue per premium customer during the six months ended June 30, 2020 compared the six months ended June 30, 2019. In addition, professional services and other revenue decreased by $1.3 million, or 24%, compared to the corresponding quarter in the prior year. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.

~~Table of Contents~~

Six Months Ended June 30,


2020

2019

Change

Revenue by Geography

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
North America
   $ 51,038    54 % $ 47,521    53 % $ 3,517 7 %






Europe
   16,888    18 14,636    16 2,252 15
Japan
   11,656    12 11,334    13 322 3
Asia Pacific
   14,584    16 15,363    17 (779 ) (5 )
Other
   413    —   564    1 (151 ) (27 )






International subtotal
   43,541    46 41,897    47 1,644 4






Total
   $ 94,579    100 % $ 89,418    100 % $ 5,161 6 %

During the six months ended June 30, 2020, total revenue for North America increased $3.5 million, or 7%, compared to the six months ended June 30, 2019. In the six months ended June 30, 2020, total revenue outside of North America increased $1.6 million, or 4%, compared to the six months ended June 30, 2019. The increase in revenue from international regions is primarily related to increases in revenue in Japan and Europe.

~~Cost of Revenue~~

Six Months Ended June 30,


2020

2019

Change

Cost of Revenue

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%

   (in thousands, except percentages)
Subscription and support
   $ 34,555    38 % $ 33,551    40 % $ 1,004 3 %
Professional services and other
   3,986    93 4,804    85 (818 ) (17 )






Total
   $ 38,541    41 % $ 38,355    43 % $ 186 0 %

In the six months ended June 30, 2020, cost of subscription and support revenue increased $1.0 million, or 3%, compared to the six months ended June 30, 2019. The increase resulted primarily from incremental costs from the acquisition of Ooyala.

In the six months ended June 30, 2020, cost of professional services and other revenue decreased $818,000, or 17%, compared to the six months ended June 30, 2019. This decrease corresponds to decreases in employee-related and contractor expenses of $611,000 and $163,000, respectively.

~~Gross Profit~~

Six Months Ended June 30,


2020

2019

Change

Gross Profit

Amount

Percentage of

Related

Revenue

Amount

Percentage of

Related

Revenue

Amount

%

   (in thousands, except percentages)
Subscription and support
   $ 55,720    62 % $ 50,217    60 % $ 5,503 11 %
Professional services and other
   318    7 846    15 (528 ) (62 )






Total
   $ 56,038    59 % $ 51,063    57 % $ 4,975 10 %

The overall gross profit percentage was 59% and 57% for the six months ended June 30, 2020 and 2019, respectively. Subscription and support gross profit increased $5.5 million, or 11%, compared to the six months ended June 30, 2019. It is likely that gross profit, as a percentage of revenue, will fluctuate quarter by quarter due to the timing and mix of subscription and support revenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.

~~Table of Contents~~

~~Operating Expenses~~

Six Months Ended June 30,


2020

2019

Change

Operating Expenses

Amount

Percentage of

Revenue

Amount

Percentage of

Revenue

Amount

%

   (in thousands, except percentages)
Research and development
   $ 17,984    19 % $ 15,023    17 % $ 2,961 20 %
Sales and marketing
   27,557    29 31,083    35 (3,526 ) (11 )
General and administrative
   12,939    14 11,240    13 1,699 15
Merger-related
   5,768    6 5,552    6 216 4






Total
   $ 64,248    68 % $ 62,898    70 % $ 1,350 2 %


	Six Months Ended June 30,
	2021						2020					Change
Operating Expenses	Amount			Percentage of Revenue			Amount		Percentage of Revenue			Amount			%
	(in thousands, except percentages)
Research and development	$	16,139			15	%	$	17,984		19	%	$	(1,845	)		(10	)%
Sales and marketing		34,279			32			27,557		29			6,722			24
General and administrative		14,477			14			12,939		14			1,538			12
Merger-related		255			0			5,768		6			(5,513	)		(96	)
Other (benefit) expense		(1,965	)		(4	)		—		—			(1,965	)		N/A

Total	$	63,185			59	%	$	64,248		68	%	$	(1,063	)		(2	)%

Research and Development

In the six months ended June 30, ~~2020,~~2021, research and development expense ~~increased~~decreased by ~~$3.0,~~$1.8 million, or ~~20%~~10%, compared to the six months ended June 30, ~~2019~~2020 primarily due to ~~an increase~~a decrease in employee-related ~~contractor,~~and rent ~~computer maintenance~~expenses of $1.5 million and ~~support and stock-based compensation~~$728, respectively. These decreases were partially offset by increases in amortization expense of ~~$2.1 million, $352,000, $231,000, $200,000~~$293 and ~~$165,000, respectively.~~various other expenses that, in aggregate, increased by $135.

Sales and Marketing

In the six months ended June 30, ~~2020,~~2021, sales and marketing expense ~~decreased~~increased by ~~$3.5~~$6.7 million, or ~~11%~~24%, compared to the six months ended June 30, ~~2019~~2020 primarily ~~because our annual customer conference, which is normally held~~due to increases in ~~May, was held virtually in May 2020 due~~

~~to COVID-19.~~

~~There were decreases in marketing programs, travel-related~~market program, commission and ~~employee-related~~employer-related expenses of ~~$2.1~~$2.9 million, ~~$1.6~~$2.9 million, and ~~$1.2~~$2.2 million, respectively. These ~~decreases~~increases were offset by ~~increases~~decreases in ~~stock-based compensation, intangible amortization~~rent and ~~computer maintenance~~travel expenses of $759 and ~~support of $863,000, $315,000 and $180,000,~~$462, respectively. The remaining decreases were due to various other expenses, that, in aggregate, decreased by $78.

General and Administrative

In the six months ended June 30, ~~2020,~~2021, general and administrative increased by ~~$1.7~~$1.5 million or ~~15%~~12%, compared to the six months ended June 30, ~~2019~~2020 primarily due to increases in stock-based compensation, employee-related, bad debt, restructuring and contractor expenses of $789,000, $727,000, $149,000, $124,000 and $119,000, respectively. These increases were offset by decreases in travel-related expenses and outside accounting and legal fees, employee-related, stock-based compensation, and contractor expenses of ~~$163,000~~$751, $476, $154 and ~~$114,000,~~$156, respectively.

Merger-Related

In the six months ended June 30, ~~2020,~~2021, merger-related expenses ~~remained relatively unchanged, compared~~decreased $5.5 million due to costs incurred in connection with general merger and related activities in 2020 which did not recur in the ~~six months ended June 30, 2019.~~current period.

Other (benefit) expense

On March 27, 2020, in response to the

COVID-19

pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act, which was amended by the Consolidated Appropriations Act in December of 2020 (the “CARES Act”). The CARES Act provides numerous tax provisions and other stimulus measures, including the creation of certain employee retention credits. In the first quarter of 2021, we recognized a benefit of $1,965 from the CARES Act related to employee retention credits. The benefit was recorded as Other (benefit) expense.

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Liquidity and Capital Resources

Cash and cash equivalents.

Our cash and cash equivalents at June 30, ~~2020~~2021 were held for working capital purposes and were invested primarily in ~~money market funds.~~cash. We do not enter into investments for trading or speculative purposes. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$17.1~~$13.8 million and ~~$14.0~~$17.1 million, respectively, of cash and cash equivalents held by subsidiaries in international locations, including subsidiaries located in Japan and the United Kingdom. These earnings can be repatriated to the United

~~United~~ States tax-free but

could

still be subject to foreign withholding taxes.

Six Months Ended June 30,

Condensed Consolidated Statements of Cash Flow Data

2020

2019

   (in thousands)
Cash flows provided by (used in) operating activities
   5,300    (3,881 )
Cash flows used in investing activities
   (5,036 )    (6,073 )
Cash flows provided by financing activities
   4,965    1,726


	Six Months Ended June 30,
Condensed Consolidated Statements of Cash Flow Data	2021			2020
	(in thousands)
Cash flows provided by operating activities	$	7,377		$	5,300
Cash flows used in investing activities	$	(3,785	)	$	(5,036	)
Cash flows provided by financing activities	$	157		$	4,965

Accounts receivable, net.

Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. The fluctuations vary depending on the timing of our billing activity, cash collections, and changes to our allowance for doubtful accounts. In many instances we receive cash payment from a customer prior to the time we are able to recognize revenue on a transaction. We record these payments as deferred ~~revenue.~~revenue, which has a positive effect on our accounts receivable balances.

~~Table of Contents~~

Cash flows provided by ~~(used in)~~ operating activities.

Cash provided by ~~(used in)~~ operating activities consists primarily of net ~~loss~~income adjusted for

certain non-cash items

including depreciation and amortization, stock-based compensation expense, the provision for bad debts and the effect of changes in working capital and other activities. Cash provided by operating activities during the six months ended June 30, ~~2020~~2021 was ~~$5.3~~$7.4 million. The cash flow provided by operating activities primarily resulted from ~~net~~

~~non-cash~~

~~charges of $9.5 million and~~ changes in our operating assets and liabilities of ~~$5.0~~$8.0 million, ~~partially offset by~~ net ~~losses~~income of ~~$9.2~~$6 million and net

non-cash

charges of $9.5 million. Net

non-cash

expenses mainly consisted of $4.3 million for depreciation and amortization and $4.9 million for stock-based compensation. Cash ~~provided by~~inflows resulting from changes in our operating ~~activities increased compared to the same period in 2019 as~~assets and liabilities consisted primarily of a ~~result of an improvement in days sales outstanding in trade accounts receivable, a decrease in net losses and an~~ increase in ~~accounts payable,~~deferred revenue of $3.8 million, offset by an increase in ~~prepaids~~accounts receivable of $2.6 million. In summary, cash provided by operating activities has increased when compared to the prior period due to an increase in net income and ~~other current assets.~~improvements in working capital.

Cash flows used in investing activities.

Cash used in investing activities during the six months ended June 30, ~~2020~~2021 was ~~$5.0~~$3.8 million, consisting primarily of ~~$3.8~~$3.0 million for the capitalization of

of internal-use

software

costs and ~~$1.2 million~~$808 in capital expenditures to support the business. ~~The decrease in cash used in investing activities is primarily due to consideration paid in 2019 related to the Ooyala acquisition.~~

Cash flows provided by financing activities.

Cash provided by financing activities for the six months ended June 30, ~~2020~~2021 was ~~$5.0~~$157, consisting primarily of $2.0 million ~~consisting of proceeds from debt, net of repayments. The increase in cash provided by financing activities is due to net borrowings, offset by a decrease~~ in proceeds from the exercise of stock ~~options.~~options, offset by $475 deferred acquisition payments and $1.3 million in other financing activities

Credit ~~facility availability.~~facility.

On December ~~14, 2018,~~28, 2020, we entered into an amended and restated loan and security agreement with a lender ~~or the~~(the “Loan Agreement”,) providing for up to a $30.0 million ~~asset based~~asset-based line of credit ~~or the~~(the “Line of Credit”). Borrowings under the Line of Credit are secured by substantially all of our assets, excluding our intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate as follows; (i) for prime rate advances, the greater of (A) the prime rate and (B) 4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points and (B) 4%. Under the Loan Agreement, we must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold

~~based on non-GAAP operating measures.~~

Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. We were in compliance with all covenants under the Line of Credit as of June 30, ~~2020.~~

~~We assessed the effect~~2021. As we

~~believe COVID-19 might~~

have on our liquidity and believe that our existing cash and cash equivalents and the capital available under our credit facility will be sufficient to meet our anticipated working capital and capital expenditure needs over at least the next 12 months. On March 25, 2020, we borrowed $10.0 million on our line of credit in anticipation of any operating cash needs in light

~~of COVID-19. During~~

~~the three months ended June 30, 2020, we paid back $5.0 million of borrowings. As of the date of this Quarterly Report on~~

~~Form 10-Q we~~

have not ~~had to use any of the borrowings to fund operations. The effective interest rate for the amounts borrowed~~drawn on the Line of Credit, ~~was 4% for the three and six months ended~~there are no amounts outstanding as of June 30, ~~2020. The Line of Credit matures in December~~ 2021.

Net operating loss carryforwards.

As of December 31, ~~2019,~~2020, we had federal and state net operating losses of approximately $161.8 million and $82.4 million, respectively, which are available to offset future taxable income, if any, through 2039. We had federal and state net operating losses of approximately ~~$23.8~~$23.9 million and $1.7 million, respectively, which are available to offset future taxable income, if any, indefinitely.

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We had federal and state research and development tax credits of $7.8 million and $4.8 million, respectively, which expire in various amounts through 2039. Our net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of the U.S. Internal Revenue Code of 1986, as amended.

~~Table of Contents~~

In assessing our ability to utilize our net deferred tax assets, we considered whether it is more likely than not that some portion or all of our net deferred tax assets will not be realized. Based upon the level of our historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, we believe it is more likely than not that we will not realize the benefits of these deductible differences. Accordingly, we have provided a valuation allowance against our U.S. deferred tax assets as of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Contractual Obligations and Commitments

Our principal commitments consist primarily of obligations under our leases for our office as well as content delivery network services, hosting and other support services. Other than these lease obligations and contractual commitments, we do not have commercial commitments under lines of credit, standby repurchase obligations or other such debt arrangements.

Our contractual obligations as of December 31, ~~2019~~2020 are summarized in our Annual Report on Form

10-K

for the year ended December 31, ~~2019.~~2020.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see

Recently Issued and Adopted Accounting Standards

in ~~the notes~~Note 2 to the condensed consolidated financial statements ~~appearing elsewhere~~ in this Quarterly Report on Form

10-Q.

Off-Balance

Sheet Arrangements

We do not have any special purpose entities or

off-balance

sheet arrangements.

Anticipated Cash Flows

We expect to incur significant operating costs, particularly related to services delivery costs, sales and marketing and research and development, for the foreseeable future in order to execute our business plan. We anticipate that such operating costs, as well as planned capital expenditures will constitute a material use of our cash resources. As a result, our net cash flows will depend heavily on the level of future sales, changes in deferred revenue and our ability to manage infrastructure costs.

We believe our existing cash and cash equivalents and credit facility will be sufficient to meet our working capital and capital expenditures for at least the next 12 months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, our introduction of new products and enhancements, and our expansion of sales and marketing and product development activities. To the extent that our cash and cash equivalents, and cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements or public or private equity or debt financings. We also may need to raise additional funds in the event we determine in the future to acquire businesses, technologies and products that will complement our existing operations. In the event funding is required, we may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to us or at all. Market volatility resulting from the

~~the~~ COVID-19

coronavirus

pandemic or other factors could also adversely impact our ability to access capital as and when needed.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (in thousands, except share and per share data, unless otherwise noted)

~~Quantitative and Qualitative Disclosures about Market Risk~~

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily foreign exchange risks, interest rate and inflation.

Financial instruments

Financial instruments meeting fair value disclosure requirements consist of cash equivalents, accounts receivable and accounts payable. The fair value of these financial instruments approximates their carrying amount.

3028

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Foreign currency exchange risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro, British pound, Australian dollar and Japanese yen. Except for revenue transactions in Japan, we enter into transactions directly with substantially all of our foreign customers.

Percentage of revenues and expenses in foreign currency is as follows:


	Three Months Ended June 30,						Three Months Ended June 30,
	2020			2019			2021			2020
Revenues generated in locations outside the United States		50	%		50	%		47	%		50	%
Revenues in currencies other than the United States dollar (1)		30	%		29	%		27	%		30	%
Expenses in currencies other than the United States dollar (1)		15	%		15	%		17	%		15	%

	Six Months Ended June 30,
	2020			2019
Revenues generated in locations outside the United States		50	%		50	%
Revenues in currencies other than the United States dollar (1)		30	%		32	%
Expenses in currencies other than the United States dollar (1)		15	%		14	%


	Six Months Ended June 30,
	2021			2020
Revenues generated in locations outside the United States		47	%		50	%
Revenues in currencies other than the United States dollar (1)		28	%		30	%
Expenses in currencies other than the United States dollar (1)		16	%		15	%

(1)	Percentage of revenues and expenses denominated in foreign currency for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		1	%		8	%		1	%
British pound		6			5			6			5
Japanese Yen		10			3			12			2
Other		3			8			4			7

Total		27	%		17	%		30	%		15	%

Three Months Ended June 30,
2020

Three Months Ended June 30,
2019


Revenues

Expenses

Revenues

Expenses

Euro
   8 % 1 % 7 % 2 %
British pound
   6 5 7 5
Japanese Yen
   12 2 11 3
Other
   4 7 4 5


Total
   30 % 15 % 29 % 15 %

Six Months Ended June 30,

2020

Six Months Ended June 30,

2019


Revenues

Expenses

Revenues

Expenses

Euro
   8 % 1 % 7 % 1 %
British pound
   6 5 7 5
Japanese Yen
   12 2 13 4
Other
   4 7 5 4


Total
   30 % 15 % 32 % 14 %


	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
	Revenues			Expenses			Revenues			Expenses
Euro		7	%		0	%		8	%		1	%
British pound		6			5			6			5
Japanese Yen		12			3			12			2
Other		3			8			4			7

Total		28	%		16	%		30	%		15	%

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$6.7~~$8.1 million and ~~$7.5~~$9.0 million, respectively, of receivables denominated in currencies other than the U.S. dollar. We also maintain cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange rate movements.

In addition, although our foreign subsidiaries have intercompany accounts that are eliminated upon consolidation, these accounts expose us to foreign currency exchange rate fluctuations. Exchange rate fluctuations on short-term intercompany accounts are recorded in our consolidated statements of operations under “other income (expense) ~~income,~~, net”, while exchange rate fluctuations on long-term intercompany accounts are recorded as a component of other comprehensive income (loss), as they are considered part of our net investment.

Currently, our largest foreign currency exposures are the euro and British pound primarily because our European operations have a higher proportion of our local currency denominated expenses, in addition to the Japanese Yen as result of our ongoing operations in Japan. Relative to foreign currency exposures existing at June 30, ~~2020,~~2021, a 10% unfavorable movement in foreign currency exchange rates would expose us to losses in earnings or cash flows or significantly diminish the fair value of our foreign

~~Table of Contents~~

currency financial instruments. For the six months ended June 30, ~~2020,~~2021, we estimated that a 10% unfavorable movement in foreign

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currency exchange rates would have decreased revenues by ~~$2.8~~$3.0 million, decreased expenses by $1.7 million and ~~increased~~decreased operating ~~loss~~income by ~~$1.2~~$1.4 million. The estimates used assume that all currencies move in the same direction at the same time and the ratio

of non-U.S. dollar

denominated revenue and expenses to U.S. dollar denominated revenue and expenses does not change from current levels. Since a portion of our revenue is deferred revenue that is recorded at different foreign currency exchange rates, the impact to revenue of a change in foreign currency exchange rates is recognized over time, and the impact to expenses is more immediate, as expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred. All of the potential changes noted above are based on sensitivity analyses performed on our financial results as of June 30, ~~2020.~~2021.

Interest rate risk

We had cash and cash equivalents totaling ~~$27.8~~$40.4 million at June 30, ~~2020.~~2021. Cash and cash equivalents were invested primarily in cash and are held for working capital purposes. We do not use derivative financial instruments in our investment portfolio. Declines in interest rates, however, would reduce future interest income. ~~While we continue to~~We did not incur interest expense in connection with our capital leases, the interest expense is fixed and not subject to changes in market interest rates. Our effective interest rate on our Line of Credit was 4%, and we incurred approximately $101,000 and $109,000 in interest expense for the three ~~and six~~ months ended June 30, ~~2020, respectively.~~2021. An unfavorable movement of 10% in the interest rate on the Line of Credit would not have had a material effect on interest expense.

~~Inflation risk~~

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, ~~2020,~~2021, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, ~~2020,~~2021, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required

by Rule 13a-15(d) and 15d-15(d) of

the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We, ~~are,~~ from time to time, are party to litigation arising in the ordinary course of ~~our~~ business. Management does not believe that the outcome of these claims will have a material adverse effect on our consolidated financial position, results of operations or cash flows based on the status of proceedings at this time.

~~Table of Contents~~

ITEM 1A.

RISK FACTORS

You should carefully consider the risks described in our annual report on Form

10-K

for the fiscal year ended December 31, ~~2019,~~2020, under the heading “Part I — Item 1A. Risk Factors,” together with all of the other information in this Quarterly Report on Form

10-Q.

Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

~~The effects of the~~

~~COVID-19~~

pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

~~In March 2020, the World Health Organization declared the novel coronavirus disease, or~~

~~COVID-19,~~

~~as a pandemic. The~~

~~COVID-19~~

~~pandemic, which has continued to spread, and the related adverse public health developments, including orders to~~

~~shelter-in-place,~~

travel restrictions, and mandated business closures, have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal operations of many businesses, including ours.

~~As a result of the~~

~~COVID-19~~

pandemic, beginning in March 2020 we temporarily closed our global offices, including our corporate headquarters, and all employees globally are required to work remotely until further notice. We have also suspended all company-related travel. We held our annual customer conference virtually in May, shifted our partner events to virtual-only experiences, and have cancelled other customer and industry events. We may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future. All of these changes have disrupted or may disrupt the way we operate our business.

~~Moreover, the conditions caused by the~~

~~COVID-19~~

pandemic can affect the rate of spending on software products and could adversely affect our customers’ ability or willingness to attend our events or to purchase our offerings, delay prospective customers’ purchasing decisions, increase pressure for pricing discounts, lengthen payment terms, reduce the value or duration of their subscription contracts, or increase customer attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.

~~Our operations have also been negatively affected by a range of external factors related to the~~

~~COVID-19~~

pandemic that are not within our control. For example, many cities, counties, states, and even countries have imposed or may impose a wide range of restrictions on the physical movement of our employees, partners and customers to limit the spread of

~~COVID-19,~~

~~including physical distancing, travel bans and restrictions, closure of~~

~~non-essential~~

~~business, quarantines, work-from-home directives and~~

~~shelter-in-place~~

~~orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide. If the~~

~~COVID-19~~

pandemic has a substantial impact on the productivity of our employees and partners, or a continued substantial impact on the ability of our employees to execute responsibilities, or a continued and substantial impact on the ability of our customers to purchase our offerings, our results of operations and overall financial performance may be harmed.

~~The duration and extent of the impact from the~~

~~COVID-19~~

pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the disruption caused by such actions, and the impact of these and other factors on our employees, customers, partners and vendors. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

~~To the extent the~~

~~COVID-19~~

~~pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in our annual report on Form~~

~~10-K~~

~~for the fiscal year ended December 31, 2019, under the heading “Part I — Item 1A. Risk Factors”.~~

~~Table of Contents~~

~~Our operating results may fluctuate from quarter to quarter, which could make them difficult to predict.~~

Our quarterly operating results are tied to certain financial and operational metrics that have fluctuated in the past and may fluctuate significantly in the future. As a result, you should not rely upon our past quarterly operating results as indicators of future performance. Our operating results depend on numerous factors, many of which are outside of our control. In addition to the other risks described in this “Risk Factors” section, the following risks could cause our operating results to fluctuate:

~~our ability to retain existing customers and attract new customers;~~

~~the rates at which our customers renew;~~

~~the amount of revenue generated from our customers’ use of our products or services in excess of their committed contractual entitlements;~~

~~the timing and amount of costs of new and existing sales and marketing efforts;~~

~~the timing and amount of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;~~

~~the cost and timing of the development and introduction of new product and service offerings by us or our competitors;~~

~~impacts on the national and global economies due to natural disasters, acts of terrorism, or public health emergencies, such as the~~

~~COVID-19~~

~~pandemic;~~

~~system or service failures, security breaches or network downtime.~~

~~We use a data center and cloud computing services facilities to deliver our services. Any disruption of service at these facilities could harm our business.~~

We manage our services and serve all of our customers from cloud computing services facilities, such as AWS, as well as one physical data center facility. While we control the actual computer and storage systems upon which our software runs, and deploy them to these facilities, we do not control the operation or availability of these facilities.

The owners of these facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer to new facilities, and we may incur significant costs and possible service interruption in connection with doing so.

Any changes in third-party service levels at these facilities or any errors, defects, disruptions or other performance problems at or related to these facilities that affect our services could harm our reputation and may damage our customers’ businesses. Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates.

These facilities are vulnerable to damage or service interruption resulting from human error, intentional bad acts, security breaches, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, global health emergencies such as the

~~COVID-19~~

~~pandemic, and similar events. For example, on September 18, 2014, we suffered a service disruption resulting from a distributed~~

~~denial-of-service~~

~~attack at third-party data center facilities used by us. By September 20, 2014, we had restored the services impacted by the attack. We contacted federal law enforcement authorities regarding the~~

~~denial-of-service~~

attack and cooperated with them. We also conducted an assessment of our internet service providers and data center providers, potential future vulnerability to malicious activity, and the sufficiency of our infrastructure to withstand and recover rapidly from such attacks. While this matter did not have a material adverse effect on our operating results, there can be no assurance that such incidents will not occur again, and they could occur more frequently and on a more significant scale. The occurrence of a natural disaster or an act of terrorism, or vandalism or other misconduct, or a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in our services.

~~Fluctuations in the exchange rate of foreign currencies could result in currency translation losses.~~

We currently have foreign sales denominated in Australian dollars, British pound sterling, Euros, Japanese yen and New Zealand dollars and may, in the future, have sales denominated in the currencies of additional countries in which we establish or have established sales offices. In addition, we incur a portion of our operating expenses in British pound sterling, Euros, Japanese yen and, to a lesser extent, other foreign currencies. Any fluctuation in the exchange rate of these foreign currencies may negatively impact our business, financial condition and operating results. Global economic events, such as the

~~COVID-19~~

pandemic, have and may continue to significantly impact local economies and the foreign exchange markets, which may increase the risks associated with sales denominated in foreign currencies. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets.

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~~Our stock price has been volatile and is likely to be volatile in the future.~~

The market price of our common stock has been and is likely to be highly volatile and could be subject to significant fluctuations in response to, among other things, the risk factors described in this report and other factors beyond our control. Market prices for securities of early stage companies have historically been particularly volatile. Some, but not all, of the factors that may cause the market price of our common stock to fluctuate include:

~~fluctuations in our quarterly or annual financial results or the quarterly or annual financial results of companies perceived to be similar to us or relevant for our business;~~

~~changes in estimates of our financial results or recommendations by securities analysts;~~

~~failure of our products to achieve or maintain market acceptance;~~

~~changes in market valuations of similar or relevant companies;~~

~~success of competitive service offerings or technologies;~~

~~changes in our capital structure, such as the issuance of securities or the incurrence of debt;~~

~~announcements by us or by our competitors of significant services, contracts, acquisitions or strategic alliances;~~

~~regulatory developments in the United States, foreign countries, or both;~~

~~market volatility resulting from the~~

~~COVID-19~~

~~pandemic;~~

~~litigation;~~

~~additions or departures of key personnel;~~

~~investors’ general perceptions; and~~

~~changes in general economic, industry or market conditions.~~

In addition, if the market for technology stocks, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

~~Failure of our customers to pay the amounts owed to us, or to pay such amounts in a timely manner, may adversely affect our financial condition and operating results.~~

If any of our significant customers have insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by such customers, and we may need to extend our payment terms or restructure the receivables owed to us, which could have a significant adverse effect on our financial condition, including impacting the timing of revenue recognition. Any deterioration in the financial condition of our customers will increase the risk of uncollectible receivables. Global economic uncertainty, such as the economic instability and market volatility caused by the global

~~COVID-19~~

pandemic, could continue to affect our customers’ ability to pay our receivables in a timely manner or at all or result in customers going into bankruptcy or reorganization proceedings, which could also affect our ability to collect our receivables.

ITEM 5.

OTHER INFORMATION

Our policy governing transactions in our securities by directors, officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule

10b5-1

under the Exchange Act. We have been advised that our Chief Legal Officer, David Plotkin, has entered into a trading plan in accordance with

Rule 10b5-1 and

our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

We anticipate that, as permitted by Rule

10b5-1

and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule

10b5-1

and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form

10-Q

and

10-K

filed with the Securities and Exchange Commission. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan.

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Table of Contents

ITEM 6.

EXHIBITS


Exhibits

3.1 (1)		Eleventh Amended and Restated Certificate of Incorporation.

3.2 (2)		Amended and Restated By-Laws.

4.1 (3)		Form of Common Stock certificate of the Registrant.

10.1†(4)		Brightcove Inc. 2021 Stock Incentive Plan.

10.2†		Form of Incentive Stock Option Agreement under the Brightcove Inc. 2021 Stock Incentive Plan.

10.3†		Form of Non-Qualified Stock Option Agreement for Brightcove Employees under the Brightcove Inc. 2021 Stock Incentive Plan.

10.4†		Form of Non-Qualified Stock Option Agreement for Non-U.S. Employees under the Brightcove Inc. 2021 Stock Incentive Plan.

10.5†		Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Brightcove Inc. 2021 Stock Incentive Plan.

10.6†		Form of Restricted Stock Unit Agreement for Brightcove Employees under the Brightcove Inc. 2021 Stock Incentive Plan.

10.7†		Form of Restricted Stock Unit Agreement for Non-U.S. Employees under the Brightcove Inc. 2021 Stock Incentive Plan.

10.8†		Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Brightcove Inc. 2021 Stock Incentive Plan.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1^		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		~~Inline~~ XBRL Instance Document. ~~The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

101.SCH		XBRL ~~Inline~~ Taxonomy Extension Schema Document.

101.CAL		XBRL ~~Inline~~ Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL ~~Inline~~ Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL ~~Inline~~ Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL ~~Inline~~ Taxonomy Extension Presentation Linkbase Document.

~~104~~104*		Cover Page Interactive Data File (formatted as Inline XBRL ~~and~~ with applicable taxonomy extension information contained in ~~Exhibit 101)~~Exhibits 101.*)

(1)	Filed as Exhibit 3.2 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

(2)	Filed as Exhibit 3.3 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

(3)	Filed as Exhibit 4.1 to Amendment No. 5 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.

(4)	Filed as Exhibit 99.1 to Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 17, 2021, and incorporated herein by reference

^	Furnished herewith.

†	Indicates a management contract or any compensatory plan, contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BRIGHTCOVE INC.
	(Registrant)

Date: July ~~24, 2020~~28, 2021	By:
		/s/ Jeff Ray

		Jeff Ray
		Chief Executive Officer
		(Principal Executive Officer)

Date: July ~~24, 2020~~28, 2021	By:
		/s/ Robert Noreck

		Robert Noreck
		Chief Financial Officer
		(Principal Financial Officer)

3733


	June 30, 2020			December 31, 2019
	(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	27,753		$	22,759
Accounts receivable, net of allowance of $651 and $904 at June 30, 2020 and December 31, 2019, respectively		26,794			31,181
Prepaid expenses		8,986			5,171
Other current assets		8,340			6,713

Total current assets		71,873			65,824
Property and equipment, net		14,726			12,086
Operating lease right-of-use asset		13,340			16,912
Intangible assets, net		12,090			13,875
Goodwill		60,902			60,902
Other assets		3,524			3,268

Total assets	$	176,455		$	172,867

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,283		$	9,917
Accrued expenses		20,556			20,925
Operating lease liability		5,687			6,174
Deferred revenue		54,647			49,260

Total current liabilities		92,173			86,276
Operating lease liability, net of current portion		8,618			11,701
Debt		5,000			—
Other liabilities		1,100			767

Total liabilities		106,891			98,744
Commitments and contingencies (Note 10)
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 39,543,991 and 39,042,787 shares issued at June 30, 2020 and December 31, 2019, respectively		39			39
Additional paid-in capital		281,255			276,365
Treasury stock, at cost; 135,000 shares		(871	)		(871	)
Accumulated other comprehensive loss		(1,086	)		(785	)
Accumulated deficit		(209,773	)		(200,625	)

Total stockholders’ equity		69,564			74,123

Total liabilities and stockholders’ equity	$	176,455		$	172,867


	June 30, 2020
Description	Contracted Maturity		Cost		Fair Market Value		Balance Per Balance Sheet
Cash		Demand	$	27,712	$	27,712	$	27,712
Money market funds		Demand		41		41		41

Total cash and cash equivalents			$	27,753	$	27,753	$	27,753


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2019		2,479,423		$	8.96
Granted		79,920			7.76
Exercised		(61,096	)		6.48			$	108
Canceled		(126,007	)		9.00

Outstanding at June 30, 2020		2,372,240		$	8.99		6.81	$	852

Exercisable at June 30, 2020		1,368,007		$	8.70		5.67	$	740


	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2019		3,626,364		$	9.03
Granted		746,295			7.95
Vested and issued		(438,484	)		8.92
Canceled		(353,932	)		8.52

Unvested at June 30, 2020		3,580,243		$	8.81


	Allowance for Credit Losses
	(in thousands)
Balance as of December 31, 2019	$	904
Current provision for credit losses		310
Write-offs against allowance		(563	)
Recoveries		—
Balance as of June 30, 2020	$	651


	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		1	%		7	%		2	%
British pound		6			5			7			5
Japanese Yen		12			2			11			3
Other		4			7			4			5

Total		30	%		15	%		29	%		15	%

	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
	Revenues			Expenses			Revenues			Expenses
Euro		8	%		1	%		7	%		1	%
British pound		6			5			7			5
Japanese Yen		12			2			13			4
Other		4			7			5			4

Total		30	%		15	%		32	%		14	%