Brightcove Inc (BCOV) 2015 Q3 法說會逐字稿

Greetings and welcome to the Brightcove third-quarter 2015 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brian Denyeau of ICR.

Good afternoon and welcome to Brightcove's third-quarter 2015 earnings call. Today we will be discussing the results announced in our press release issued after market close today.

With me on the call are David Mendels, Brightcove's Chief Executive Officer, and Kevin Rhodes, Brightcove's Chief Financial Officer.

During the call, we will make statements related to our business that may be considered forward looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning our financial guidance for the fourth fiscal quarter of 2015 and the full year of 2015, expected profitability, our position to execute on our go-to-market and growth strategy, our ability to expand our leadership position, our ability to maintain and upsell existing customers, and our ability to acquire new customers.

Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming, or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion of these material risks and other important factors that could affect our actual results, please refer to those contained in our most recently filed annual report on Form 10-K as updated by our other SEC filings.

Also during the course of today's call we will refer to certain non-GAAP financial measures. There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after market close today, which can be found on our website at www.Brightcove.com.

In terms of the agenda for today's call, David will provide a summary review of our financial results and market opportunity as well as an update on our operations. Kevin will then finish with additional detail regarding our third-quarter 2015 results as well as our guidance for the fourth quarter and full year 2015.

With that, let me turn the call over to David.

Thanks, Brian, and thanks to all of you for joining us today on our third-quarter 2015 earnings call. I am pleased with our performance in the quarter with financial performance that exceeded our estimates on both revenue and profitability.

For the quarter, total revenue was $33.8 million, up 11% on a constant currency basis and above the high end of our guidance range of $33.4 million. Adjusted EBITDA was $2.7 million, with non-GAAP operating income of $1.3 million and net income per diluted share of $0.03, both of which were well ahead of guidance.

During the quarter we re-accelerated revenue growth. This is our top priority as a Company and we are pleased to be delivering on that goal. We are also especially pleased to have returned to non-GAAP profitability a quarter earlier than we anticipated, which demonstrates the scalability of our business model and our disciplined approach to investing.

Overall, our third-quarter performance built upon the momentum that we are seeing in parts of our business. Specifically, our digital marketing group in North America posted another strong quarter, driven by good upsell performance with our video marketing suite. Our North American digital marketing business is growing in the midteens and we believe is indicative of the significant growth opportunity in this market.

We are also seeing growth in our media business, primarily in the North American, Japan, and Asia-Pacific regions, that underscores the large market potential we are targeting. The efforts we have made over the past 12 to 18 months to focus Brightcove around specific business value use cases in both of our core markets is working. Going forward, we expect to expand upon these successes by increasing the velocity of our sales efforts.

As it relates to Europe, Andy Feinberg, our new President of International Operations, and his team spent the quarter reviewing our operations in the region and are beginning the process of implementing necessary changes to our go-to-market efforts. I am confident these efforts will lead to improved performance over time, but realistically it will take a few quarters for these changes to positively impact the business.

I would now like to take a few minutes to highlight some of our progress in the media and digital marketing businesses.

In the media market, during the quarter we had a significant presence at the annual International Broadcasting Convention in Amsterdam, the premier conference for digital content creators and distributors in Europe that was attended by more than 55,000 people. This year our major theme was on how OTT services are increasingly becoming mission-critical and areas of strategic investment for broadcasters and content providers.

Customer preferences continue to shift towards on-demand OTT delivery and broadcasters recognize they need a holistic approach that encompasses architecture, feature set, user experience, and multiple monetization capabilities to address these market changes. Helping media companies position themselves through this changing environment has been a major focus of our development efforts and we've brought a lot of exciting innovation to market in recent months.

Most recently, we introduced a jumpstart offering for Apple TV, a new service to enable publishers to quickly launch video apps on the new version of Apple TV. This new service builds on our existing capabilities with Apple TV that includes our Once ad-insertion solution, DRM capabilities, content management, analytics, and player to help publishers quickly get their content on Apple TV. We have seen strong interest from both media companies and digital markers in this service in the weeks since introduction.

Another major area of focus for media customers is the increasing prevalence of ad-blocking technology, especially in the light of the recent inclusion of ad-blocking capabilities in mobile Safari for the first time. Current ad-blocking technology is estimated to disrupt 15% to 20% of digital and deliveries. This is an existential issue for publishers with an ad-supported business model.

Earlier this week we announced the launch of Brightcove Lift, which combines our server-side ad-insertion solution with the industry's leading HTML 5 player management service to deliver a TV-like ad-supported experience. A/B testing by a large media customer has demonstrated up to a 50% uplift in ad delivery by deploying Brightcove Lift to minimize the impact of ad blockers. This is a terrific example of the business value our solutions deliver for customers every day.

Overall, we have made significant investments across our product portfolio to update and modularize our solutions, making them easier for customers to deploy and quickly drive value. We made significant progress in this process in the third quarter with the release of the new Video Cloud.

The new release includes a completely rebuilt user interface that works on both desktop and tablet browsers, as well as numerous performance and workflow enhancements that help our customers complete tasks faster. The new Video Cloud is built on top of our latest APIs, which provide richer functionality and faster time to publish than our previous generation of APIs.

We also released significant updates to our custom reporting module, allowing customers to schedule distribution of recurring reports of content metrics to anyone in their organization and a new set of capabilities in our web player that allow customers to use HTML 5-based DRM to protect premium content.

In the third quarter we signed new or expanded agreements with a number of high-profile media companies that include Brit + Co.; Cyber Communications; Electus Digital; International Data Group; Marathon Ventures; MediaWorks New Zealand; Presentcast representing TV ER, a consortium of five broadcasters in Japan; Seven Network; Scripps Network Interactive; Sunbeam Television; Time Inc.; Tokyo Broadcasting; and Wenner Media. We would like to highlight three interesting wins that illustrate trends we've talked about previously related to new OTT services and monetization.

Electus Digital is an integrated multimedia entertainment studio that unites producers, creators, advertisers, and distributors to produce broadcast cable, digital, and OTT content to companies known through the online site collegehumor.com as well as shows such as Mob Wives, Marco Polo, Wake Up Call, Southern Justice, and Running Wild with Bear Grylls.

Electus had previously built technology in-house, but had selected Brightcove to move away from home-grown solutions. Electus chose us for the Brightcove Player, which performed best in a benchmark test Electus conducted of several providers, and for our rapidly evolving capabilities around syndication to social networks such as YouTube, as well as the Company's other distribution inputs.

Marathon Ventures is a company that is traditionally focused on optimizing direct response advertising and managing ad inventory for media clients such as Fox Business, 20th Century Fox TV, and MGM TV, and specific shows such as Paternity Court, Tennis Channel, Grit, and Anger Management. Marathon is now moving towards offering its content via an OTT service. It selected Brightcove as its one-stop-shop for this initiative, marrying the best-in-class Video Cloud platform as a backend to our front-end application and responsive web development services.

In the quarter, we also closed a significant multiyear Once agreement with MediaWorks New Zealand, a large independent broadcaster in New Zealand with an audience reach of 3.8 million viewers through its multiple broadcast, radio, and online properties. MediaWorks, an existing video cloud customer, chose Once to provide its audience with a TV-like viewing experience across a broader range of platforms while mitigating the threat of ad blockers and increasing its advertising revenue.

Turning to the digital marketing business. Customers are increasingly recognizing the strategic value of video as part of their digital marketing and communications initiatives and we are pleased with the improvements we have made from a go-to-market perspective to tap into this growing area of technology spend.

An exciting proof point that demonstrates the value we are delivering to digital marketing customers is the number of upsells we had during the quarter. We're seeing a meaningful increase in the size and scope of upsells in this market, which in many cases are multiple times larger than the initial sale. This is primarily based on moving customers from Video Cloud to our Video Marketing Suite, which includes our live event capabilities along with our Gallery and Audience modules.

From a product perspective, the introduction of Gallery in the Video Marketing Suite has significantly lowered the barriers to adoption and time to value for digital marketing customers. In July, we shipped the first major release of our new Audience module which we announced in Q2 with Brightcove Play. Audience allows marketing organizations to capture lead information and viewing behavior within the Brightcove Player and easily synchronize it to marketing automation systems such as Oracle Eloqua and Marketo.

We also released important enhancements to some existing products including a new live template for our Gallery product and significant enhancements to our YouTube distribution tools that allow more fine-grained control over when videos can be pushed to YouTube and automatically set availability and restriction dates for those videos.

During the quarter, we signed new deals or upsells with a range of brands that span all industries. Select companies include All Nippon Airways, Artnet, John Wiley & Sons, Money Map Press, MWH Global, PennWell Corporation, SAS Institute, Samsung Electronics America, and Think and Learn, the largest test prep company in India. We would like to highlight three wins that are representative of the breadth and depth of our business.

John Wiley & Sons is a publisher of award-winning journals, encyclopedias, books, and online products, notably the popular For Dummies series of tutorials and how-to books. Wiley recently upgraded to Video Marketing Suite to use the Brightcove Audience module, which connects video assets to marketing automation platforms in order to capture and score marketing leads.

Wiley found value in utilizing Audience to connect video analytics from marketing campaigns into both its marketing automation platform and its CRM system. As a result, its sales teams have better insight into how a potential lead has engaged with a video which produces higher-quality conversion opportunities.

We closed a significant deal with a global financial services company that does both investment banking and consumer operations. The Company is a longtime customer that was using Video Cloud for one of its business divisions and it expanded its use to an enterprise-wide deal that resulted in a more than 7x increase in annual contract value. The customer wanted to consolidate video players across its online properties in order to standardize on one platform and meet its security and compliance requirements.

Last quarter we talked about Sotheby's use of the Brightcove Live module to live stream auctions to extend its brand to new audiences. In the time we've worked with Sotheby's, its use of video has grown continually and we have been impressed by the company's cutting-edge use of video to build its brand. We are noting Sotheby's again this quarter as it is our first Jump Start for Apple TV customer.

In summary, we had a very good third-quarter performance from an operational and financial perspective, including returning to non-GAAP profitability. The hard work we have done over the past 12 to 18 months to focus the Company on delivering business value is beginning to pay off. We are still working to generate greater velocity and I am confident the steps we are taking will continue to improve growth and generate shareholder value over time.

With that let me turn the call over to Kevin to walk you through the numbers.

Thank you, David, and good afternoon, everyone. As David mentioned, we are pleased with our results for the quarter, which were ahead of our guidance from both a revenue and profitability perspective. I will now begin by reviewing our financial results for the third quarter and then finish with guidance for both the fourth quarter and update our outlook for 2015.

Our total revenue in the third quarter was $33.8 million, up from $31.5 million in the third quarter of 2014 and above the top end of our guidance of $33.4 million. Breaking revenue down further, our subscription and support revenue of $33.2 million was up 9% year over year and 13% on a constant currency basis. Professional services revenue for the quarter was $653,000.

Now let me add some color around our revenue mix. In the third quarter, our premium offerings generated 94% of total revenue, while our volume offerings generated 6% of total revenue. On a geographic basis, we generated 65% of our revenue in North America during the quarter, Europe generated 18% of our revenue, and Japan and Asia Pac generated the remaining 17% of our revenue during the quarter.

From a vertical perspective our media business generated 49% of our revenue in the quarter. Our growth in media is being driven by our increased focus on this vertical, new product introductions we've made in recent quarters, and a healthy demand in Japan and Asia Pacific.

Our digital marketing business represented 51% of our revenue in the third quarter. We were pleased with the progress that we've made in this market as well and the exciting wins that we signed in the third quarter validate our strategy.

Let me now turn to the supplemental metrics that we provide on a quarterly basis. Our recurring dollar retention rate in the third quarter was 101%, which compares favorably to our target range in the low to mid 90%s. We had strong upsell performance during the third quarter, which reflects the significant value customers are realizing from our solutions. We also had strong customer and dollar retention which aided in our performance.

Looking at our customer count, we ended the third quarter with 5,152 customers, of which 1,852 were classified as premium customers. Our average revenue per premium customer continued to increase, up to 67,000 per year, which is up 10% year over year.

Moving down the P&L, our non-GAAP gross profit in the third quarter was $22.9 million, up from $21.3 million in the year-ago period and representing a gross margin of 68%. Subscription support revenue represented approximately 98% of our total revenue and generated 71% gross margins in the quarter.

Non-GAAP income from operations was $1.3 million in the third quarter, compared to a loss of $134,000 in the third quarter of 2014 and ahead of our guidance of a loss of $500,000 to breakeven. Profitability was positively impacted by the revenue over-performance in the quarter and our continued focus to drive leverage in our SG&A. As David mentioned, we are pleased to have returned to non-GAAP operating profitability to quarter earlier than we anticipated.

Adjusted EBITDA was $2.7 million, up 122% compared to $1.2 million in the year-ago period and was above our guidance range of $1.1 million to $1.6 million. Non-GAAP earnings per share was $0.03 based on 33.5 million weighted average shares outstanding, which was well ahead of our guidance of a loss of $0.01 to $0.03 per share. This compares to a loss per share of $0.03 on 32.2 million weighted average shares outstanding in the year-ago period.

I would note that there are approximately 900,000 additional shares outstanding due to achieving non-GAAP profitability in this quarter, which accounts for the dilutive effect of options and restricted stock units outstanding. On a GAAP basis, our gross profit was $22.3 million, operating loss was $1 million, and net loss per share was $0.04 in the quarter.

Turning to the balance sheet and cash flow, we ended the quarter with cash and cash equivalents of $23.8 million. We generated $3.8 million in cash flow from operations during the quarter and invested $722,000 in capital expenditures and capitalized internal use software. This equates to free cash flow of $3.1 million for the quarter and compares favorably to the $1.5 million of free cash flow in the year-ago period.

I would now like to finish by providing a financial outlook for the fourth quarter and full year 2015. For the fourth quarter we are targeting revenue of $33.8 million to $34.3 million, including approximately $800,000 of professional services revenue. From a profitability perspective, we expect a non-GAAP operating income of $600,000 to $1.1 million in the fourth quarter.

Non-GAAP net income per share is expected to be in the range of $0.01 to $0.02 per share, based on 33.7 million weighted average shares outstanding. In the fourth quarter, adjusted EBITDA is anticipated to be in a range of $1.9 million to $2.4 million.

For the full year 2015, we are increasing our revenue guidance to $133.4 million to $133.9 million, which represents year-over-year growth of approximately 7%. Excluding Rovio, revenue growth is expected to be 12% and 13% on a constant currency basis.

In terms of profitability, we are forecasting full-year non-GAAP operating income to be in a range of $700,000 to $1.2 million. In addition, we expect non-GAAP net loss per share of breakeven to $0.02 per share, based on 33.6 million weighted average shares outstanding.

Adjusted EBITDA is targeted to be in a range of $6.5 million to $7 million for the full year, an increase of $1 million to $1.5 million compared to our prior guidance of $5 million to $6 million. Lastly, we are estimating free cash flow of $2.5 million to $3.5 million for the full year, which is an improvement from our prior guidance, which was zero to $2 million. As you can see, we are making meaningful improvements to our guidance from both a profitability and cash flow perspective.

From a foreign currency perspective, we are estimating the fourth-quarter and full-year impact of changing currency rates on our revenue to be $1 million and $3.9 million, respectively, which represents a 3% drag on revenue growth on a quarter and full-year basis.

In summary, we are very pleased with the results in the third quarter from both a financial as well as operational perspective. We are encouraged by the positive results we are seeing in both of our businesses and we remain confident that our strategy that we have in place will drive improved growth and profitability over time.

And with that, we will now take your questions. Operator, we are ready to begin Q&A.

(Operator Instructions) Tom Roderick, Stifel.

Good afternoon. Congratulations, especially on achieving profitability here, so nice job on that. I will come back to that as my second question.

First question I wanted to go little bit deeper on the Jump Start offering for Apple TV. I know it's early on that, but certainly a lot of discussion around that and you've listed a number of features and capabilities that you are offering to publishers out there. Sort of curious what feedback you're getting from your community of existing customers and potentially -- particularly those in the media side of the organization where that piece of business seems to be picking up for you.

What else can you share with us for what you are hearing out there in the field; what they are doing to sort of prepare for this launch? Do you feel like you have all the pieces today or do you think there are more pieces of that puzzle that you can add in the future?

Tom, first of all, welcome to everyone and thank you very much, Tom. That was nice of you to say.

We're excited about Apple TV. It's a cool device. It just started shipping; reviews are out today. We have had one in-house for some time now doing testing and the like and building against that in terms of upgrading our software and building the Jump Start and some initial apps for some customers. So we are very excited.

I look at the Apple TV as a punctuation mark or a step function within a bigger trend that has been going on for some time, which is the proliferation of these TV-based devices, whether that's smart TVs, game consoles, or OTT boxes that enable people to watch their choice of content and entertainment on their living room device, the TV. There's been this fundamental shift as more and more consumers move from sitting down at night in primetime for example and watching traditional broadcast in linear TV to using an Internet-based TV service, whether it's Apple TV or Amazon TV or Chromecast, or whatever, to watch what they want to watch, when they want to watch, where they want to watch.

And so there's nothing that is fundamentally new about Apple TV. There's no one feature that they have, for example, that no one else has. Other people have done voice-based search; other people have done universal search. But they are Apple.

Apple has a consumer brand and an ability to take a trend and an opportunity in the market and package that in a way that has proven to be incredibly compelling in the market so far many times now with their different devices. And I think they are on track with this device as well.

And so I think it's a punctuation mark or it's a step function that will continue to accelerate that adoption of Internet-based TV services by consumers, which then of course continues the acceleration of publishers saying I have to move and shift from traditional broadcast delivery to IP-based delivery and I have to rethink my business model for internet-based advertising business models, internet-based subscription business models. And so in that sense it is an exciting opportunity.

Apple TV has been around for some time, but what's new for them is the combination of the device with an open app ecosystem. Up until now there were, I don't know exactly, 25, 30 apps on the device and several of them were already powered by Brightcove, which we are proud of. But now I think we are going to see an app store environment with thousands, tens of thousands, and eventually hundreds of thousands of apps available for people to leverage on the TV and it's going to create I think a lot of great experiences.

What we're hearing from customers is this is going to be an important device. A lot of customers have gone through a process now for several years with every device of a lot of analysis. Should I go for Amazon? Should I go for Chromecast? Should I go for Xbox? Because each one of these has been an incremental hurdle in investment.

And so the two things we're hearing is, one, is I have to get an Apple TV. I don't think a lot of people are spending a lot of time on analysis paralysis. I think everyone expects it will be fairly successful.

And then the second thing is there is this continued pressure to how can I deliver to all of these devices with all of these formats, with all of these closed caption formats, with all these security formats, how can I even do that without building this incremental technology stack over and over again for each different device? And that's where we come in. We are able to provide a significant simplification of that for our customers.

We have a significant number of customers who are interested in us helping them get on the device, take advantage of the work we've done. I think we can move very fast for our customers, deliver great experiences, and we will see where it goes from there.

But we are excited. I think it's another key indicator in this fundamental trend that we are all a part of.

Great. That's great color, thank you. Again, sort of turning to execution, I think you put on a number of new sales hires early in the year and I think the time to ramp on those hires had maybe taken a little bit longer than expected, but it seems like you had a pretty darn productive bookings and execution quarter from the sales front.

What are you seeing out of the execution of the sales team today? And with what you are seeing out there in the marketplace, does it sort of make you think a little bit about upping that investment going into next year?

Yes, sure. First of all, yes, we are pleased with the results, thank you. It was a pretty pleasing quarter in many regards. We are happy to have exceeded on the top line.

We're happy to see the slope of the curve in terms of growth change directions from deceleration to acceleration. That has been the fundamental focus we have had to re-accelerate growth and we are happy to see the beginnings of that. Obviously we want to do that quarter after quarter for some time.

We also are happy to have achieved profitability ahead of schedule in a relatively meaningful way. We are pretty pleased with that result, so all-in-all a good quarter. I think we're happy mostly with the sales team's execution, the account management team's execution.

You see that in the revenue retention rate as well as in the overall results, so revenue retention I think is a really strong metrics. Those numbers have been fairly -- have been up and down a bit, as you know, but we've said for a long time we are trending -- moving average in the low to mid 90s. So that's trended up to the high part of that range and that's a good thing, and that's something we want to continue to drive.

So I feel good about the salesforce. We still have some issues in Europe. I think we've been pretty transparent about that last quarter and this quarter. And we have work to do. We've put some new management in place and so I think that will take a couple quarters. But when I look at the other 80% of the world, so North America and Asia and Japan and the Australia region, we feel very good and I certainly see us making continued investments in sales and marketing resources as we go into next quarter and into next year.

Excellent, I will jump back in the queue. Thank you guys very much. Appreciate it.

Eric Lemus, Raymond James.

Thanks for taking the question and nice job in the quarter. Kind of following on with the last question, this quarter, like you said, you reached breakeven sooner than you expected and the implied guidance for fourth quarter is obviously above breakeven. Do you guys see that as somewhat of a line in the sand as you move forward?

You talk about revenue acceleration moving forward, but would you say that you will continue to have breakeven and profitability moving forward in each quarter or even for the years?

Yes.

Okay, great.

I can elaborate a little. I was just trying to make sure that's clear, because that is a strong point I think. Let me just elaborate a little bit, which is we're not ready to guide 2016 yet. We guide 2016 at our January earnings call and so I'm not going to go there today, because we still have work to do, obviously. We have to finish Q4 and we have to finish our operating plan.

But that said, the fundamental plan we put in place and the fundamental strategy of the Company that we've had for many years -- really this goes all the way back to the IPO -- is to achieve profitability while staying focused on the best possible growth rates and growing those growth rates. So I think you're going to continue to see that from us. We're going to continue to drive growth and look for acceleration of that growth, but we don't intend to go backwards on profitability.

Let me just add something on my end, too. There is two measures of profitability, there's non-GAAP operating income and then there's EBITDA. We have been EBITDA profitable for last several quarters and that's continuing to be a meaningful number for us. Generating $2.7 million this particular quarter, we feel is a very good also number to keep in mind as well.

So it's a balance of the two. It's obviously balancing investments and business and growing the business, which is our priority right now with the balancing of the profitability of the business. But we want to continue to stay profitable.

Okay, great. That's very helpful. On the digital marketing side, it looks like a little over half of your business is still coming from digital marketing, which is great, and you talk about several use cases of pretty advanced uses of the software and digital marketing. But how much of that install base is actually coming from more advanced solutions, whether be tied with the marketing automation solutions or leveraging analytics for advanced campaigns?

That's a really good question. I don't have a solid number for you on that because it's a little bit subjective what constitutes advanced, but I think you're hitting on something that's very important here.

A key part of our strategy is what's often referred to as land-and-expand. which is we often get into a company or a project, maybe it's a product launch, maybe it's a landing page, maybe it's a support portal. It could be a range of different things for which a company is looking for video; it might be departmental, project based, time based. And that's often the starting point. Those deals often have relatively small annual contract value, but it's a foot in the door.

And then we do is we grow that business and upselling and expanding in the account is a key part of what we do. That's where having this really deep set of functionality now with the Brightcove Audience module, the Brightcove Gallery module, the advanced analytics, and all the like, really gives us more and more opportunities to upsell customers.

And so we are seeing multiple paths to expand within customers by going from a division to an enterprise-wide deal, by going from a Video Cloud deal to a Video Marketing Suite deal. Those are driving significant growth and that's a significant part of why you see things like the revenue retention being a little bit higher and things like that.

And so the percentage of our base that has gone through that kind of transformation I mentioned one financial services company that, from that initial purchase a few years ago to where we are now, is an enterprise-wide relationship with a 7x improvement in ARPU. The percentage of our base that has gone through that kind of transformation is still relatively small. We are nowhere close to the saturation. We have lots and lots of room for growth and that will be a strategy and an opportunity for several years ahead.

You can see that, what David's talking about, a little bit in the revenue-per-customer metric that we have there, which grew 10% year over year to now $67,000.

Great, that's all I had. Thanks, guys.

Sameet Sinha, B. Riley & Co.

Actually this is Zach filling in for Sameet today, but I just have a couple of questions for you. First question is strategically do you need any products to add to your portfolio, or do you have most of what you want or your customers want at this point?

There's always more. We are a software company, not like a shovel company, so there's always more. This is a fast and dynamically growing industry. There's more things that our customers want to do and so we have been organically extending our products and creating new products like Brightcove Audience, like Brightcove Gallery, both of which we built organically and are a bigger and bigger part of our strategy.

And so there's nothing that I would say we need. There's nothing that is gating our business today, but if you said to me in three years from now are we going to have multiple additional new products that we don't have today, then the answer would be absolutely. We are going to keep extending the value proposition. We're going to keep solving new problems.

We're going to keep focus on providing the best-in-class in the industry, but that will involve more product development and the like over time. It's not what we need for today, but it's certainly going to be part of the strategy over the next few years.

Okay, thank you very much. And then one more question. Are you seeing any benefits or traction due to your relationship with Eloqua or Marketo?

Yes, absolutely. The company -- Eloqua is actually an Oracle product. That product's early; we announced Brightcove Audience in the second quarter at our Brightcove Play conference. We shipped it early in the third quarter.

What that product does is it connects our video marketing suite in with marketing automation platforms like Oracle Eloqua and Marketo. We have done -- it's still early so we don't have a lot of customers yet, but we have early customers. We have many, many customers evaluating. We're getting very good feedback from customers who are using it.

And we are absolutely working with the partner teams, the sales teams, the marketing teams of both of those companies in order to create awareness and demand: participating and sponsoring their events, having them at our events, working on salesforce training, providing training to our team about their products, sharing collateral, co-marketing on their websites and things like that. And so that's absolutely a channel and a program we have in terms of how we market and communicate about our products.

Great, that was very helpful. That's all I have. Thank you.

(Operator Instructions) Dan Bergstrom, RBC Capital Markets.

Thanks for taking my question. Cisco announced it was acquiring 1 Mainstream this week. Do you see or run into them? Any thoughts on the announcement or any similarities or differences you have with that company?

Sure, we have run into 1 Mainstream a few times but I mean that fairly literally -- a few times. I've talked some about the competition on prior conference calls and a keyboard I use every time is it's a very fragmented competitive landscape. There are many players, some big, some small, some our size or smaller, or whatever, as well as start up like 1 Mainstream.

1 Mainstream is a smallish company, maybe a dozen or a few dozen employees, I don't know exactly, that provided a solution for companies to launch an OTT service easily. And I think their core value proposition was fast time-to-market and turnkey solutions, but it was a very inflexible system from my understanding and from talking with some customers.

We saw them in a couple of accounts, but not very often. They are one of many competitors that we ran into. They weren't a major competitor. We didn't see them a lot. We haven't heard anything particularly compelling or exciting about their offering, and so I'm sure in the hands of Cisco we will have a lot more to learn over the next couple of years. But I think it's just a continuation of that fragmentation and complexity we see in the competitive landscape.

Thanks, David. That was very helpful. Then, Kevin, I'm not sure if this is something you breakout, but what is your Canadian exposure? Just something we are trying to get a handle on given currency movements.

We don't have a lot of Canadian exposure at all. We have -- about 27% of our exposure to currency is outside the United States, but most of that is in EMEA and then Japan and obviously other parts of Asia and New Zealand and Australia.

Perfect, thank you.

There are no further questions in queue. I would like to hand the call back over to management for closing comments.

Well, I just want to thank everyone who joined us today on the call. We had I think a fairly positive quarter, a solid quarter that we are pleased with. We're looking forward to another good quarter and talking to you again in 90 days -- approximately.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.