Brightcove Inc (BCOV) 2016 Q1 法說會逐字稿

Greetings and welcome to the Brightcove first-quarter 2016 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Brian Denyeau of ICR. Thank you. You may begin.

Good afternoon and welcome to Brightcove's first-quarter 2016 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 that 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 second fiscal quarter of 2016 and the full year of 2016, expected profitability, our position to execute on our go to market and growth strategy, our ability to expand our leadership decision, 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 material risks and other important factors that could affect our actual results, please refer to those contained in our most recently filed annual report on Form 10-K and as updated by our other SEC filings.

Also, during the course of today's call, we will refer to some non-GAAP financial measures. There is a reconciliation schedule showing G&A versus non-GAAP results currently available on 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 details regarding our first-quarter 2016 results as well as our guidance for the second quarter and full-year 2016.

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

Thanks, Brian. Thanks to all of you for joining us today. We delivered strong first-quarter results that came in at or above the high-end of our guidance range. In the first quarter we executed well across both our target markets, which reflects the positive impact of our updated product portfolio and go-to-market positioning. Our strategy is working and we believe we are well-positioned to drive further improvement across the business as we move through 2016.

On our last call, we told you that we would be making additional hires to drive faster topline growth and product innovation. We got off to a strong start in this area in the quarter.

Together with a solid first-quarter sales performance, some exciting customer wins and additional major product announcements, we continue to feel confident about our ability to achieve our midteens full-year bookings growth target.

Looking at our results for the quarter, total revenue was $36.3 million, up 10% year-over-year and ahead of our guidance. Adjusted EBITDA was $2 million with non-GAAP income from operations of $0.7 million and net income per diluted share of $0.02, all of which were above the high end of our guidance.

I'd like to take a few minutes to review the progress we're making across each of our target markets. We had a great quarter in media with particularly strong performances in North America, Japan and Australia. The investments we have made in our products over the past two years, particularly the modularization of our platform, our new player and our service-side and insertion solution are gaining significant traction in the market.

We continue to be in the middle of a fundamental transformation of how consumers consume entertainment, news and sports. Our success comes from focusing on how publishers and content owners can deliver great experiences on mobile and in the living room, reduce the cost and complexity associated with the complex and fragmented device landscape and more effectively monetize their content with advertising, subscriptions or both.

This focus has been the driving force behind our updated modular product portfolio, which provides publishers and content owners the flexibility they need to adapt and thrive in this rapidly changing market. The positive impact Brightcove is having on our customers' business is increasing the strategic value customers place on their relationship with us.

In the first quarter we signed new or expanded agreements with a number of media customers. Notable names included about.com, Reader's Digest, Winter Media, Singapore Press Holdings, Fox Media, DraftKings, Barstool Sports and Tribune Content Agency, among others.

Let me highlight a few exciting examples that demonstrate our momentum in the media market. A great example of our success in media is a multiyear, multimillion dollar deal we won with one of the 10 largest broadcasters in North America. This customer chose Brightcove after an extensive nine-month technical bake-off conducted by the customer and third-party evaluators, who gave us a clear technical win and noted in particular our faster video delivery time and having the most developer-friendly platform.

This customer will be deploying our new perform player management service and be broadly adopting the Brightcove player for the web as well as using our native SDKs for iOS and Android applications. This win is a great example of the positive impact our product investments are having, as we simply would not have been able to win this deal two years ago.

Singapore Press Holdings is the largest print publisher in Singapore and the most influential publisher in all of Southeast Asia. SPH chose Brightcove over several competitors to publish and monetize news and other short form content across 40 web properties and related iOS and Android applications. SPH's choice was based on Brightcove's functionality, global scalability and service capabilities and our outstanding reputation with the global publishing community. Not only is this a great individual win we this specific customer, it's another milestone on Brightcove's rapidly growing presence across Asia.

DraftKings, the fantasy sports leader, was looking to launch an ad-supported online TV-like video experience to supplement its core business. DraftKings turned to Brightcove to help get its video experience up and running quickly. By building on top of our core video platform through our extensive APIs, DraftKings was able to stand up an ad-supported channel, DK TV, faster than it believed possible.

Turning to the digital marketing business, we had a solid first quarter that reinforced our excitement about the opportunity to establish Brightcove as an integral part of the next-generation digital marketing stack. In particular, we had a very strong renewal quarter, which is a great validation of the stickiness of our Video Marketing Suite and, in particular, new products like Gallery and Audience have with brands around the world.

Video is in the stages of establishing itself with enterprises as a significant component of their online and mobile digital marketing investments. We are seeing many enterprises that are selling the very early stages of adopting video and need the ability to experiment on a project level before adopting video as a core part of their marketing and demand generation strategies. To better support enterprises at this stage of deployment, we continue to refine our go to market efforts to drive even greater success in the market.

In the coming months we will be rolling out some exciting new packaging and pricing options in order to drive greater enterprise sales velocity. These new offerings, which will be priced at $199 and $499 per month, will provide a low-friction way for enterprises to begin experiencing the power of Brightcove's solutions.

We are optimistic these new offerings will accelerate our ability to seed the enterprise market, and provide significant upsell opportunities over time. To be clear, this is an expansion of our core go to market messaging for our enterprises' digital marketing needs. It is not focused on attracting small/medium business customers.

During the first quarter, we signed new or expanded deals with the range of industry-leading brands in our digital marketing enterprise business including Avnet, Edmund, EMC, Hanover Insurance, Hess Corporation, Mary Kay Cosmetics, QVC Italia, Stage, GoShare, the University of Pennsylvania and Yale University. At that is one of the world's largest global distributors of electronic components, computer and IT solutions, embedded technology and services.

Avnet selected Brightcove over several other competitors for internal and external uses of video around the world. First, our global presence and scale matched Avnet's global footprint in requirements. Second, because a significant number of its suppliers are also Brightcove customers, Avnet can easily share key video assets like training videos, product videos, etc., directly through the Brightcove platform, simplify the process and saving both time and money.

Hess is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. Hess chose Brightcove to replace its internally developed video platform because Hess saw us as an enterprise-ready solution and platform that supported both internal and external use cases, offered a simple but powerful publishing process, detailed analytics and integration with its key infrastructure investments.

Penn Medicine, health system of the University of Pennsylvania, has responsibility for the University-run hospitals, medical schools and continuing medical education program. Penn Medicine is a great example of a customer who began using Brightcove two years ago for a small marketing project and now has expanded to a very broad range of external and internal use cases.

The Q1 deal represents a significant upgrade to our video marketing suite in the marketing department and an expansion from marketing to the HR and information services groups. In a reverse of the usual process or the functional departments as IT for its recommended technology solutions, here the information services group went to the marketing team and asked what they were using for video.

Based on our high-level performance and exceptional customer support, the marketing group strongly recommended Brightcove to both information services and HR groups for their internal training needs.

We are off to a very strong start in 2016 on the product development front, with several exciting new product announcements. Increasing the cadence of our product releases is a core focus of our engineering team and will help to increase the value Brightcove delivers for our customers over time.

Brightcove OTT Flow is an innovative new turnkey OTT solution for media companies and content owners that we are developing in partnership with Accedo, an industry leader in user experience and multiplatform video applications. Media companies are struggling to create a scalable OTT offering that works across devices and operating systems, while enabling consistent monetization and ad support to drive additional revenue.

OTT Flow solves these problems by offering an end-to-end technology solution that dramatically lowers the barriers to entry for starting a multiplatform OTT service. We have also structured OTT Flow with the simple and cost-effective pricing structure that eliminates the need for heavy upfront investments, enabling customers to have their content delivered over the top in weeks rather than months.

We also recently announced the availability of ultrahigh definition or UHD cloud transcoding through Zencoder. Media companies are focused on being able to provide the same high-quality viewing experience across browsers, handheld devices and other OTT devices that customers experience in traditional television. We will be highlighting these and many other product innovations at our annual player user conference in a few weeks.

This year's event, which is sold out with more than double the number of attendees compared to last year, is shaping up to be our best play yet. We feel terrific about the product innovation and the momentum we are seeing in the market, and this event will be a great showcase of the exciting things happening in the industry and with Brightcove.

Before I turn the call over to Kevin, I wanted to comment on our earlier announcement that Gary Haroian has been named the new Chairman of the Board of Brightcove. Gary has been a valued Board member and Chair of Brightcove's Audit Committee since joining our Board in April 2014. He has held numerous senior executive positions throughout his career, including serving as the Chief Financial Officer of Bow Street and Concord Communications and as the Chief Executive Officer of Stratus Computer.

In addition, he currently serves on the Board of Directors of Aspen Technologies and [Innerknock] and previously served on the Board of Directors of Unicode Corporation and Phase Forward, among others.

I'd like to congratulate Gary on this new role and I look forward to continuing to benefit from his wise counsel.

Our current Chairman, Jeremy Allaire, has decided to step down from the Board in order to develop greater time to his role as Founder and CEO of a privately held digital financial service provider. As the Founder and former CEO of the Company Jeremy was instrumental in establishing Brightcove as the leader in the online video for market and scaling the business to over $100 million in annual revenue.

On behalf of everyone here at Brightcove, I'd like to thank Jeremy for everything he has done for the Company and wish you much success with his current venture.

To summarize, Brightcove began 2016 with continued momentum across both of our target markets. We are very pleased with the traction our products and go to market efforts are generating with media and digital marketing customers, while also generating solid profitability. We are well-positioned to achieve our full-year growth objectives and are increasingly confident in our ability to generate accelerating growth and profitability 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.

I'd like to begin by reviewing our first-results and then I will finish with our outlook for the second quarter and full year.

We had a great first quarter. Our total revenue for the first order was $36.3 million, a 10% increase from the first quarter of 2015 and above the high end of our guidance of $35.2 million. Breaking revenue down further, our subscription and support revenue of $34.7 million was up 9% year-over-year and professional services revenue for the quarter was $1.6 million, up 53% year-over-year. Our revenue outperformance in the quarter was largely driven by higher-than-anticipated overage revenue.

Now let me add some color around our revenue mix. In the first quarter, our premium offerings generated 95% of total revenue while our volume offerings generated 5% of total revenue. On a geographic basis we generated 63% of our revenue in North America during the quarter. Europe generated 17% of our revenue and Japan and Asia-Pac generated the remaining 20% of revenue during the quarter.

From a vertical perspective our media business represented 51% of our revenue in the quarter and our digital marketing business represented the remaining 49% of our revenue.

Let me now turn to the supplemental metrics that we share on a quarterly basis. Our recurring dollar retention rate in the first quarter was 98%. This is the third quarter in a row that we have delivered a retention rate above our target range of the low to mid 90s. The improved retention rate reflects solid sales and operational execution as well as the value Brightcove is delivering to its customers.

Looking at our customer count, we ended the first quarter with 4,915 customers, of which 1,910 were classified as premium customers. Our revenue per premium customer continues to increase, up to $69,000 per year, which is up 10% year-over-year.

Moving down the P&L, our non-GAAP gross profit in the first quarter was $23.6 million, up from $21.9 million in the year-ago period, and represented a gross margin of 65%. Subscription and support revenue represented approximately 95% of our total revenue and generated 68% gross margin in the quarter.

Non-GAAP income from operations was $714,000 in the first quarter compared to a loss of $284,000 in the first quarter of 2015, and was ahead of our guidance range of breakeven to $500,000.

Adjusted EBITDA was $2 million, up 45% from the year-ago period and at the high end of our guidance range. Non-GAAP earnings per share was $0.02 based on 33.6 million weighted average shares outstanding and above the high-end of our guidance range of a loss of $0.01 to income of $0.01 per share. This compares to a loss per share of $0.02 on 32.5 million weighted average shares in the year-ago period.

On a GAAP basis, our gross profit was $23 million, operating loss was $1.5 million and loss per share was $0.05 in the quarter.

Turning to the balance sheet and cash flow, we ended the quarter with cash and cash equivalents of $29.3 million, an increase in cash of $7.4 million compared to the prior year. During the first quarter we generated $3 million and cash flow from operations, With $1.7 million in capital expenditures and capitalized internal use software, we generated free cash flow of $1.3 million in the quarter, a significant improvement from negative $692,000 of free cash flow in the year-ago period.

I'd now like to finish by providing our financial outlook for the second quarter and the full year 2016. In the second quarter, we are expecting revenue to be in the range of $35.8 million to $36.3 million, including $1.6 million of professional services revenue. From a profitability prospective, we expect non-GAAP operating loss of breakeven to $500,000 for the second quarter. Non-GAAP net loss per share is expected to be in the range of zero to $0.02, based on 34 million weighted average shares outstanding.

In the second quarter we host our annual PLAY user conference as well as two of our largest industry conferences that we attend, NAV and Oracle's Modern Marketing Experience, which will increase overall sales and marketing spend during the quarter. In the second quarter adjusted EBITDA is expected to be in a range of $800,000 to $1.3 million.

For the full-year 2016, we are raising our revenue guidance to be in a range of $145.8 million to $147.8 million, which represents year-over-year growth of 8% to 10%. Included in this range, professional services revenue is expected to be $5.5 million to $6 million for the year.

As David mentioned earlier, we are on track to deliver midteens bookings growth in 2016. Delivering against our bookings plan would position us to exit the year with significant momentum that would lead to accelerating revenue growth in 2017 and beyond.

In terms of profitability, we're expecting full-year non-GAAP net income to be in the range of $2 million to $3.5 million, and adjusted EBITDA is expected to be in a range of $8 million to $9.5 million, both consistent with previous guidance.

In addition, we expect non-GAAP net income per share to be $0.02 to $0.07, based on 34.1 million weighted average shares outstanding. Lastly, we estimate free cash flow of $5 million to $7 million for the full year.

In summary, we are pleased with the first-quarter performance. Our results are being driven by consistent execution and our strong continued focus on product innovation. We remain confident in our ability to expand our market leadership, topline growth and profitability going forward, and believe we are well-positioned to deliver enhanced shareholder value over the long term.

And with that, we would now like to open up the call for questions. Operator, we are ready to begin Q&A.

(Operator Instructions) Tom Roderick, Stifel.

It's actually Parker Lane in for Tom Roderick. Thanks for taking my questions.

The first one I had is obviously a nice jump in revenues in Japan during the quarter. I was wondering if you could pinpoint the most significant factors behind your success in the region during the quarter.

Sure. First of all, hi, Parker, and thank you, everyone, for joining us this quarter. It was a strong quarter in pretty much every regard. So thank you very much for joining us and happy to answer your questions.

So Parker, you are exactly right. Japan continues to be a strong port for us. I think we've mentioned that on several prior calls over the last. We've really seen an acceleration. If I go all the way back to the founding of our Japanese business, which I think goes back six, seven years now, in the early years of our business in Japan, the media business for online video was very immature and there wasn't a lot of -- there wasn't a strong ecosystem or market around online video advertising for pre-rolls or mid-rolls on video.

And the early years our business was more dominated by some of the brands that were used in video for marketing and communication.

In the last couple of years, we started to see a maturation of the media business for Japan and the Asia-Pacific region where there's a much more robust economic ecosystem for media companies. And with that over the last two years we've just seen successive growth as we have been able to win more and more of the media companies in Japan and then more recently in the other parts of Asia-Pacific. So the business is just going very strong in Japan.

For example, over the last year or two the majority of major newspaper brands, broadcast brands and others have signed on. In the Asia-Pacific region, we mentioned broadcasters in the past like SET and media companies from Thailand to Singapore. We mentioned Singapore Press Holdings on this call. Down in the Australian-New Zealand region we continue to have a very, very strong market-leading position and continue to win business with our existing customers as well as new customers.

So it's a great region for us. We've hired new people there. We continue to expand our sales force out of our Singapore office, our Tokyo office and our Sydney office. And we expect it to be a growth driver for years to come.

Yes, and then hitting on the point of the salesforce, I was just wondering if you could give us a sense of your progress in hiring there. It looks like you added about 25 people to your headcount this quarter. Maybe just where your targets are there for the rest of the year and how the plans are progressing there?

The plans are progressing quite well. As you can tell, we got out of the gate pretty quickly here in terms of hiring. That was our goal. And we are quite pleased with both the hiring environment for us and attractiveness of Brightcove right now and our ability to hire great people.

And so all of those people, the majority of them were in sales-related decisions. There's also some key positions in innovation and engineering-related roles that we are very excited about that are going to help continue to increase the value proposition and innovation we can bring to market.

So a majority of those were in sales. We are continuing to recruit. You can see a lot of job openings on our website, so you will see us hire a number of more people over the course of the year in this quarter and beyond.

All right, thank you.

Brian Peterson, Raymond James.

So I wanted to hit on your premium customers. The net adds this quarter -- it's the best quarter you had in a couple of years. Just can you dive into that a little deeper? Was that mostly related to the media segment? Any particular region? And what are you seeing from your customers that has really changed from maybe the last few quarters?

Well, I think we've seen now several quarters in a row where we have been quite pleased with our results. And we talked about a feeling and a reality of accelerating momentum. We talked about the fact that we expect to have bookings growth in the midteens for this year and we're on track for doing that. And so overall I think we have turned a pretty significant corner from a period of decelerating growth to accelerating growth. And so you see some of that over the last several quarters and certainly in this quarter's results. And that's exciting.

In terms of specifically the customer adds, it was fairly widespread across the board geographically and across our new business units. So good number of customers in both places.

Now, I do want to say we are very pleased with that result. And it's a good number and I certainly expect we will continue to add many new customers over the years to come. But we've tried to guide our investor community for some time that we incent our salesforce to drive committed revenue, not customer count. And so we can be -- when we've had a low customer account we've discouraged people from overemphasizing that because in a quarter with a low customer count you could add a hypothetical $1 million customer and lose a hypothetical $10,000 customer, and that's a win for everyone. But it looks like no customer adds.

And so, while we are very pleased with this result and I do think it's representative of the fundamental positive trend in our business, we wouldn't want to overemphasize it or indicate that we expect necessarily this number to continue in the quarters to come. We don't project the customer count, per se. What we try and focus on is that revenue and committed revenue that we can drive over time.

So it's a good result but premature to say it's a trend. And I wouldn't overemphasize it, because what matters, obviously, is committed revenue. Now, that said, it was good to add that number and still see growth in the average revenue for a premium customer as well.

So that's obviously a good sign for different aspects of the business coming together in the right way at this point.

Got it. And just a follow-up -- can you talk about the linearity in the quarter? There has been some press out there that large deal activity for some software companies has pushed out a bit. Maybe came back in March. Just curious how the linearity played out versus your expectations.

I don't think we have anything in particular there. We typically follow similar patterns of enterprise software companies where you get a smaller percent in month one, a medium percent in month to and the largest percentage of your business comes in month three, towards the end of the quarter.

It is a pretty sticky pattern throughout our industry, in my experience. And it continues to be our pattern here, and I didn't see any particular change in Q1.

Okay, thank you.

Steven Frankel, Dougherty & Company.

So the subscription and support gross margin after several quarters of improvement slipped back some this quarter. What's behind that? And how might that change going forward?

I'll talk a little bit about that. As you know, we have a ratable recognition model. And so any given deal that we have, we take that revenue over time. But that doesn't necessarily correspond to the usage from our customers. Some customers can run hotter in terms of their usage of our platform in any given quarter. And as I mentioned in my prepared notes that we had higher overages this particular quarter, that's in fact the case.

And so, sometimes we take those and keep those in overages. Other times we move those higher-end usage patterns into future bookings.

But I am not overly concerned about the margins that we had in Q1, per se. To me, it is part of our business model where usage means good things for us in the long term with their customers because we can continue to help them scale their businesses, help them grow their businesses, monetize more out of video, and we are the benefactor of that.

Okay. And for David, on this top 10 network that you talked about signing, congratulations. And maybe some detail on timing and, again, just go over what particular components in your stack they're going to be licensing at this point?

Sure. Well, the timing is -- they are in implementation phase and will be rolling out over the next fairly brief period, weeks and months. And hopefully, we will scale over time very rapidly.

But what we sold -- in this case it was our modular player service. It is a company that we've done business before with other parts of our [stack]. As you know, we've made a big focus over the last couple years, and really this is targeted at those tier 1 broadcasters at making our products much more modular so that they can adopt it and integrate it in with their systems in a way that's very specific to the way they like to do business.

And that's very important with the most sophisticated, largest tier 1 broadcasters around the world but in particular in North America, where they can be larger and more sophisticated.

And so, in this case we went through -- it was a decent sales cycle, probably at least four quarters. And it was a very thorough sales cycle. We were very excited to go through this and get a lot of validation from the word we've been doing. They did a technical bake-off where they actually hired a third-party so that they had clean -- no one in their companies you had any biases or relationships with any of the potential vendors in the market, and did a head-to-head bake-off performance, load time and time to first frame, looking at the flexibility of the player, looking at the developer friendliness because they are a [technical] organization and they wanted to build on top of player. And they obviously concluded that we came out head and shoulders -- that's a quote from the CTO -- above our competitors.

And so, that was something we were quite proud of. And it reflected on the work we've talked about on these calls over the last three years, really, the work we've done to rebuild the system that was from the start-up years as a very modular, high-performance, modern API-based system.

And that's paying off with some of the bigger customers now and it's exciting times.

So does that answer your question?

It does, thank you.

Sameet Sinha, B. Riley.

So Kevin, if you can give us the number for [overages] (inaudible) help calculating how we forecast this business, on that front my question, I guess, is you increased revenues by a couple of million, you (inaudible) guidance (inaudible) $500,000. You have a new broadcaster win. How come full year guidance go up as much as one would have thought? I can understand there's some issues in forecasting overage, but if you can just touch on those topics?

Secondly, equipment financing, seeing that in the financial statements now. What is that exactly? And how should we think about it in terms of is that an offset to CapEx or any other entry that would be needed for it? And then I have a follow-up.

So on the overages we typically estimate about $1.5 million in any given quarter. We were about $500,000 more than on the net normal overages amount this particular quarter. And so, that's the answer to that.

As it relates to revenue guidance for the rest of the year, we did raise our revenue guidance up $800,000 on the full year. We were over the top end of our guidance here in Q1 by $1 million. From our perspective, the guidance is the guidance that we have and the visibility that we have for the rest of the year. We are only in Q1, so obviously we don't know what the bookings are for the rest of the year at this point but felt confident enough coming out of Q1 to be able to raise for the rest of the year.

So, that's all I can comment on the guidance for the rest of the year.

In terms of the equipment financing in the first quarter, we simply financed a piece of equipment for some data storage for us. This is data storage that we are going to have outside of our cloud-based infrastructure. It was 2 petabytes of storage that we had, nothing significant there other than just having some storage on our backend.

If you can just touch on -- you added a media customer but guidance didn't go up, how should we think about it in respect to guidance? Is that something you expect more in 2017 sort of revenues? Or you had already anticipated some of these revenues when you initially gave guidance?

So, guidance did go up. I just want to make sure there's no confusion there. We added many customers. We had what we thought was a fairly strong quarter and we raised our guidance.

So, I guess $800,000, out of that $500,000 was professional services. So I'm just talking about the big [drug caster].

So when we guided the year originally, we certainly assumed we were going to win some customers. And so we don't break out -- when we guide, we're not trying to narrow that down to a customer-by-customer level. That wouldn't be appropriate or a good model for forecasting. We are not the kind of company that does one or two customers a year, so it's not really the right approach to think about it in terms of a customer-by-customer basis.

I might add to that, David, as well, that in some cases where we have professional services arrangements or engagements, that those sometimes lead up to a larger licensed you that one might have. And this situation here in terms of some of the professional services that we are doing here for some of our larger customers.

Got it. One final question -- can you talk about [service] ad insertion, obviously ad blocking (inaudible) and continues to be there (inaudible) especially when you talk about video CPNs, which are higher [signals] publishers and they have to deal with it, to sacrifice that differently impacts the revenue stream.

So what sort of endpoints do you get about it in your technical solutions? Can you compare and contrast with some of the others that are in the marketplace? And is it a standalone product or is it sales with all the other products, kind of as an add-on?

So our service ad insertion product is sold in two ways. It's [break of once], which is standalone service ad insertion, modular products and [break of] lift, which is a combination of our backend service side ad insertion and our player service. And so you get the best of both worlds. You get a great video player combined with the service side ad insertion to really provide the best experience possible.

It's a great solution. It's part of the core technology we acquired when we acquired a company called Unicorn several years ago. The team around that is just a fantastic team. We are starting to see some new opportunities outside the US.

When we bought that company a few years ago, it was pretty US-centric for the most part with one or two exceptions. And we are starting to see a much greater diversity of opportunities geographically. And we are excited about the technology and the problems it solves, some very significant problems for our customers and for prospects around the world where no media company is making incredible margins. The media business is a hard business.

And so, if you lose 5% of your viewers, 10% of your viewers, that's tough. And the reality is, with ad blockers but also with just poor ad integrations and poor ad experiences, people are losing 20%, 30%, 40%, sometimes 50% of their views. And so you can imagine the economic cost of that to any publisher of any type that's doing an ad-supported business.

And so we are really able to make a big impact with customers and help them capture, recapture that business and provide a better experience. That's really what it's about.

It provides a more seamless, more TV-like, faster smoother experience, for watching that ad-supported video. I'm sure everyone on the call has had that experience of you are sent a link, you want to check out a video, you go on to a page, you check out a video and you click. And then you wait forever and then an ad starts then you have to get through the ad and then there's like five seconds of black and the spinning wheel before the content starts. And that's still, unfortunately, all too common across the Internet. And we are really out there to make it completely different so that videos start fast, the ad flows directly into the content just like on TV and that you deliver a more seamless, beautiful experience. And that obviously is better for the publishers to monetize with.

So we are in a strong position and we are going to build on that.

Okay, thank you.

(Operator Instructions) Glenn Mattson, Ladenburg Thalman.

On the two metrics that you guys put out, for instance, the revenue per premium customer -- that has been growing quite nicely for some time now. Is there a lot of headroom there? And do you expect a pretty steady progression of continued year-over-year growth throughout the year?

So yes, we have been pretty pleased with that over the last year. But we don't guide it, and so I want to be careful about that because it's a little bit difficult to project. I think that there is plenty of room for that to grow. I will tell you that when I go out in the field and talk to customers in every geography, both media customers and brands and enterprise users, there is opportunity for us to grow just about every customer we sell to. And that is a source of real excitement for our organization. It's one of the reasons we invest a lot in our account management team and the people that we have that service our existing customers as well as people that pursue new business. And so I would say there's still lots of room for that to grow.

Now, that said, I want to caution that we are pursuing multiple go-to-market strategies with different parts of our business. And on the digital marketing and enterprise side of our business we are, and we mentioned this in the script, introducing some new lower-priced packages that are really getting started packages. It's a way of getting a big enterprise that hasn't bought into the idea of an enterprise-wide adoption of a video platform, a way to get started with the project.

And so, we don't know what the impact of that will be yet on customer count and average revenue per premium customer in that side of our business. But fundamentally lots of headroom. But the numbers might get a little bit blurrier if we have a lot of success with that project-level thing. And over time we will be upselling those people.

It's what I would call and what the industry calls -- it's a bit of jargon here -- but a land and expand strategy, where you want to win that first opportunity where somebody doesn't yet have a big idea to use an enterprise video platform across their enterprise but they have a product to launch and they want to put up a bunch of videos. And you want to get that foot in the door and then you can go wider and expand within the account.

So that might change the dynamic a bit. But fundamentally, if I look at the business we have today, yes, there's lots of headroom. We can continue to grow there.

Great, thanks for that color. And then just -- most of the questions have been asked. But just philosophically, there was an article in the Journal last week about people cutting the cord a little less because they are finding it kind of expensive to do so. And then this week I believe Comcast had a good subscriber ad number.

Is there any sense out there that maybe the truth is slowing down on the OTC stuff or is it just a couple random data points that I've come across?

Yes, I think it's way too soon to try and call that a trend one way or the other. Keep in mind that this is something that's happening on a global basis. We are seeing a wide range of different kinds of video services and OTC services being launched in practically every country in the world. So I still think that fundamentally we are in a period of expansion.

But I'd also say that our business is not just standalone subscription VOD services. If you think about the Netflixes of the world and the like, but it's a wide range of use cases -- ad supported video, marketing use cases, communication use cases, etc.

So there's going to be fluctuations in the kinds of use cases and the specific business models different companies pursue. But the fundamental trend of are people going to watch more video over the Internet or not --? There is no doubt that that's going to continue to expand and expand significantly over the next many years, even if some of the standalone subscription VOD services go out of business.

That will be a small note in a much bigger wave of the growth of video on the open Internet.

Okay, great. Thanks for the color and nice quarter.

Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to management for closing comments.

So, thank you again for joining us today. Obviously, we had a strong quarter and we are excited about the place we are in. We are excited about the momentum and velocity of our product and innovation teams, the engagement we have with our customers and with the market. And so, we are looking forward to continuing to have a great year and we look forward to speaking with you again in approximately 90 days. So thank you very much.

Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.