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PhunwareTable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 001-35429BRIGHTCOVE INC.(Exact name of registrant as specified in its charter) Delaware 20-1579162(State or other jurisdictionof incorporation) (I.R.S. EmployerIdentification No.)290 Congress StreetBoston, Massachusetts 02210(Address of principal executive offices) (Zip Code)(888) 882-1880(Registrant’s telephone number, including area code)Securities Registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which RegisteredCommon Stock, par value $0.001 per share The NASDAQ Global MarketSecurities Registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 90days. Yes ☒ No ☐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-Tduring the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitionsof “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 ☐ 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 revisedfinancial 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 ☒The aggregate market value of common stock held by non-affiliates of the registrant based on the closing price of the registrant’s common stock as reported on theNASDAQ Global Market on June 30, 2018, was $344,202,202.As of February 15, 2019 there were 36,645,299 shares of the registrant’s common stock, $0.001 par value per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this AnnualReport on Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscalyear to which this report relates. Table of ContentsBRIGHTCOVE INC.Table of Contents Page PART I. Item 1. Business 4 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 29 Item 2. Properties 29 Item 3. Legal Proceedings 29 Item 4. Mine Safety Disclosures 30 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6. Selected Consolidated Financial Data 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 54 Item 8. Financial Statements and Supplementary Data 57 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 58 Item 9A. Controls and Procedures 58 Item 9B. Other Information 61 PART III Item 10. Directors, Executive Officers and Corporate Governance 61 Item 11. Executive Compensation 61 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 61 Item 13. Certain Relationships and Related Transactions, and Director Independence 61 Item 14. Principal Accountant Fees and Services 61 PART IV Item 15. Exhibits and Financial Statement Schedules 61 Item 16. Form 10-K Summary 66 Signatures 67 2 Table of ContentsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if theynever 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 Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, orExchange 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 the acquisition of substantially all of the assets of Unicorn Media, Inc. and certain of its subsidiaries, or theexpected acquisition of the online video player related assets from Ooyala, Inc. and certain of its subsidiaries; statements related to future capitalexpenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relatestrictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use ofwords 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 arebased on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statementsare subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially fromfuture results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are notlimited to, those identified below, and those discussed in the section titled “Risk Factors” included in Item 1A of Part I of this Annual Report on Form10-K, and the risks discussed in our other Securities and Exchange Commission, or SEC, filings. Furthermore, such forward-looking statements speakonly 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 orcircumstances after the date of such statements. Forward-looking statements in this Annual Report on Form 10-K 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 our recently announced expected acquisition of certain assets of Ooyala, Inc.; • 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 estimates regarding our anticipated results of operations, future revenue, bookings growth, capital requirements and our needs foradditional financing; and • our goals and strategies, including those related to revenue and bookings growth. 3 Table of ContentsPART I Item 1.BusinessOverviewBrightcove Inc., or Brightcove, is a leading global provider of cloud-based services for video. Brightcove was incorporated in Delaware inAugust 2004 and our headquarters are in Boston, Massachusetts. Our suite of products and services reduces the cost and complexity associated withpublishing, distributing, measuring and monetizing video across devices.Brightcove Video Cloud, or Video Cloud, our flagship product released in 2006, is the world’s leading online video platform. Video Cloudenables our customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner.Brightcove Zencoder, or Zencoder, is a cloud-based video encoding service. Brightcove SSAI, or SSAI, is an innovative, cloud-based ad insertion andvideo stitching service that addresses the limitations of traditional online video ad insertion technology. Brightcove Player, or Player, is a cloud-basedservice for creating and managing video player experiences. Brightcove OTT Flow is a service for media companies and content owners to rapidlydeploy high-quality, direct-to-consumer, live and on-demand video services across platforms. Brightcove Video Marketing Suite, or Video MarketingSuite, is a comprehensive suite of video technologies designed to address the needs of marketers to drive awareness, engagement and conversion.Brightcove Enterprise Video Suite, or Enterprise Video Suite, is an enterprise-class platform for internal communications, employee training, livestreaming, marketing and ecommerce videos.Since 2014, our go-to-market approach for our solutions has been focused primarily on (i) media companies and (ii) enterprises and organizationsin a wide range of use cases.As of December 31, 2018, we had 3,783 customers in over 80 countries, including many of the world’s leading media companies, broadcasters,publishers, brands and corporations, as well as governments, educational institutions and non-profit organizations.We primarily generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenuegrew from $155.9 million in the year ended December 31, 2017 to $164.8 million in the year ended December 31, 2018. As of December 31, 2017, wehad 4,168 customers, of which 2,167 used our premium offerings and 2,001 used our volume offerings. As of December 31, 2018, we had 3,783customers, of which 2,226 used our premium offerings and 1,557 used our volume offerings. Substantially all of our revenue has historically beenattributable to our Video Cloud product, and we expect that revenue from Video Cloud will continue to comprise a significant portion of our revenue.In addition to being offered on a stand-alone basis, Video Cloud is also a core component of OTT Flow, Video Marketing Suite and Enterprise VideoSuite.We recently signed a definitive agreement to acquire Ooyala, Inc.’s online video platform technology, including the video content managementand publishing platform Backlot, Analytics, Live, and its associated patents and other intellectual property. As part of the transaction, we will acquiresubstantial portions of Ooyala’s engineering, support, and sales staff, including the company’s Guadalajara, Mexico operations. We intend to take onall customer, reseller, and partner relationships utilized by Ooyala’s online video platform business globally.Our SolutionsOur solutions provide our customers with the following key benefits: • Comprehensive, modular and scalable solutions. Video Cloud provides a single, integrated solution to meet a range of video publishingand distribution needs. OTT Flow, Video Marketing Suite and 4 Table of Contents Enterprise Video Suite are end-to-end solutions of video technologies built for media companies and enterprises. Each of Zencoder, SSAIand Player are modular solutions that customers can license on a stand-alone basis and integrate into their existing video workflows. Inaddition, our multi-tenant architecture enables us to deliver each of our solutions across our customer base with a single version of oursoftware for each product, making it easier to scale our solutions as our customer and end user base expands. • Easy to use and low total cost of ownership. Our products were designed to be intuitive and easy to use. We provide reliable, cost-effective,on-demand solutions to our customers, relieving them of the cost, time and resources associated with in-house solutions and enabling themto be up and running quickly after signing with us. • Open platforms and extensive ecosystem. Our open and extensible platforms enable our customers to customize standard features andfunctionality and easily integrate third-party technology to meet their own specific requirements and business objectives. We have anextensive ecosystem of partners, which we refer to as the Brightcove Partner Program. More than 150 members of the Brightcove PartnerProgram have solutions that are integrated with our platform. This ecosystem includes leading technology companies such as Akamai,comScore, Google and Oracle and providers of niche technology services. These integrated technologies provide our customers withenhanced flexibility, functionality and ease of use. • Help customers achieve business objectives. Our customers use our products to achieve key business objectives such as driving site traffic,increasing viewer engagement on their sites, monetizing content, increasing conversion rates for transactions, increasing brand awarenessand expanding their audiences, internal communications, employee training and customer support. We believe our customers view us as astrategic partner in part because our business model is not dependent on building our own audience or generating our own ad revenue. Ourbusiness interests align with our customers’ interests as we each benefit from the success of our customers’ online strategy. • Ongoing customer-driven development. Through our account managers, customer success and support teams, product teams and regularoutreach from senior leadership, we solicit and capture feedback from our customer base for incorporation into ongoing enhancements toour solutions. We regularly provide our customers with enhancements to our products. In 2018, we continued to develop and add features,such as video clipping, to Brightcove Live, a live streaming service for delivering and monetizing live events and linear channels,Dynamic Delivery, a media delivery platform that enhances video reach, flexibility and performance while reducing storage requirements,and Context Aware Encoding, an innovative solution for performing per-file encoding, which uses machine learning and deep videoanalysis to achieve optimum quality for each video with the fewest bits necessary. Delivering cloud-based solutions allows us to serveadditional customers with little incremental expense and to deploy innovations and best practices quickly and efficiently to our existingcustomers.Our Business StrengthsWe believe that the following business strengths differentiate us from our competitors and are key to our success: • We are the recognized online video platform market leader. In 2018, our customers used Video Cloud to deliver an average ofapproximately 3.2 billion video streams per month, which we believe is more video streams per month than any other professional solution.We have in recent years received numerous awards for our market leadership from industry analysts such as Frost & Sullivan, Forrester andGartner and publishers such as Fast Company. • We have established a global presence. We have established a global presence, beginning with our first non-U.S. customer in 2007, andcontinuing with the expansion of our operations into Europe, Japan, Asia Pacific and the Middle East. Today, we have employees in sevencountries. We built our solutions 5 Table of Contents to be localized into almost any language and currently offer 24/7 customer support worldwide. As of December 31, 2018, organizationsthroughout the world used Video Cloud to reach viewers in approximately 252 countries and territories. • We have high visibility and predictability in our business. We sell our subscription and support services through monthly, quarterly orannual contracts and recognize revenue ratably over the committed term. The majority of our revenue comes from annual contracts. Ourexisting contracts provide us with visibility into revenue that has not yet been recognized. We have also achieved an overall recurringdollar retention rate of at least 94% in each of the last four fiscal quarters, including 103%, 95%, 94% and 104% for the three months endedMarch 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively. Our business model and customer loyaltyprovide greater levels of recurring revenue and predictability compared to traditional, perpetual-license business models. • We have customers of all sizes across multiple industries. We offer different editions of our products tailored to meet the needs oforganizations of various sizes and across industries. Our offerings range from entry-level editions to enterprise-level editions used bymultiple departments in a single organization. • Our management team has experience building and scaling software companies. Our senior leadership team has built innovative softwareplatform businesses. Members of our senior leadership team have held senior product, business and technology roles at companies such asDassault Systemes, DS SolidWorks, Ellucian, Fidelity Investments, IBM, RSA, PTC, and SAP Americas.Our CustomersAs of December 31, 2018, we had 3,783 customers in over 80 countries and territories. We provide our solutions to many of the world’s leadingmedia companies, broadcasters, publishers, sports and entertainment companies, fashion and hospitality brands and corporations, faith-basedinstitutions, e-commerce platforms, and hi-tech organizations, as well as governments, educational institutions and non-profit organizations. While oursolutions are tailored to meet the needs of media companies and enterprises and organizations in a wide range of use cases, we believe our solutionscan benefit any organization with a website or digital content.Our Products and ServicesVideo CloudVideo Cloud, the world’s leading online video platform, enables our customers to publish and distribute video to Internet-connected devicesquickly, easily and in a cost-effective and high-quality manner. Our innovative technology and intuitive user interface give customers control over awide range of features and functionality needed to publish and deliver a compelling user experience, including the following: • Uploading and Encoding. Using Video Cloud, customers may upload videos in various formats for adaptive encoding that maximizesquality and minimizes file size. Video Cloud then automatically enables the content to be delivered to end users via a third-party contentdelivery network, or CDN, such as Akamai Technologies, Inc., or Akamai, or Fastly, Inc., or Fastly. • Content Management. Whether a customer has a few short video clips or thousands of full-length episodes, Video Cloud makes it easy toorganize a media library. Videos can be grouped together with drag-and-drop controls or smart playlists that automatically organizecontent. Customers can set rules for geographic access and schedules to define where and when their videos can be viewed. • Video Players. Video Cloud includes leading video player technology, with fast load times and fast video starts. Video Cloud allows forpoint-and-click styling and configuration of video players that can reflect the brand or design of the customer. Our video players alsoinclude built-in support for advertising, analytics and content protection, and provide a consistent cross-platform playback experience.Developers can also take advantage of a set of tools to create completely custom video player experiences. 6 Table of Contents • Multi-platform video experiences. We have built Video Cloud to support numerous operating systems, formats and devices. In addition toweb-based experiences, Video Cloud provides publishing and delivery services for cross-platform devices including smartphones, tablets,media streaming devices and Connected TVs. Our solution includes automated device detection and manages multiple renditions of thesame video encoded in different forms with optimized delivery protocols for different target formats. • Live Video Streaming. In addition to on-demand video distribution, Video Cloud includes support for live video broadcasts. Video Cloudaccepts multiple live streams at different quality levels and delivers the rendition that best matches each viewer’s available bandwidth,processor utilization and player size. • Distribution and Syndication. Video Cloud supports a blended distribution strategy across the Internet, allowing customers to distributevideos on their own website, partner websites or video-sharing sites such as YouTube. These tools help content owners to drive site traffic,increase brand awareness and expand their audience. • Social Media. Customers can expand their audience by leveraging the social network of their viewers. Through integrated Video Cloudcapabilities, users can share complete videos or video clips through Facebook, YouTube, Twitter and other social media destinations.Brightcove Social allows customers to manage their video presence across social networks from a single interface. With Brightcove Social,customers can clip and publish videos to the native playback environments of Facebook, YouTube and Twitter, as well as their ownwebsites, from Video Cloud and track performance in a single location. • Advertising and Monetization. Video Cloud can help customers grow and monetize their audience with video ad features such as tools forad insertions and built-in ad server and network integrations. Video Cloud includes tools to support synchronized in-player ads withembedded link functionality and overlays for persistent branding. • Analytics. Video Cloud’s integrated video analytics present information to optimize and support customers’ online video publishing anddistribution strategy. Online publishers can also choose to integrate web analytics solutions such as Adobe Omniture or Google Analyticswith Video Cloud. • APIs, SDKs and Developer Resources. Video Cloud includes comprehensive APIs to customize, extend and integrate with our platform. OurSDKs for iOS, tvOS, Android and AndroidTV offer customers tools to jump-start projects and deliver high quality mobile videoapplications and connected TV experiences. Our developer center gives customers unlimited access to comprehensive productdocumentation, sample code, developer articles and technical videos, making it easy for them to access additional information.ZencoderZencoder is a cloud-based video encoding service. Zencoder provides our customers with high-quality, reliable encoding of live and on-demandvideo and access to highly scalable encoding power without having to pay for, manage and scale expensive hardware and software. Zencoder includesthe following principal features and functionality: • File Support. Zencoder accepts files in an extensive range of formats and codecs and supports video output to a multitude of devices. • Quality and Control. Zencoder includes tools to support high quality video output and to adjust and edit video. • Speed and Reliability. Zencoder provides extremely fast transcoding and industry leading reliability. • Platform and Security. Zencoder is scalable, globally distributed and includes advanced security features designed to protect content. 7 Table of Contents • Account and Integration. Zencoder provides a simple API for streamlined integration, supports most major transfer protocols andaccelerated file transfers and allows users to manage their accounts and encoding jobs from an intuitive, online dashboard.SSAISSAI is an innovative, cloud-based ad insertion and video stitching service that addresses the limitations of traditional online video ad insertiontechnology. SSAI reduces or eliminates the need for platform-specific ad technology and makes it possible for customers to reliably deliver live oron-demand video with dynamically customized programming and targeted ads to the maximum range of devices. SSAI includes the followingprincipal features and functionality: • Reach. SSAI features cloud-based ad monetization of video on demand across devices, apps and websites. • Integrations. SSAI is pre-integrated with ad networks and ad decision systems. • Server-Side Solution. SSAI is a server-side solution, requiring no SDKs, plug-ins or client-side code. • Simplicity. SSAI uses a single URL with automatic device detection to deliver high bit-rate broadcast quality video ads.PlayerPlayer is a cloud-based service for creating and managing video player experiences. This service provides customers with leading video playertechnology, a robust set of management APIs and performance optimization services. Player delivers cross-platform playback experiences and includesbuilt-in support for advertising, analytics and content protection. Player includes the following principal features and functionality: • Leading Video Player Technology. Player includes a fast HTML5-first video player, responsive design, social sharing and integration toolsand support for adaptive bitrate streaming across all major mobile and desktop platforms. • Speed. Player is designed to have the fastest load times and the fastest video starts. Player’s precompiled plugins, skinned assets andthumbnails minimize download size. Player is optimized to reduce network traffic. Player also allows customers to deploy changes tothousands of player embeds with batch publishing to accelerate time-to-market. • Wide Reach. Player allows customers to reach the maximum range of Internet-connected devices and operating systems with consistentplayback across desktop and mobile devices. • Powerful APIs, Plugins and SDKs. The developer-friendly, HTML5 video player is easily customized with CSS and JavaScript APIs.Player’s Management APIs also allow customers to easily control player configurations. Player has a robust ecosystem of plugins andintegrations, including built-in support for advertising, analytics and content protection, as well as numerous open-source plugins from theVideo.js community. Player also includes native player SDKs for easy development and deployment of native applications.OTT FlowOTT Flow is a service for media companies and content owners to rapidly deploy high-quality, direct-to-consumer, live and on-demand videoservices across platforms. OTT Flow enables video content delivery with a consistent user interface across multiple platforms, including desktop, Appleand Android smartphones and tablets, and Google Chromecast. OTT Flow also includes support for ad-supported and subscription video-on-demandmodels with ecommerce, customer relationship management, or CRM, and billing engine interfaces. This product also features a flexible and intuitiveweb-based administrative console for user 8 Table of Contentsinterface and user experience configuration, rules-based content packaging and scheduling capabilities, robust analytics and subtitle and captionsupport. OTT Flow provides an Over the Top (OTT) solution that allows for UX flexibility, support for complex integrations, delivery to a large numberof platforms, TV Everywhere (TVE) authentication and support for transactional business models.Video Marketing SuiteVideo Marketing Suite is a comprehensive suite of video technologies designed to address the needs of marketers to drive awareness,engagement and conversion. Video Marketing Suite is a bundled offering of Video Cloud, Brightcove Gallery, or Gallery, and Brightcove Social.Gallery is a cloud-based service that enables customers to create and publish video portals. This service combines portal templates with best practicesfor search engine optimization, responsive design, social sharing and conversion in a single solution that can be implemented and updated with ease.Gallery allows customers to create engaging video experiences such as video channels, product showcases, event microsites and video support centers.Brightcove Social allows customers to manage their video presence across social networks from a single interface. With Brightcove Social, customerscan edit, publish and track their videos in the native playback environments of Facebook, YouTube and Twitter, as well as their own websites, fromVideo Cloud.Enterprise Video SuiteEnterprise Video Suite is an enterprise-class platform that is designed to reduce the cost and complexity traditionally involved with internalvideo communications. The platform enables organizations to stream live internal town halls, train sales teams, ramp new employees, and buildcustomized video portals. Enterprise Video Suite is a bundled offering of Video Cloud, Gallery, and Brightcove Live. It offers security features like IPrestriction, URL tokenization, and single sign on, as well as analytics on user-level video engagement. Brightcove Live is an optional add-on to VideoCloud designed to enable non-technical users to set up live events and deliver multi-bitrate streams to multiple devices, without the need for hardwareencoders or development work.EditionsEach of our products is offered to customers on a subscription-based SaaS model, with varying levels of usage entitlements, support and, incertain cases, functionality. Our customers pay us a monthly, quarterly or annual subscription fee for access to our products. This model allows ourcustomers to scale their level of investment and usage based on the size and complexity of their needs.Video Cloud is offered in two product lines. The first product line is comprised of our premium product editions. All premium editions includefunctionality to publish and distribute video to Internet-connected devices, with higher levels of the premium editions providing additional featuresand functionality. 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 beendesigned for customers who have lower usage requirements and do not typically require advanced features or functionality.Video Marketing Suite and Enterprise Video Suite are each generally available in Starter, Pro and Enterprise editions. The Starter edition for eachprovides customers with the same basic functionality that is offered in the Pro and Enterprise editions but has been designed for customers who havelower usage requirements and do not typically require advanced features and functionality. All Video Marketing Suite and Enterprise Video Suitecustomers are considered premium customers.Zencoder customers are considered premium customers other than Zencoder customers on month-to-month contracts or pay-as-you-go contracts,which are considered volume customers.All SSAI, Player, and OTT Flow customers are considered premium customers. 9 Table of ContentsSupportOur products generally include basic support for technical and operational issues from our support team via web-based submission or email. Thepremium editions of our products generally include additional support options such as phone support, live chat, dedicated live event support,24x7x365 support and more. Our award-winning, TSIA certified team supports our customers from our offices in Boston, London, Sydney, Tokyo,Seoul and Scottsdale. We also have a dedicated customer success team that offers various onboarding and related services to new and existingcustomers looking to get the most out of our products and services.TrainingWe offer free basic online training to registered users of our products. We also offer customized, onsite training for customers that is priced on aper engagement basis.Account ManagementAn important component of our sales strategy is our account management organization. This organization is focused on ongoing customersuccess and engagement, as well as contract renewals and upsells to our customer base.Professional ServicesWhile our products are easy for customers to use and deploy without any additional specialized services, we offer a range of professional servicesfor customers who seek customization of our products or assistance with their implementations. These professional services are priced on a time andmaterials basis or a per project basis and include projects such as content migrations from other vendors or in-house solutions, video playerenhancements, mobile and connected TV app development and the creation of web pages optimized for video.Sales and MarketingWe sell our products primarily through our global direct sales organization. Our sales team is organized by the following geographic regions:Americas, Europe and the Middle East, Asia Pacific, and Japan. We further organize our go-to-market approach by focusing our sales and marketingteams on selling primarily to (i) media companies, who generally want to distribute video content to a broad audience and (ii) enterprises andorganizations in a wide range of industries, who generally use video for marketing or enterprise communication purposes. A small amount of sales aregenerated through referral partners, channel partners and resellers. We also sell some of our products online through our website.We generate customer leads, accelerate sales opportunities and build brand awareness through our marketing programs. Our marketing programstarget executives, technology professionals and senior business leaders. Our marketing programs typically target specific geographies and industrysegments. Our principal marketing programs include: • public relations and social media; • online event marketing activities, direct email, search engine marketing and display ads and blogs; • field marketing events for customers and prospects; • participation in, and sponsorship of, user conferences, trade shows and industry events; • use of our website to provide product and organization information, as well as learning opportunities for potential customers; • cooperative marketing efforts with partners, including joint press announcements, joint trade show activities, channel marketing campaignsand joint seminars; • telemarketing and lead generation representatives who respond to incoming leads to convert them into new sales opportunities; and • customer programs, including user meetings and our online customer community. 10 Table of ContentsOperationsWe use a number of third-party cloud computing platforms to provide our products and services to customers. We take advantage of thisgeographically dispersed, third-party, cloud computing capacity to improve the responsiveness of our service and lower network latency for ourcustomers. We also operate our own servers for systems that manage meta-data and business rules.Media delivery to end users, including video, audio, images and JavaScript components, is served primarily through CDN providers, includingAkamai and Fastly. We believe our agreements with our CDN providers are based on competitive market terms and conditions, including service levelcommitments from these CDN providers.We entered into our agreement with Akamai in July 2010. It enables us to use Akamai CDN services for our own benefit and to resell AkamaiCDN services to our customers. The current expiration date of the agreement is April 30, 2020.We entered into our agreement with Fastly in April 2017. It enables us to use Fastly CDN services for our own benefit and to resell Fastly CDNservices to our customers. The agreement is currently automatically renewing on a month to month basis, through January 31, 2020. We expect to enterinto a new agreement with Fastly in the first half of 2019.Our agreements with each of Akamai and Fastly contain a service continuation period following expiration of the agreement, which we believe issufficient to enable transition to an alternative provider to avoid material disruption to our business or to our customers. Our agreement with Akamaiprovides that, upon termination, Akamai will continue to provide CDN services to our existing customers for up to twelve months. Our agreement withFastly provides that, upon termination by Fastly, Fastly will continue to provide CDN services for up to six months.We use Amazon Web Services (“AWS”) to provide cloud-based computing and storage to our customers. We entered into our agreement withAWS on May 17, 2012. We believe our agreement with AWS is based on competitive market terms and conditions, including service levelcommitments. The current expiration date of our agreement with AWS is July 31, 2019, and we are working with AWS to renew the contract. Ouragreement with AWS provides that, upon termination, AWS will continue to store our content for 30 days and will, upon mutual agreement, provideadditional post-termination assistance.Intellectual PropertyWe rely principally on a combination of trademark, patent, copyright and trade secret laws in the United States and other jurisdictions, as well asconfidentiality procedures and contractual provisions to protect our proprietary technology, confidential information, business strategies and brands.We also believe that factors such as the technological and creative skills of our employees coupled with the creation of new features, functionality andproducts are essential to establishing and maintaining a technology leadership position. We enter into confidentiality and invention assignmentagreements with our employees and consultants and confidentiality agreements with other third parties, and we rigorously control access to ourproprietary technology.In the United States, we have 36 issued and/or allowed patents and 4 patent applications pending. Internationally, we have 17 issued and/orallowed patents and we are currently pursuing 17 patent applications, including two patent applications undergoing examination at the EuropeanPatent Office. We currently have patent applications pending in Canada, United Kingdom, Australia, and Hong Kong, and we may seek coverage inadditional jurisdictions to the extent we determine such coverage is appropriate and cost-effective. Our issued patents cover a variety of technicaldomains relevant to our business, including aspects of publishing and distributing digital media online, cloud-based stream delivery and ad insertion. 11 Table of ContentsOur registered trademarks in the United States include “BRIGHTCOVE”, “ZENCODER”, ONCEVOD and our logo. These trademarks are alsoregistered in certain non-U.S. jurisdictions, including the European Union and Canada. We may apply for registrations for these and other marks inadditional jurisdictions to the extent we determine such coverage is appropriate and cost-effective.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or obtain and use our technology to developproducts with the same functionality as our solutions. Policing unauthorized use of our technology is difficult and expensive. Our competitors couldalso independently develop technologies equivalent to ours, and our intellectual property rights may not be broad enough for us to preventcompetitors from selling products incorporating those technologies.CompetitionWe compete with video-sharing sites such as YouTube, in-house solutions, online video platforms and a broad range of other technologyproviders. Some of our actual and potential competitors may enjoy competitive advantages over us, such as larger marketing budgets and larger salesteams, as well as greater financial, technical and other resources. The overall markets for our products are fragmented, rapidly evolving and highlycompetitive.We expect that the competitive landscape will change as our markets consolidate and mature. We believe the principal competitive factors in ourindustry include the following: • total cost of ownership; • breadth and depth of product functionality; • ability to innovate and respond to customer needs rapidly; • level of resources and investment in sales, marketing, product and technology; • ease of deployment and use of solutions; • level of integration into existing workflows, configurability, scalability and reliability; • customer service; • brand awareness and reputation; • ability to integrate with third-party applications and technologies; • size and scale of provider; and • size of customer base and level of user adoption.The mix of factors relevant in any given situation varies with regard to each prospective customer. We believe we compete favorably with respectto all of these factors.Some of our competitors have made or may make acquisitions or enter into partnerships or other strategic relationships to offer a morecomprehensive service than we do. These combinations may make it more difficult for us to compete effectively, including on the basis of price, salesand marketing programs, technology or service functionality. We expect these challenges to continue as organizations attempt to strengthen ormaintain their market positions.Research and DevelopmentWe have focused our research and development efforts on expanding the functionality and scalability of our products and enhancing their easeof use, as well as creating new product offerings. We expect research and 12 Table of Contentsdevelopment expenses to increase in absolute dollars as we intend to continue to regularly release new features and functionality, expand our productofferings, 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 mixof revenue from new and existing products, features and functionality, as well as changes in the technology that our products must support, such as newoperating systems or new Internet-connected devices.EmployeesAs of December 31, 2018, we had 495 employees, of which 371 were located in the United States and 124 were located outside of the UnitedStates. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with ouremployees to be good.Information about Segment and Geographic RevenueInformation about segment and geographic revenue is set forth in Note 11 of the Notes to Consolidated Financial Statements under Item 8 of thisAnnual Report on Form 10-K.Available InformationOur principal executive offices are located at 290 Congress Street, Boston, Massachusetts, 02210. Our telephone number is (888) 882-1880. Ourwebsite address is www.brightcove.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of chargethrough the investor relations page of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, theSecurities and Exchange Commission. The information that is posted on or is accessible through our website is not incorporated by reference into thisAnnual Report on Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC. Alternatively, thesereports may be accessed at the SEC’s website at www.sec.gov. Item 1A.Risk FactorsYou should carefully review the risk factors described below and those described in other reports we file with the Securities and ExchangeCommission, as well as the other information contained in this Annual Report on Form 10-K, in evaluating our business. 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 currentlyconsider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differmaterially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and elsewhere in this report and in our other public filings. The trading price of our common stockcould decline due to any of these risks, and, as a result, you may lose all or part of your investment.We have a history of losses, we expect to continue to incur losses and we may not achieve or sustain profitability in the future.We have incurred significant losses in each fiscal year since our inception in 2004. We experienced a consolidated net loss of $14.0 million forthe year ended December 31, 2018, a consolidated net loss of $19.5 million for the year ended December 31, 2017 and a consolidated net loss of$10.0 million for the year ended December 31, 2016. These losses were due to the substantial investments we made to build our products and services,grow and maintain our business and acquire customers. Key elements of our growth strategy include acquiring new customers and continuing toinnovate and build our brand. As a result, we expect our operating expenses to increase in the future due to expected increased sales and marketingexpenses, operations 13 Table of Contentscosts, research and development costs and general and administrative costs and, therefore, our operating losses will continue or even potentiallyincrease for the foreseeable future. In addition, as a public company we incur significant legal, accounting and other expenses. Furthermore, to theextent that we are successful in increasing our customer base, we will also incur increased expenses because costs associated with generating andsupporting customer agreements are generally incurred up front, while revenue is generally recognized ratably over the committed term of theagreement. You should not rely upon our recent bookings or revenue growth as indicative of our future performance. We cannot assure you that we willreach profitability in the future or at any specific time in the future or that, if and when we do become profitable, we will sustain profitability. If we areultimately unable to generate sufficient revenue to meet our financial targets, become profitable and have sustainable positive cash flows, investorscould lose their investment.Substantially all of our revenue has historically come from a single product, Video Cloud.We have historically been substantially dependent on revenue from a single product, Video Cloud, and we expect that revenue from VideoCloud will continue to comprise a significant portion of our revenue. Our business would be harmed by a decline in the market for Video Cloud,increased competition in the market for online video platforms, or our failure or inability to provide sufficient investment to support Video Cloud asneeded to maintain or grow its competitive position.If we are unable to retain our existing customers, our revenue and results of operations will be adversely affected.We sell our products pursuant to agreements that are generally for annual terms. Our customers have no obligation to renew their subscriptionsafter their subscription period expires, and we have experienced losses of customers that elected not to renew, in some cases, for reasons beyond ourcontrol. For example, our largest customer during 2016 faced distressing financial circumstances and, as a result, we lost substantially all of the revenuewe expected to generate from this customer in 2017. In addition, even if subscriptions are renewed, they may not be renewed on the same or on moreprofitable terms. As a result, our ability to retain our existing customers and grow depends in part on subscription renewals. We may not be able toaccurately predict future trends in customer renewals, and our customers’ renewal rates have and may continue to fluctuate because of several factors,including their satisfaction or dissatisfaction with our services, the cost of our services and the cost of services offered by our competitors, reductions inour customers’ spending levels or the introduction by competitors of attractive features and functionality. If our customer retention rate decreases, wemay need to increase the rate at which we add new customers in order to maintain and grow our revenue, which may require us to incur significantlyhigher advertising and marketing expenses than we currently anticipate, or our revenue may decline. If our customers do not renew their subscriptionsfor our services, renew on less favorable terms, or do not purchase additional functionality or subscriptions, our revenue may grow more slowly thanexpected or decline, and our profitability and gross margins may be harmed or affected.Our long term financial targets are predicated on bookings and revenue growth and operating margin improvements that we may fail to achieve,which could reduce our expected earnings and cause us to fail to meet the expectations of analysts or investors and cause the price of our securitiesto decline.We are projecting long-term bookings and revenue growth. Our projections are based on the expected growth potential in our premium customerbase, as well as the market for on-demand software solutions generally. We may not achieve the expected bookings and revenue growth if the marketswe serve do not grow at expected rates, if customers do not purchase or renew subscriptions as we expect, and/or if we are not able to deliver productsdesired by customers and potential customers. Our long-term operating margin improvement targets are predicated on operating leverage as long termrevenue increases and improved operating efficiencies from moving to additional cloud-based delivery of services, together with lower cost of goodssold, research and development expenses and general and administrative expenses as a percentage of total revenue. If operating margins do notimprove, our earnings could be adversely affected and the price of our securities could decline. 14 Table of ContentsThe actual market for our solutions could be significantly smaller than our estimates of our total potential market opportunity, and if customerdemand for our services does not meet expectations, our ability to generate revenue and meet our financial targets could be adversely affected.While we expect strong growth in the markets for our products, it is possible that the growth in some or all of these markets may not meet ourexpectations, or materialize at all. The methodology on which our estimate of our total potential market opportunity is based includes several keyassumptions based on our industry knowledge and customer experience. If any of these assumptions proves to be inaccurate, then the actual market forour solutions could be significantly smaller than our estimates of our total potential market opportunity. If the customer demand for our services or theadoption rate in our target markets does not meet our expectations, our ability to generate revenue from customers and meet our financial targets couldbe adversely affected.Our business is substantially dependent upon the continued growth of the market for on-demand software solutions.We derive, and expect to continue to derive, substantially all of our revenue from the sale of our on-demand solutions. As a result, widespreadacceptance and use of the on-demand business model is critical to our future growth and success. Under the perpetual or periodic license model forsoftware procurement, users of the software would typically install and operate the applications on their hardware. Because many companies aregenerally predisposed to maintaining control of their information technology, or IT, systems and infrastructure, there may be resistance to the conceptof accessing software as a service provided by a third party. In addition, the market for on-demand software solutions is still evolving, and competitivedynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of solutions anddifferent approaches to enable organizations to address their technology needs. As a result, we may be forced to reduce the prices we charge for ourproducts and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same termsthat we have historically. If the market for on-demand software solutions fails to grow, grows more slowly than we currently anticipate or evolves andforces us to reduce the prices we charge for our products, our bookings growth, revenue, gross margin and other operating results could be materiallyadversely affected.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 fluctuatesignificantly in the future. As a result, you should not rely upon our past quarterly operating results as indicators of future performance. Our operatingresults depend on numerous factors, many of which are outside of our control. In addition to the other risks described in this “Risk Factors” section, thefollowing 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 marketing and advertising 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; and • system or service failures, security breaches or network downtime. 15 Table of ContentsWe operate in a relatively new and rapidly developing market, which makes it difficult to evaluate our business and future prospects.The market for our products and services is relatively new and rapidly developing, which makes it difficult to evaluate our business and futureprospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidlychanging industries, including those related to: • market acceptance of our current and future products and services; • customer renewal rates; • our ability to compete with other companies that are currently in, or may in the future enter, the market for our products; • our ability to successfully expand our business, especially internationally; • our ability to control costs, including our operating expenses; • the amount and timing of operating expenses, particularly sales and marketing expenses, related to the maintenance and expansion of ourbusiness, operations and infrastructure; • network outages or security breaches and any associated expenses; • foreign currency exchange rate fluctuations; • write-downs, impairment charges or unforeseen liabilities in connection with acquisitions; • our ability to successfully manage acquisitions; and • general economic and political conditions in our domestic and international markets.If we do not manage these risks successfully, our business will be harmed.Our long-term success depends, in part, on our ability to expand the sales of our products to customers located outside of the United States, and thusour business is susceptible to risks associated with international sales and operations.We currently maintain offices and have sales personnel in Australia, France, India, Japan, Singapore, South Korea, Spain, the United ArabEmirates and the United Kingdom, and we intend to expand our international operations. Any international expansion efforts that we may undertakemay not be successful. In addition, conducting international operations subjects us to new risks that we have not generally faced in the United States.These risks include: • unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for localpractices and regulatory requirements; • lack of familiarity with and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs, and other barriers; • unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions; • difficulties in managing systems integrators and technology partners; • differing technology standards; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • difficulties in managing and staffing international operations and differing employer/employee relationships; • fluctuations in exchange rates that may increase the volatility of our foreign-based revenue; 16 Table of Contents • potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on therepatriation of earnings; • uncertain political and economic climates (including, for example, the United Kingdom’s 2016 referendum, commonly referred to as“Brexit”, which has created economic and political uncertainty in the European Union); and • reduced or varied protection for intellectual property rights in some countries.These factors may cause our costs of doing business in these geographies to exceed our comparable domestic costs. Operating in internationalmarkets also requires significant management attention and financial resources. Any negative impact from our international business efforts couldnegatively impact our business, results of operations and financial condition as a whole.We must keep up with rapid technological change to remain competitive in a rapidly evolving industry.Our markets are characterized by rapid technological change, frequent new product and service introductions and evolving industry standards.Our future success will depend on our ability to adapt quickly to rapidly changing technologies, to adapt our services and products to evolvingindustry standards and to improve the performance and reliability of our services and products. To achieve market acceptance for our products, we musteffectively anticipate and offer products that meet changing customer demands in a timely manner. Customers may require features and functionalitythat our current products do not have. If we fail to develop products that satisfy customer preferences in a timely and cost-effective manner, our abilityto renew our contracts with existing customers and our ability to create or increase demand for our products will be harmed.We may experience difficulties with software development, industry standards, design or marketing that could delay or prevent our development,introduction or implementation of new products and enhancements. The introduction of new products by competitors, the emergence of new industrystandards or the development of entirely new technologies to replace existing offerings could render our existing or future products obsolete.If we are unable to successfully develop or acquire new features and functionality, enhance our existing products to anticipate and meet customerrequirements or sell our products into new markets, our bookings growth, revenue and results of operations will be adversely affected.We face significant competition and may be unsuccessful against current and future competitors. If we do not compete effectively, our operatingresults and future growth could be harmed.We compete with video sharing sites, in-house solutions, online video platforms and certain niche technology providers, as well as largercompanies that offer multiple services, including those that may be used as substitute services for our products. Competition is already intense in thesemarkets and, with the introduction of new technologies and market entrants, we expect competition to further intensify in the future. In addition, someof our competitors may make acquisitions, be acquired, or enter into strategic relationships to offer a more comprehensive service than we do. Thesecombinations may make it more difficult for us to compete effectively. We expect these trends to continue as competitors attempt to strengthen ormaintain their market positions.Demand for our services is sensitive to price. Many factors, including our advertising, customer acquisition and technology costs,commoditization of our products and services and our current and future competitors’ pricing and marketing strategies, can significantly affect ourpricing strategies. There can be no assurance that we will not be forced to engage in price-cutting initiatives, or to increase our advertising and otherexpenses to attract and retain customers in response to competitive pressures, either of which could have a material adverse effect on our revenue,operating results and resources.We will likely encounter significant, growing competition in our business from many sources, including portals and digital media retailers,search engines, social networking and consumer-sharing services companies, 17 Table of Contentsbroadband media distribution platforms, technology suppliers, direct broadcast satellite television service companies and digital and traditional cablesystems. Many of our present and likely future competitors have substantially greater financial, marketing, technological and other resources than wedo. Some of these companies may even choose to offer services competitive with ours at no cost as a strategy to attract or retain customers of their otherservices. Technological and commercial developments may lead to the increasing commoditization of our products and services, including datadelivery and storage, further increasing downward pressure on the prices we can charge. If we are unable to compete successfully with traditional andother emerging providers of competing services, our business, financial condition and results of operations could be adversely affected.We depend on the experience and expertise of our executive officers, senior management team and key technical employees, and the loss of any keyemployee could have an adverse effect on our business, financial condition and results of operations.Our success depends upon the continued service of our executive officers, senior management team and key technical employees, as well as ourability to continue to attract and retain additional highly qualified personnel. Each of our executive officers, senior management team, key technicalpersonnel and other employees could terminate his or her relationship with us at any time. The loss of any member of our senior management team orkey personnel might significantly delay or prevent the achievement of our business objectives and could materially harm our business and ourcustomer relationships. In addition, because of the nature of our business, the loss of any significant number of our existing engineering, projectmanagement and sales personnel could have an adverse effect on our business, financial condition and results of operations.Changes in our business and operations, as well as organizational changes, have placed, and may continue to place, significant demands on ourmanagement and infrastructure. If we fail to manage these changes effectively and successfully recruit additional highly-qualified employees, wemay be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.Our business, headcount and operations have grown, both domestically and internationally, since our inception. In addition, we have seenorganizational changes during that time, including the addition of several new members to our leadership team in 2018. This growth and theseorganizational changes have placed, and will continue to place, a significant strain on our management, administrative, operational and financialinfrastructure. We anticipate further growth will be required to address increases in our product and service offerings and continued internationalexpansion. Our success will depend in part upon the ability of our senior management team to manage Brightcove effectively. To do so, we mustcontinue to recruit, hire, train, manage and integrate a significant number of qualified managers, technical personnel and employees in specializedroles within our company, including in technology, sales and marketing. If our new employees perform poorly, or if we are unsuccessful in recruiting,hiring, training, managing and integrating these new employees, or retaining these or our existing employees, our business may suffer.In addition, to manage the expected continued growth of our business, headcount, operations and geographic expansion, we will need tocontinue to improve our information technology infrastructure, operational, financial and management systems and procedures. Our expectedadditional headcount and capital investments will increase our costs, which will make it more difficult for us to address any future revenue shortfalls byreducing expenses in the short term. If we fail to successfully manage our growth we will be unable to successfully execute our business plan, whichcould have a negative impact on our business, financial condition or results of operations. 18 Table of ContentsOur recently announced transaction with Ooyala, Inc. and/or potential future acquisitions could be difficult to integrate, divert the attention of keypersonnel, disrupt our business, dilute stockholder value and impair our financial results.As part of our business strategy, we intend to consider acquisitions of companies, technologies and products that we believe could accelerate ourability to compete in our core markets or allow us to enter new markets. For example, in February 2019, we entered into a definitive agreement toacquire the online video player related assets of Ooyala, Inc. (“Ooyala”) and certain of its subsidiaries. Acquisitions, including the Ooyala transaction,involve numerous risks, any of which could harm our business, including: • difficulties in integrating the technologies, products, operations and existing contracts of a target company and realizing the anticipatedbenefits of the combined businesses; • difficulties in integrating the personnel of a target company, including the onboarding of approximately 100 Ooyala employees whom weplan to hire in connection with the Ooyala transaction; • difficulties in supporting and transitioning customers, if any, of a target company, including the customers that we will acquire inconnection with the Ooyala transaction; • diversion of financial and management resources from existing operations; • the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocatedthe purchase price or other resources to another opportunity; • risks of entering new markets in which we have limited or no experience; • potential loss of key employees, customers and strategic alliances from either our current business or a target company’s business,including the customers that we will acquire in connection with the Ooyala transaction; and • inability to generate sufficient revenue to offset acquisition costs.Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in thefuture that could harm our financial results. In addition, if we finance acquisitions by issuing equity securities, our existing stockholders may bediluted. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions,and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or otherwiseadequately address these risks could materially harm our business and financial results.We may experience delays in product and service development, including delays beyond our control, which could prevent us from achieving ourgrowth objectives and hurt our business.Many of the problems, delays and expenses we may encounter may be beyond our control. Such problems may include, but are not limited to,problems related to the technical development of our products and services, problems with the infrastructure for the distribution and delivery of onlinemedia, the competitive environment in which we operate, marketing problems, consumer and advertiser acceptance and costs and expenses that mayexceed current estimates. Problems, delays or expenses in any of these areas could have a negative impact on our business, financial conditions orresults of operations.Delays in the timely design, development, deployment and commercial operation of our product and service offerings, and consequently theachievement of our revenue targets and positive cash flow, could result from a variety of causes, including many causes that are beyond our control.Such delays include, but are not limited to, delays in the integration of new offers into our existing offering, changes to our products and services madeto correct or enhance their features, performance or marketability or in response to regulatory developments or otherwise, delays encountered in thedevelopment, integration or testing of our products and services and the infrastructure for the distribution and delivery of online media and othersystems, unsuccessful commercial launches of new products and services, delays in our ability to obtain financing, insufficient or ineffective marketingefforts and slower-than-anticipated consumer acceptance of our products. Delays in any of these matters could hinder or prevent our achievement of ourgrowth objectives and hurt our business. 19 Table of ContentsThere is no assurance that the current cost of Internet connectivity and network access will not rise with the increasing popularity of online mediaservices.We rely on third-party service providers for our principal connections to the Internet and network access, and to deliver media to consumers. Asdemand for online media increases, there can be no assurance that Internet and network service providers will continue to price their network accessservices on reasonable terms. The distribution of online media requires delivery of digital content files and providers of network access anddistribution may change their business models and increase their prices significantly, which could slow the widespread adoption of such services. Inorder for our services to be successful, there must be a reasonable price model in place to allow for the continuous distribution of digital media files.We have limited or no control over the extent to which any of these circumstances may occur, and if network access or distribution prices rise, ourbusiness, financial condition and results of operations would likely be adversely affected.Failure of our infrastructure for the distribution and delivery of online media could adversely affect our business.Our success as a business depends, in large part, on our ability to provide a consistently high-quality digital experience to consumers via ourrelationships and infrastructure for the distribution and delivery of online media generally. There is no guarantee that our relationships andinfrastructure will not experience problems or other performance issues, which could seriously impair the quality and reliability of our delivery ofdigital media to end users. For example, we primarily use three content delivery networks, or CDNs, to deliver content to end users. If one or more ofthese CDNs were to experience sustained technical failures, it could cause delays in our service and we could lose customers. If we do not accuratelypredict our infrastructure capacity requirements, our customers could experience service outages or service degradation that may subject us to financialpenalties and liabilities and result in customer losses. In the past we have, on limited occasions, suffered temporary interruptions of certain aspects ofour service, including our customers’ ability to upload new content into our system, our customers’ ability to access administrative control of theiraccounts, and our ability to deliver content to end users in certain geographic locations. These service interruptions were the results of human error,hardware and software failures or failures of third-party networks. On a limited number of occasions, these service interruptions have required us toprovide service credits to customers. We cannot guarantee that service interruptions will not occur again or predict the duration of interruptions of ourservice or the impact of such interruptions on our customers. Failures and interruptions of our service may impact our reputation, result in our paymentof compensation or service credits to our customers, result in loss of customers and adversely affect our financial results and ability to grow ourbusiness. In addition, if AWS or our hosting infrastructure capacity fails to keep pace with increased sales or if our delivery capabilities fail, customersmay experience delays as we seek to obtain additional capacity or enable alternative delivery capability, which could harm our reputation andadversely affect our revenue growth.We may have difficulty scaling and adapting our existing infrastructure to accommodate increased traffic and storage, technology advances orcustomer requirements.In the future, advances in technology, increases in traffic and storage, and new customer requirements may require us to change our infrastructure,expand our infrastructure or replace our infrastructure entirely. Scaling and adapting our infrastructure is likely to be complex and require additionaltechnical expertise. If we are required to make any changes to our infrastructure, we may incur substantial costs and experience delays or interruptionsin our service. These delays or interruptions may cause customers and partners to become dissatisfied with our service and move to competing serviceproviders. Our failure to accommodate increased traffic and storage, increased costs, inefficiencies or failures to adapt to new technologies or customerrequirements and the associated adjustments to our infrastructure could harm our business, financial condition and results of operations. 20 Table of ContentsWe rely on software and services licensed from other parties. The loss of software or services from third parties could increase our costs and limit thefeatures available in our products and services.Components of our service and product offerings include various types of software and services licensed from unaffiliated parties. If any of thesoftware or services we license from others or functional equivalents thereof were either no longer available to us or no longer offered on commerciallyreasonable terms, we would be required to either redesign our services and products to function with software or services available from other parties ordevelop these components ourselves. In either case, the transition to a new service provider or an internally-developed solution could result inincreased costs and could result in delays in our product launches and the release of new service and product offerings. Furthermore, we might beforced to temporarily limit the features available in our current or future products and services. If we fail to maintain or renegotiate any of thesesoftware or service licenses, we could face significant delays and diversion of resources in attempting to license and integrate functional equivalents.If our software products contain serious errors or defects, then we may lose revenue and market acceptance and may incur costs to defend or settleclaims.Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions orenhancements are released. Despite internal testing and testing by our customers, our current and future products may contain serious defects, whichcould result in lost revenue, lost customers, slower growth or a delay in market acceptance.Since our customers use our products for critical business applications, such as online video, errors, defects or other performance problems couldresult in damage to our customers. They could seek significant compensation from us for the losses they suffer. Although our customer agreementstypically contain provisions designed to limit our exposure to claims, existing or future laws or unfavorable judicial decisions could negate theselimitations. Even if not successful, a claim brought against us would likely be time-consuming and costly and could seriously damage our reputationin the marketplace, making it harder for us to sell our products.Unauthorized disclosure of data, unauthorized access to our service and misuse of our service could adversely affect our business.Any security breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidentialinformation, personal data and customer content, damage to our reputation, early termination of our contracts, litigation, regulatory investigations,increased costs or other liabilities. If our security measures, or those of our partners or service providers, are breached as a result of third-party action,employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to confidential information, personal data or customercontent, our reputation will be damaged, our business may suffer or we could incur significant liability. If the measures we have put in place to limit orrestrict access to and use of functionality, usage entitlements and support for customers or prospective customers are breached, circumvented orineffective as a result of third-party action, employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to and useof functionality, usage entitlements and support, our business may suffer or we could incur significant liability and/or costs.Techniques used to obtain unauthorized access or use or to sabotage systems change frequently and generally are not recognized until launchedagainst a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceivedsecurity breach occurs, the market perception of our security measures could be harmed and we could lose sales and customers. Any significantviolations of data privacy or unauthorized disclosure of information could result in the loss of business, litigation and regulatory investigations andpenalties that could damage our reputation and adversely impact our results of operations and financial condition. Moreover, if a security breachoccurs with respect to another software as a service, or SaaS, provider, our customers and potential customers may lose trust in the security of the SaaSbusiness model generally, which could adversely impact our ability to retain existing customers or attract new ones. 21 Table of ContentsWe use a data center and cloud computing services facilities to deliver our services. Any disruption of service at these facilities could harm ourbusiness.We manage our services and serve all of our customers from a data center facility and cloud computing services facilities, such as AWS. While wecontrol the actual computer and storage systems upon which our software runs, and deploy them to the data center facilities, we do not control theoperation 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 unableto renew these agreements on commercially reasonable terms, we may be required to transfer to new facilities, and we may incur significant costs andpossible 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 thesefacilities that affect our services could harm our reputation and may damage our customers’ businesses. Interruptions in our services might reduce ourrevenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm ourrenewal 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 and similar events. Forexample, on September 18, 2014, we suffered a service disruption resulting from a distributed denial-of-service attack at third-party data centerfacilities used by us. By September 20, 2014, we had restored the services impacted by the attack. We contacted federal law enforcement authoritiesregarding the denial-of-service attack and cooperated with them. We also conducted an assessment of our internet service providers and data centerproviders, potential future vulnerability to malicious activity, and the sufficiency of our infrastructure to withstand and recover rapidly from suchattacks. While this matter did not have a material adverse effect on our operating results, there can be no assurance that such incidents will not occuragain, 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 orother misconduct, or a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions inour services.Our business may be adversely affected by third-party claims, including by governmental bodies, regarding the content and advertising distributedthrough our service.We rely on our customers to secure the rights to redistribute content over the Internet, and we do not screen the content that is distributed throughour service. There is no assurance that our customers have licensed all rights necessary for distribution, including Internet distribution. Other partiesmay claim certain rights in the content of our customers.In the event that our customers do not have the necessary distribution rights related to content, we may be required to cease distributing suchcontent, or we may be subject to lawsuits and claims of damages for infringement of such rights. If these claims arise with frequency, the likelihood ofour business being adversely affected would rise significantly. In some cases, we may have rights to indemnification or claims against our customers ifthey do not have appropriate distribution rights related to specific content items, however there is no assurance that we would be successful in any suchclaim.We operate an “open” publishing platform and do not screen the content that is distributed through our service. Content may be distributedthrough our platform that is illegal or unlawful under international, federal, state or local laws or the laws of other countries. We may face lawsuits,claims or even criminal charges for such distribution, and we may be subject to civil, regulatory or criminal sanctions and damages for suchdistribution. Any such claims or investigations could adversely affect our business, financial condition and results of operations. 22 Table of ContentsWe could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Companiesproviding Internet-related products and services are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights,particularly patent rights. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims, someof whom have sent letters to and/or filed suit alleging infringement against some of our customers. From time to time, third parties claim that we areinfringing upon their intellectual property rights. For information regarding these claims, see Part I, Item 3, “Legal Proceedings.” We could incursubstantial costs in prosecuting or defending any intellectual property litigation. Additionally, the defense or prosecution of claims could be time-consuming, and could divert our management’s attention away from the execution of our business plan.Moreover, any settlement or adverse judgment resulting from a claim could require us to pay substantial amounts or obtain a license to continueto use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that wewould be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to developalternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable alternative technology to permit us tocontinue offering, and our customers to continue using, our affected product or service. In addition, we may be required to indemnify our customers forthird-party intellectual property infringement claims, which would increase the cost to us. An adverse determination could also prevent us fromoffering our products or services to others. Infringement claims asserted against us may have an adverse effect on our business, financial condition andresults of operations.Our agreements with customers often include contractual obligations to indemnify them against claims that our products infringe the intellectualproperty rights of third parties. The results of any intellectual property litigation to which we might become a party, or for which we are required toprovide indemnification, may force us to do one or more of the following: • cease selling or using products or services that incorporate the challenged intellectual property; • make substantial payments for costs or damages; • obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or • redesign those products or services to avoid infringement.If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual propertyinfringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverseeffect upon our business and financial results.Failure to adequately protect our intellectual property could substantially harm our business and operating results.Because our business depends substantially on our intellectual property, the protection of our intellectual property rights is important to thesuccess of our business. We rely upon a combination of trademark, patent, trade secret and copyright law and contractual restrictions to protect ourintellectual property. These afford only limited protection. Despite our efforts to protect our property rights, unauthorized parties may attempt to copyaspects of our products, service, software and functionality or obtain and use information that we consider proprietary. Moreover, policing ourproprietary rights is difficult and may not always be effective. In addition, we may need to enforce our rights under the laws of countries that do notprotect proprietary rights to as great an extent as do the laws of the United States.Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the UnitedStates and abroad may be necessary in the future to enforce our 23 Table of Contentsintellectual property rights, to protect our patent rights, trade secrets, trademarks and domain names, and to determine the validity and scope of theproprietary rights of others. Such litigation or proceedings may be very costly and impact our financial performance. We may also incur substantialcosts defending against frivolous litigation or be asked to indemnify our customers against the same. Our efforts to enforce or protect our proprietaryrights may prove to be ineffective and could result in substantial costs and diversion of resources and could substantially harm our operating results.Our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions, as we have less opportunity to havevisibility into the development process with respect to acquired technology or the care taken to safeguard against infringement risks. Third parties maymake infringement and similar or related claims after we have acquired technology that had not been asserted prior to our acquisition.Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.We have devoted substantial resources to the development of our technology, business operations and business plans. In order to protect ourtrade secrets and proprietary information, we rely in significant part on confidentiality agreements with our employees, licensees, independentcontractors, advisers and customers. These agreements may not be effective to prevent disclosure of confidential information, including trade secrets,and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independentlydiscover trade secrets and proprietary information, and in such cases we would not be able to assert trade secret rights against such parties. To theextent that our employees and others with whom we do business use intellectual property owned by others in their work for us, disputes may arise as tothe rights in related or resulting know-how and inventions. Laws regarding trade secret rights in certain markets in which we operate may afford little orno protection to our trade secrets. The loss of trade secret protection could make it easier for third parties to compete with our products by copyingfunctionality. In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country inwhich we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation couldbe necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adverselyaffect our competitive business position.Our use of “open source” software could negatively affect our ability to sell our services and subject us to possible litigation.A portion of the technology licensed by us incorporates “open source” software, and we may incorporate open source software in the future. Suchopen source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, wemay be subject to certain conditions, including requirements that we offer our services that incorporate the open source software for no cost, that wemake available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that welicense such modifications or alterations under the terms of the particular open source license. If an author or other third party that distributes suchopen source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incursignificant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our services thatcontained the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of ourservices.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 andmay, 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 24 Table of Contentsexpenses in British pound sterling, Euros, Japanese yen and, to a lesser extent, other foreign currencies. Any fluctuation in the exchange rate of theseforeign currencies may negatively impact our business, financial condition and operating results. We have not previously engaged in foreign currencyhedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs orilliquid markets.We may be required to collect sales and use taxes on the services we sell in additional jurisdictions in the future, which may decrease sales, and wemay be subject to liability for sales and use taxes and related interest and penalties on prior sales.State and local taxing jurisdictions have differing rules and regulations governing sales and use taxes and these rules and regulations are subjectto varying interpretations that may change over time. On June 21, 2018, the United States Supreme Court ruled in South Dakota v. Wayfair that statescan impose sales and use taxes on transactions made with out-of-state sellers. Following this ruling, certain states have enforced tax laws requiringtaxation of out-of-state purchases. We have performed an assessment of sales taxes owed under the new court ruling and determined that we need toremit sales taxes to certain states. There is a risk that states which do not currently impose taxes on out-of-state purchases will do so in the future. Wecannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we presently believe sales and usetaxes are not due. We reserve estimated sales and use taxes in our financial statements but we cannot be certain that we have made sufficient reserves tocover all taxes that might be assessed.If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our services, we may be liable for pasttaxes in addition to being required to collect sales or similar taxes in respect of our services going forward. Liability for past taxes may also includesubstantial interest and penalty charges. Our client contracts typically provide that our clients must pay all applicable sales and similar taxes.Nevertheless, clients may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes or we maydetermine that it would not be feasible to seek reimbursement. If we are required to collect and pay back taxes and the associated interest and penaltiesand if our clients do not reimburse us for all or a portion of these amounts, we will incur unplanned expenses that may be substantial. Moreover,imposition of such taxes on our services going forward will effectively increase the cost of such services to our clients and may adversely affect ourability to retain existing clients or to gain new clients in the areas in which such taxes are imposed.Government and industry regulation of the Internet is evolving and could directly restrict our business or indirectly affect our business by limitingthe growth of our markets. Unfavorable changes in government regulation or our failure to comply with regulations could harm our business andoperating results.Federal, state and foreign governments and agencies have adopted and could in the future adopt regulations covering issues such as user privacy,content, and taxation of products and services. Government regulations could limit the market for our products and services or impose burdensomerequirements that render our business unprofitable. Our products enable our customers to collect, manage and store a wide range of data. The UnitedStates and various state governments have adopted or proposed limitations on the collection, distribution and use of personal information. Severalforeign jurisdictions, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) thatincrease or change the requirements governing data collection and storage in these jurisdictions. If our privacy or data security measures fail to complywith current or future laws and regulations, we may be subject to litigation, regulatory investigations or other liabilities, or our customers mayterminate their relationships with us.In addition, although many regulations might not apply to our business directly, we expect that laws regulating the solicitation, collection orprocessing of personal and consumer information could affect our customers’ ability to use and share data, potentially reducing demand for ourservices. The Telecommunications Act of 1996 and the EU General Data Protection Regulation 2016/679, along with other similar laws and 25 Table of Contentsregulations prohibit certain types of information and content from being transmitted over the Internet. The scope of these types of prohibitions injurisdictions around the world and the liability associated with a violation are evolving. In addition, although substantial portions of theCommunications Decency Act were held to be unconstitutional, we cannot be certain that similar legislation will not be enacted and upheld in thefuture. Legislation like the Telecommunications Act and the Communications Decency Act could dampen the growth in web usage and decrease itsacceptance as a medium of communications and commerce. Moreover, if future laws and regulations limit our customers’ ability to use and shareconsumer data or our ability to store, process and share data with our customers over the Internet, demand for our products could decrease, our costscould increase, and our results of operations and financial condition could be harmed.In addition, taxation of services provided over the Internet or other charges imposed by government agencies or by private organizations foraccessing the Internet may be imposed. Any regulation imposing greater fees for Internet use or restricting information exchange over the Internetcould result in a decline in the use of the Internet and the viability of Internet-based services, which could harm our business and operating results.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 companieshave 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 tous 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; • 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 ourcommon stock could decline for reasons unrelated to our business, financial condition, or results of operations. If any of the foregoing occurs, it couldcause 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.Our business and operations could be adversely affected if we are subject to stockholder activism, which could cause us to incur significant expenseand impact the market price of our common stock.In recent years, proxy contests and other forms of stockholder activism have been directed against numerous public companies. Stockholderactivism, including potential proxy contests, could result in substantial costs and divert the attention of our management and our board of directorsand resources from our business. Activist 26 Table of Contentscampaigns can create perceived uncertainties as to our future direction, strategy or leadership and may result in the loss of potential businessopportunities and harm our ability to attract new customers, employees and investors. In addition, we may be required to incur significant legal feesand other expenses related to any activist stockholder matters. Further, the market price of our common stock could be subject to significantfluctuation or otherwise be adversely affected by the events, risks, and uncertainties of any stockholder activism.If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, or if they adverselychange their recommendations regarding our stock, our stock price and trading volume could decline.The trading market for our common stock could be influenced by research and reports that industry or security analysts may publish about us, ourbusiness, our market or our competitors. If any of the analysts who may cover us adversely change their recommendations regarding our stock, orprovide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were tocease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause ourstock price or trading volume to decline.A significant portion of our total outstanding shares may be sold into the public market in the future, which could cause the market price of ourcommon stock to drop significantly, even if our business is doing well.Sales of up to 1,056,763 shares of our common stock in the public market could occur at any time after the expiration of the lock-up agreemententered into in connection with our entry into a definitive agreement to acquire certain assets of Ooyala. Following the expiration of the lock-up period12 months following the closing date of the acquisition, these shares will be eligible for resale in compliance with Rule 144. These sales or the marketperception that the holder or holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.We do not expect to declare any dividends in the foreseeable future.We do not anticipate declaring any dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to relyon sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.Investors seeking dividends should not purchase our common stock.We may be unable to meet our future capital requirements, which could limit our ability to grow.We believe our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs overat least the next 12 months. We may, however, need, or could elect to seek, additional funding at any time. To the extent that existing resources areinsufficient to fund our business operations, our future activities for the expansion of our service and our product offerings, developing and sustainingour relationships and infrastructure for the distribution and delivery of digital media online, marketing, and supporting our office facilities, we mayneed to raise additional funds through equity or debt financing. Additional funds may not be available on terms favorable to us or our stockholders.Furthermore, if we issue equity securities, our stockholders may experience additional dilution or the new equity securities may have rights,preferences and privileges senior to those of our existing classes of stock. If we cannot raise funds on acceptable terms, we may not be able to developor enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. 27 Table of ContentsFailure to maintain effective internal control over financial reporting could result in our failure to accurately report our financial results. Anyinability to report and file our financial results accurately and timely could harm our business and adversely impact investor confidence in ourcompany and, as a result, the value of our common stock.We are required to evaluate our internal control over financial reporting in connection with Section 404 of the Sarbanes-Oxley Act, and ourindependent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting. This assessmentincludes the disclosure of any material weaknesses in our internal control over financial reporting identified by our management, as well as ourindependent registered public accounting firm’s attestation report on our internal control over financial reporting. During the evaluation and testingprocess, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internalcontrol over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independentregistered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could loseinvestor confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on the price of our commonstock.The implementation by us of a new leasing standard in 2019 (ASC 842) requires substantial preparation, and our failure to properly implement thisstandard in a timely manner could result in inaccurate expense recognition and inappropriate disclosures and cause us to fail to meet our financialreporting obligations.In February 2016, the FASB issued new lease accounting guidance under ASC 842 requiring lease assets and lease liabilities to be recognized onthe balance sheet and disclosure of key information about leasing arrangements. In order to be able to comply with the requirements of the newguidance, we need to invest effort in analyzing the existing lease arrangements and assessing the appropriate treatment. This may require incrementalresources and could increase operating costs in future periods. If we are not able to timely implement the new guidance could result in inaccurate orincomplete presentation of our lease assets and liabilities.Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisionsof Delaware law, could impair a takeover attempt.Our amended and restated certificate of incorporation and bylaws, and Delaware law, contain provisions that could have the effect of renderingmore difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions: • authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend, and other rights superior to our commonstock; • limiting the liability of, and providing indemnification to, our directors and officers; • limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of ameeting; • requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations ofcandidates for election to our board of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previouslyscheduled special meetings; • establishing a classified board of directors so that not all members of our board are selected at one time; • limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on theboard to our board of directors then in office; and • providing that directors may be removed by stockholders only for cause. 28 Table of ContentsThese provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law,which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations withoutapproval of the holders of substantially all of our outstanding common stock. Any provision of our amended and restated certificate of incorporation orbylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive apremium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.We record substantial expenses related to our issuance of equity awards that may have a material adverse impact on our operating results for theforeseeable future.We expect our stock-based compensation expenses will continue to be significant in future periods, which will have an adverse impact on ouroperating results. The model used by us requires the input of subjective assumptions, including the price volatility of the option’s underlying stock,the expected life of the options and the risk-free interest rate. If facts and circumstances change and we employ different assumptions for estimatingstock-based compensation expense in future periods, or if we decide to use a different valuation model, the future period expenses may differsignificantly from what we have recorded in the current period and could materially affect the fair value estimate of stock-based payments, ouroperating income, net income and net income per share.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 andoperating results.If any of our significant customers have insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by suchcustomers, and we may need to extend our payment terms or restructure the receivables owed to us, which could have a significant adverse effect on ourfinancial condition, including impacting the timing of revenue recognition. Any deterioration in the financial condition of our customers will increasethe risk of uncollectible receivables. Global economic uncertainty could also affect our customers’ ability to pay our receivables in a timely manner orat all or result in customers going into bankruptcy or reorganization proceedings, which could also affect our ability to collect our receivables. Item 1B.Unresolved Staff CommentsNot applicable. Item 2.PropertiesOur corporate headquarters are located in Boston, Massachusetts. We lease 82,184 square feet pursuant to a lease that terminates March 31, 2022.We have sales and marketing offices in Tokyo, Japan; Sydney, Australia; Seoul, South Korea; Mumbai, India; and Singapore. Our offices in New York,New York; London, England; Seattle, Washington; San Francisco, California; and Scottsdale, Arizona are used for sales and marketing as well asresearch and development. We believe our facilities are adequate for our current needs.The Company’s primary office lease has the option to renew the lease for two successive periods of five years each. In connection with the officelease, the Company entered into a letter of credit in the amount of $2.4 million. Item 3.Legal ProceedingsOn May 22, 2017, a lawsuit was filed against us and two individuals by Ooyala, Inc. (“Ooyala”) and Ooyala Mexico S. de R.L. de C.V. (“OoyalaMexico”). The lawsuit, which was filed in the United States District Court 29 Table of Contentsfor the District of Massachusetts, concerned allegations that two individuals, who were former employees of Ooyala Mexico, misappropriated customerinformation and other trade secrets and used that information in working for us. The complaint was amended on June 1, 2017 to remove claims againstthe two former employees of Ooyala Mexico. The remaining claims against us were for violation of the Defend Trade Secrets Act of 2016 (18 U.S.C.§1836), violation of the Massachusetts trade secret statute (M.G.L. c. 93, §42), violation of Massachusetts Chapter 93A (M.G.L. c. 93A, §11), andtortious interference with advantageous business relationships. Ooyala and Ooyala Mexico also filed a motion for preliminary injunction (amended atthe same time the complaint was amended), seeking to enjoin us from using any of the allegedly misappropriated information or communicating withcustomers whose information was taken, and seeking the return of any information that was allegedly taken. On June 16, 2017, we filed an oppositionto the motion for preliminary injunction, and also moved to dismiss the lawsuit. The motion to dismiss was denied on September 6, 2017. The courtissued a preliminary injunction on July 10, 2018. The injunction required us to delete any Ooyala confidential information obtained from the formerOoyala employees and prohibited us from using such information to pursue business with twenty-two specified Latin American prospective customers.On October 19, 2018, the parties settled the matter for an immaterial amount, and the case was dismissed on October 24, 2018.On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against us and our subsidiary Brightcove Holdings, Inc. in the UnitedStates District Court for the District of Delaware. The complaint alleged that we infringed five patents related to file compression technology. Thecomplaint sought monetary damages and injunctive relief. On December 1, 2017, Realtime filed an amended complaint, adding two additional patentsto its claims. We filed a motion to dismiss on January 26, 2018. The plaintiff filed an opposition to the motion to dismiss on February 9, 2018 and wefiled a reply on February 16, 2018. A ruling on the motion to dismiss was not issued by the court. On July 31, 2018, we filed a Motion to TransferVenue, which motion was opposed by the plaintiff. On October 18, 2018, we, via our insurer, entered into a Patent License Agreement which providesus a license to the patents-in-suit (as well as additional patents and patent applications owned by Realtime) in exchange for a one-time payment, whichis immaterial in amount. As a result of entering into the Patent License Agreement, the case was dismissed on October 31, 2018.On January 30, 2019, Uniloc 2017 LLC filed a complaint against us and our subsidiary, Brightcove Holdings, Inc. in the United States DistrictCourt for the District of Delaware. The complaint alleges that we infringed four patents and seeks monetary damages and other relief. We cannot yetdetermine whether it is probable that a loss will be incurred in connection with this complaint, nor can we reasonably estimate the potential loss, if any.In addition, we are, from time to time, party to litigation arising in the ordinary course of our business. Management does not believe that theoutcome of these claims will have a material adverse effect on our consolidated financial position, results of operations or cash flows based on thestatus of proceedings at this time. Item 4.Mine Safety DisclosuresNot applicable. 30 Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock has been traded on the NASDAQ Global Market under the symbol “BCOV” since our initial public offering on February 17,2012. Prior to this time, there was no public market for our common stock.Dividend PolicyWe have never paid or declared any cash dividends on our common stock. We currently intend to retain any cash flow to finance the growth anddevelopment of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of futuredividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capitalrequirements, restrictions contained in current or future financing instruments and other factors our board of directors deems relevant.StockholdersAs of February 15, 2019, there were approximately 101 holders of record of our common stock (not including beneficial holders of stock held instreet name).Stock Performance GraphThe graph set forth below compares the cumulative total stockholder return on our common stock between January 1, 2014 and December 31,2018, with the cumulative total return of (a) the NASDAQ Computer & Data Processing Index and (b) the NASDAQ Composite Index, over the sameperiod. This graph assumes the investment of $100 on January 1, 2014 in our common stock, the NASDAQ Computer & Data Processing Index and theNASDAQ Composite Index and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on January 1, 2014 of$14.1 per share as the initial value of our common stock. 31 Table of ContentsThe comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph belowis not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Information used in the graph wasobtained from the NASDAQ Stock Market LLC, a financial data provider and a source believed to be reliable. The NASDAQ Stock Market LLC is notresponsible for any errors or omissions in such information. 1/1/2014 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Brightcove, Inc. 100.0 55.0 43.8 56.9 50.2 49.8 NASDAQ Composite Index 100.0 113.4 119.9 128.9 165.3 158.9 NASDAQ Computer & Data Processing Index 100.0 119.9 127.4 143.0 198.4 191.1 Sales of Unregistered SecuritiesOn December 7, 2018, there was a defective issuance of putative stock of the Company due to an error in the vesting information of options topurchase stock of the Company with respect to a single former employee. Pursuant to Section 204 of the Delaware General Corporation Law, the Boardof Directors of the Company ratified the defective issuance on February 12, 2019. Such issuance amounted to an unregistered sale of 562 shares of theCompany’s common stock by the former employee.Purchases of Equity Securities by the Issuer or Affiliated PurchasersThere were no repurchases of shares of common stock made during the year ended December 31, 2018. Item 6.Selected Consolidated Financial DataThe following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations”, the consolidated financial statements and related notes, and other financial information included in this AnnualReport on Form 10-K. 32 Table of ContentsWe derived the consolidated financial data for the years ended December 31, 2018, 2017 and 2016 and as of December 31, 2018 and 2017 fromour audited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. We derived the consolidatedfinancial data for the years ended December 31, 2015 and 2014 and as of December 31, 2016, 2015 and 2014 from our audited consolidated financialstatements, which are not included in this Annual Report on Form 10-K. Historical results are not necessarily indicative of the results to be expected infuture periods. Year Ended December 31, 2018 2017 2016 2015 2014 (1) (in thousands, except per share data) Consolidated statements of operations data: Revenue $164,833 $155,913 $150,266 $134,706 $125,017 Gross profit 98,209 91,295 94,419 88,229 81,284 Loss from operations (13,101) (19,696) (8,978) (6,931) (15,193) Consolidated net loss (14,028) (19,519) (9,986) (7,580) (16,893) Basic and diluted net loss per share (0.39) (0.57) (0.30) (0.23) (0.53) (1)The results of operations for Unicorn have been included in our consolidated financial statements since the date of acquisition on January 31,2014. As of December 31, 2018 (2) 2017 2016 2015 2014 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $29,306 $26,132 $36,813 $27,637 $22,916 Accounts receivable, net 23,264 25,236 21,575 21,213 21,463 Property and equipment, net 9,703 9,143 9,264 8,689 10,372 Working capital 2,966 (983) 7,792 6,592 4,582 Total assets 133,356 127,615 136,424 127,668 127,584 Current and long-term deferred revenue 39,992 39,614 34,756 29,931 29,704 Total stockholders’ equity 70,614 66,756 78,196 78,135 80,763 (2)The results of the adoption of ASC 606 have been included in our consolidated financial statements since the date of adoption on January 1,2018. 33 Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financialstatements and related notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statementsthat reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K,particularly in “Risk Factors.”OverviewWe are a leading global provider of cloud-based services for video. We were incorporated in Delaware in August 2004 and our headquarters arein Boston, Massachusetts. Our suite of products and services reduce the cost and complexity associated with publishing, distributing, measuring andmonetizing video across devices.Brightcove Video Cloud, or Video Cloud, our flagship product released in 2006, is the world’s leading online video platform. Video Cloudenables our customers to publish and distribute video to Internet-connected devices quickly, easily and in a cost-effective and high-quality manner.Brightcove Zencoder, or Zencoder, is a cloud-based video encoding service. Brightcove SSAI, or SSAI, is an innovative, cloud-based ad insertion andvideo stitching service that addresses the limitations of traditional online video ad insertion technology. Brightcove Player, or Player, is a cloud-basedservice for creating and managing video player experiences. Brightcove OTT Flow is a service for media companies and content owners to rapidlydeploy high-quality, direct-to-consumer, live and on-demand video services across platforms. Brightcove Video Marketing Suite, or Video MarketingSuite, is a comprehensive suite of video technologies designed to address the needs of marketers to drive awareness, engagement and conversion.Brightcove Enterprise Video Suite, or Enterprise Video Suite, is an enterprise-class platform for internal communications, employee training, livestreaming, marketing and ecommerce videos.Our philosophy for the next few years will continue to be to invest in our product strategy and development, sales, and go-to-market activities tosupport our long-term revenue growth. We believe these investments will help us address some of the challenges facing our business such as demandfor 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 salespersonnel, the innovation of new features for existing products and the development of new products. We believe this strategy will help us retain ourexisting 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 anddevelopment and general and administrative expenses as a percentage of total revenue.As of December 31, 2018, we had 495 employees and 3,783 customers, of which 2,226 used our premium offerings and 1,557 used our volumeofferings. As of December 31, 2017, we had 498 employees and 4,168 customers, of which and 2,167 used our premium offerings and 2,001 used ourvolume offerings.We generate revenue by offering our products to customers on a subscription-based, software as a service, or SaaS, model. Our revenue grew from$155.9 million in the year ended December 31, 2017 to $164.8 million in the year ended December 31, 2018, primarily related to an increase inrevenue from professional services engagements and to a lesser extent our subscription-based SaaS. Our consolidated net loss was $14.0 million and$19.5 million for the years ended December 31, 2018 and 2017, respectively. Included in consolidated net loss for the year ended December 31, 2018was stock-based compensation expense and amortization of acquired intangible assets of $6.6 million and $2.3 million, respectively. Included inconsolidated net loss for the year ended December 31, 2017 was stock-based compensation expense and amortization of acquired intangible assets of$7.2 million and $2.7 million, respectively. 34 Table of ContentsFor the years ended December 31, 2018 and 2017, our revenue derived from customers located outside North America was 46% and 41%,respectively. We expect the percentage of total net revenue derived from outside North America to increase in future periods as we continue to expandour international operations.Key MetricsWe regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trendsaffecting our business, formulate financial projections and make strategic decisions. • Number of Customers. We define our number of customers at the end of a particular quarter as the number of customers generatingsubscription revenue at the end of the quarter. We believe the number of customers is a key indicator of our market penetration, theproductivity of our sales organization and the value that our products bring to our customers. We classify our customers by including themin 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, our Video Marketing Suite customers and our Enterprise Video Suite customers. Ourvolume offerings include our Video Cloud Express customers and our Zencoder customers on month-to-month contracts and pay-as-you-gocontracts.As of December 31, 2018, we had 3,783 customers, of which 1,557 used our volume offerings and 2,226 used our premium offerings. As ofDecember 31, 2017, we had 4,168 customers, of which 2,001 used our volume offerings and 2,167 used our premium offerings. Ourgo-to-market focus and growth strategy is to expand our premium customer base, as we believe our premium customers represent a greateropportunity for our solutions. Volume customers decreased in recent periods primarily due to our discontinuation of the promotionalVideo Cloud Express offering. As a result, we have experienced attrition of this base level offering without a corresponding addition ofcustomers. We expect customers using our volume offerings to continue to decrease in 2018 and beyond as we continue to focus on themarket for our premium solutions. • 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 theprevious recurring value of subscription revenue for the same period. We define retained recurring value of subscription revenue as thecommitted subscription fees for all contracts that renew in a given period, including any increase or decrease in contract value. We defineprevious recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in thatsame period. We typically calculate our recurring dollar retention rate on a monthly basis. Recurring dollar retention rate providesvisibility into our ongoing revenue. During the years ended December 31, 2018 and 2017, the recurring dollar retention rate was 94% and89%, respectively. • Average Annual Subscription Revenue Per Premium Customer. We define average annual subscription revenue per premium customer asthe total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by theaverage number of premium customers for that period. We believe that this metric is important in understanding subscription revenue forour 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 allother premium customers. • Backlog. We define backlog as the aggregate amount of transaction price that is allocated to performance obligations that have not yetbeen satisfied, excluding professional service engagements. We believe that this metric is important in understanding future businessperformance. As of 35 Table of Contents December 31, 2018, the total backlog for subscription and support contracts was approximately $109.4 million, of which approximately$90.7 million is expected to be recognized over the next 12 months. As of December 31, 2017, the total backlog for subscription andsupport contracts was approximately $101.0 million, of which approximately $79.2 million was expected to be recognized over the next12 months.The following table includes our key metrics for the periods presented: Year EndedDecember 31, 2018 2017 Customers (at period end) Volume 1,557 2,001 Premium 2,226 2,167 Total customers (at period end) 3,783 4,168 Recurring dollar retention rate 94% 89% Average annual subscription revenue per premium customer, excluding Starter edition customers(in thousands) $74.9 $70.1 Average annual subscription revenue per premium customer for Starter edition customers only (inthousands) $4.7 $4.3 Total backlog, excluding professional services engagements $109.4 $101.0 Components of Consolidated Statements of OperationsRevenueSubscription 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 includefunctionality to publish and distribute video to Internet-connected devices, with higher levels of premium editions providing additional features andfunctionality. Customer arrangements are typically one year contracts, which include a subscription to Video Cloud, basic supportand a pre-determined amount of video streams, bandwidth, transcoding and storage. We also offer gold support or platinum support to our premiumcustomers for an additional fee, which includes extended phone support. The pricing for our premium editions is based on the value of our software, aswell as the number of users, accounts and usage, which is comprised of video streams, bandwidth, transcoding and storage. Should a customer’s usageexceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractualentitlements. The second product line is comprised of our volume product edition. Our volume editions target small and medium-sized businesses, orSMBs. The volume editions provide customers with the same basic functionality that is offered in our premium product editions but have beendesigned for customers who have lower usage requirements and do not typically require advanced features and functionality. We discontinued thelower level pricing options for the Express edition of our volume offering and expect the total number of customers using the Express edition tocontinue to decrease. Customers who purchase the volume editions generally enter into month-to-month agreements. Volume customers are generallybilled on a monthly basis and pay via a credit card.Zencoder is offered to customers on a subscription basis, with either committed contracts or pay-as-you-go contracts. The pricing is based onusage, which is comprised of minutes of video processed. The committed contracts include a fixed number of minutes of video processed. Should acustomer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above thecontractual entitlements. Zencoder customers are considered premium customers other than Zencoder customers on month-to-month contractsor pay-as-you-go contracts, which are considered volume customers. 36 Table of ContentsSSAI is offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the size andcomplexity 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 toPlayer, basic support and a pre-determined amount of video streams. We also offer gold support or platinum support to our Player customers for anadditional fee, which includes extended phone support. The pricing for Player is based on the number of users, accounts and usage, which is comprisedof video streams. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay foractual usage above the contractual entitlements.OTT Flow is offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the sizeand 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 Proand Enterprise customer arrangements are typically one-year contracts, which typically include a subscription to Video Cloud, Gallery, BrightcoveSocial (for Video Marketing Suite customers) or Brightcove Live (for Enterprise Video Suite customers), basic support and a pre-determined amount ofvideo streams or plays (for Video Marketing Suite customers), viewers (for Enterprise Video Suite customers), bandwidth and storage or videos. We alsogenerally offer gold support or platinum support to these customers for an additional fee, which includes extended phone support. The pricing for ourPro and Enterprise editions is based on the number of users, accounts and usage, which is comprised of video streams or plays, viewers, bandwidth andstorage or videos. Should a customer’s usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay foractual usage above the contractual entitlements, or will require the customer to upgrade its package upon renewal. The Starter edition providescustomers with the same basic functionality that is offered in our Pro and Enterprise editions but has been designed for customers who have lowerusage requirements and do not typically seek advanced features and functionality. Customers who purchase the Starter edition may enter into one-yearagreements or month-to-month agreements. Starter customers with month-to-month agreements are generally billed on a monthly basis and pay via acredit card.All SSAI, Player, OTT Flow, 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, softwarecustomizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basiswith 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 RevenueCost of subscription, support and professional services revenue primarily consists of costs related to supporting and hosting our product offeringsand delivering our professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense relatedto the management of our data centers, our customer support team and our professional services staff. In addition to these expenses, we incur third-partyservice provider costs such as data center and content delivery network, or CDN, expenses, allocated overhead, depreciation expense and amortizationof capitalized internal-use software development costs and acquired intangible assets. We allocate overhead costs such as rent, utilities and supplies toall departments based on relative headcount. As such, general overhead expenses are reflected in cost of revenue in addition to each operating expensecategory. The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associatedwith delivering our subscription and support services due to the labor costs of providing professional services. 37 Table of ContentsCost of revenue increased in absolute dollars from 2017 to 2018. In future periods we expect our cost of revenue will increase in absolute dollarsas our revenue increases. Cost of revenue as a percentage of revenue could fluctuate from period to period depending on the number of our professionalservices engagements and any associated costs relating to the delivery of subscription services and the timing of significant expenditures. To theextent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products andother services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage ofrevenue, in any particular quarterly or annual period.Operating ExpensesWe classify our operating expenses as follows:Research and Development. Research and development expenses consist primarily of personnel and related expenses for our research anddevelopment staff, including salaries, benefits, incentive compensation and stock-based compensation, in addition to the costs associated withcontractors and allocated overhead. We have focused our research and development efforts on expanding the functionality and scalability of ourproducts and enhancing their ease of use, as well as creating new product offerings. We expect research and development expenses to increase inabsolute dollars as we intend to continue to periodically release new features and functionality, expand our product offerings, continue the localizationof our products in various languages, upgrade and extend our service offerings, and develop new technologies. Over the long term, we believe thatresearch and development expenses as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existingproducts, features and functionality, as well as changes in the technology that our products must support, such as new operating systems or newInternet-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 intangibleassets, in addition to costs associated with marketing and promotional events, corporate communications, advertising, other brand building andproduct marketing expenses and allocated overhead. Our sales and marketing expenses have increased in absolute dollars in each of the last threeyears. We intend to continue to invest in sales and marketing and expand the sale of our product offerings within our existing customer base, buildbrand awareness and sponsor additional marketing events. Accordingly, we expect sales and marketing expense to continue to be our most significantoperating expense in future periods. Over the long term, we believe that sales and marketing expense as a percentage of revenue will decrease, but willvary depending upon the mix of revenue from new and existing customers and from small, medium-sized and enterprise customers, as well as changesin 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 andallocated overhead. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.Merger-related. Merger-related costs consisted of expenses of $716,000 incurred as part of the anticipated acquisition of the online video playerrelated assets from the assets of Ooyala, Inc. (“Ooyala”) and certain of its subsidiaries, and the acquisition of all of the assets of Unicorn Media, Inc. andcertain of its subsidiaries, or Unicorn, as well as costs associated with the retention of key employees of Unicorn. Approximately $1.5 million wasrequired to be paid to retain certain key employees from the Unicorn acquisition. The period in which these services were performed varies byemployee. Given that the retention amount was related to a future service requirement, the related expense was recorded as merger-relatedcompensation expense in the consolidated statements of operations over the expected service period. 38 Table of ContentsOther ExpenseOther expense consists primarily of interest income earned on our cash, cash equivalents, foreign exchange gains and losses.Income TaxesAs part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions inwhich we operate. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilitiesare recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. Inaddition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not thatsome 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 atDecember 31, 2018. We maintain net deferred tax liabilities for temporary differences related to our foreign subsidiaries.Stock-Based Compensation ExpenseOur cost of revenue, research and development, sales and marketing, and general and administrative expenses include stock-based compensationexpense. Stock-based compensation expense represents the fair value of outstanding stock options and restricted stock awards, which is recognized asexpense over the respective stock option and restricted stock award service periods. For the years ended December 31, 2018, 2017, and 2016, werecorded stock-based compensation expense of $6.6 million, $7.2 million, and $6.0 million, respectively. We expect stock-based compensationexpense to increase in absolute dollars in future periods.Foreign Currency TranslationWith 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 changes in the euro, British pound,Australian dollar, and Japanese yen. For the years ended December 31, 2018, 2017 and 2016, 49%, 45% and 42%, respectively, of our revenue wasgenerated in locations outside the United States. During the same periods, 31%, 29% and 28%, respectively, of our revenue was in currencies otherthan the U.S. dollar, as were some of the associated expenses. In periods when the U.S. dollar declines in value as compared to the foreign currencies inwhich we conduct business, our foreign currency-based revenue and expenses generally increase in value when translated into U.S. dollars. We expectthe percentage of total net revenue derived from outside North America to increase in future periods as we continue to expand our internationaloperations.Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. Thepreparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during thereporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparentfrom other sources. Our actual results may differ from these estimates under different assumptions or conditions.We believe that the following significant accounting policies, which are more fully described in the notes to our consolidated financialstatements included elsewhere in this Annual Report on Form 10-K, involve a greater degree of judgment and complexity. Accordingly, these are thepolicies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. 39 Table of ContentsRevenue RecognitionWe primarily derive revenue from the sale of our online video platform, which enables our 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 subscriptionto our technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which include customizationservices.In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic606), which modifies how all entities recognize revenue, and consolidates revenue recognition guidance into one ASC Topic (ASC Topic606, Revenue from Contracts with Customers) (“ASC 606”). We adopted ASC 606 on January 1, 2018. ASC 606 outlines a comprehensive five-steprevenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 1)Identify the contract with a customer 2)Identify the performance obligations in the contract 3)Determine the transaction price 4)Allocate the transaction price to performance obligations in the contract 5)Recognize revenue when or as the Company satisfies a performance obligationOur subscription arrangements provide customers the right to access our hosted software applications. Customers do not have the right to takepossession of our software during the hosting arrangement. Contracts for premium customers generally have a term of one yearand are non-cancellable. These contracts generally provide the customer with a maximum annual level of entitlement and provide the rate at which thecustomer must pay for actual usage above the annual entitlement allowance. These subscription arrangements are considered stand ready obligationsthat are providing a series of distinct services that are substantially the same and are transferred with the same pattern to the customer. As such, thesesubscription arrangements are treated as a single performance obligation and the related fees are recognized as revenue ratably over the term of theunderlying arrangement.Under ASC 605, if usage exceeded the annual allowance level for a particular customer arrangement, the associated revenue was recognized inthe period that the additional usage occurred. Under ASC 606, when the transaction price includes a variable amount of consideration, an entity isrequired to estimate the consideration that is expected to be received for a particular customer arrangement. We evaluate variable consideration forusage-based fees at contract inception and re-evaluate quarterly over the course of the contract. Specifically, we estimate the revenue pertaining to acustomer’s usage that is expected to exceed the annual entitlement allowance and allocate such revenue to the distinct service within the relatedcontract that gives rise to the variable payment. Estimates of variable consideration include analyzing customer usage against the applicableentitlement limit at the end of each reporting period and estimating the amount and timing of additional amounts to be invoiced in connection withprojected usage. Estimates of variable consideration relating to customer usage do not include amounts for which it is probable that a significantreversal will occur. Determining the amount of variable consideration to recognize as revenue involves significant judgment on the part ofmanagement and it is possible that actual revenue will deviate from estimates over the course of a customer’s committed contract term.Contracts with customers that are month-to-month arrangements (volume customers) have a maximum monthly level of usage and provide therate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage feesare recognized as revenue during the related period of performance. Contracts with customers that are invoiced on a pay-as-you-go basis, where there isno monthly or annual commitment for usage, provide the rate at which the customer must pay for actual 40 Table of Contentsusage for a particular period. Fees that are invoiced on a pay-as-you-go basis are recognized as revenue during the period of performance.Professional services and other revenue consist of services such as implementation, software customizations and project management forcustomers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signingand the remainder due when the related services have been completed, or on a time and materials basis. Professional services and other revenue sold ona stand-alone basis are recognized as the services are performed, subject to any refund or other obligation. Deferred revenue includes amounts billed tocustomers for which revenue has not been recognized, and primarily consists of the unearned portion of annual software subscription and support fees,and deferred professional service fees. Revenue is presented net of any taxes collected from customers.We periodically enter into multiple-element service arrangements that include platform subscription fees, support fees, and, in certain cases, otherprofessional services. These contracts include multiple promises that we evaluate to determine if the promises are separate performance obligations.Performance obligations are identified based on services to be transferred to a customer that are both capable of being distinct and are distinct withinthe context of the contract. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amountof variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in thecontract based on a relative stand-alone selling price method. The transaction price post allocation is recognized as revenue as the related performanceobligation is satisfied.Income TaxesWe are subject to income taxes in both the United States and international jurisdictions, and we use estimates in determining our provision forincome taxes. We account for income taxes under the asset and liability method for accounting and reporting for income taxes. Deferred tax assets andliabilities are recognized based on temporary differences between the financial reporting and income tax basis of assets and liabilities using statutoryrates. This process requires us to project our current tax liability and estimate our deferred tax assets and liabilities, including net operating losses andtax credit carryforwards. In assessing the need for a valuation allowance, we considered our recent operating results, future taxable income projectionsand feasible tax planning strategies. We have provided a valuation allowance against our net U.S. deferred tax assets at December 31, 2018. Wemaintain net deferred tax liabilities for temporary differences related to our foreign subsidiaries. Due to the evolving nature and complexity of taxregulations combined with the number of jurisdictions in which we operate, it is possible that our estimates of our tax liability could change in thefuture, which may result in additional tax liabilities and adversely affect our results of operations, financial condition and cash flows.As of December 31, 2018 and 2017, we had no material unrecognized tax benefits.Business CombinationsWe record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting.Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. Wethen allocate the purchase price in excess of net tangible assets acquired to identifiable intangible assets based on detailed valuations that useinformation and assumptions provided by management. We allocate any excess purchase price over the fair value of the net tangible and intangibleassets acquired and liabilities assumed to goodwill. If the fair value of the assets acquired exceeds our purchase price, the excess is recognized as again.Significant management judgments and assumptions are required in determining the fair value of acquired assets and liabilities, particularlyacquired intangible assets. The valuation of purchased intangible assets is based 41 Table of Contentsupon estimates of the future performance and cash flows from the acquired business. Each asset is measured at fair value from the perspective of amarket participant.If different assumptions are used, it could materially impact the purchase price allocation and adversely affect our results of operations, financialcondition and cash flows.Goodwill and Acquired Intangible AssetsWe record goodwill when consideration paid in a purchase acquisition exceeds the fair value of the net assets acquired. Goodwill is notamortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. Conditions that could trigger amore frequent impairment assessment include, but are not limited to, a significant adverse change in certain agreements, significant underperformancerelative to historical or projected future operating results, an economic downturn in customers’ industries, increased competition, a significantreduction in our stock price for a sustained period or a reduction of our market capitalization relative to net book value. We evaluate impairment bycomparing the estimated fair value of each reporting unit to its carrying value. We estimate fair value primarily utilizing the market approach, whichcalculates fair value based on the market values of comparable companies or comparable transactions. Actual results may differ materially from theseestimates. The estimates we make in determining the fair value of our reporting unit involve the application of judgment, which could affect the timingand size of any future impairment charges. Impairment of our goodwill could significantly affect our operating results and financial position.Intangible assets are recorded at their estimated fair value at the date of acquisition. We amortize our intangible assets over their estimated usefullives based on the pattern of consumption of the economic benefit or, if that pattern cannot be readily determined, on a straight-line basis.Amortization is recorded over the estimated useful lives ranging from two to fourteen years.We review our intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurredthat would indicate impairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, we willwrite down the carrying value of the intangible asset to its fair value in the period identified. In assessing recoverability, we must make assumptionsregarding estimated future cash flows and discount rates. If these estimates or related assumptions change in the future, we may be required to recordimpairment charges. We generally calculate fair value as the present value of estimated future cash flows to be generated by the asset using a riskadjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of theintangible asset prospectively over the revised remaining useful life.We adopted ASU 2017-04 during the year ended December 31, 2018, prior to our annual testing of goodwill impairment. The updated guidanceeliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairmentcharge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined inStep 1. For the year ended December 31, 2018, we have not identified any impairment of our goodwill. 42 Table of ContentsResults of OperationsThe following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is notnecessarily indicative of future results. Year Ended December 31, 2018 2017 2016 (in thousands, except share and per sharedata) Revenue: Subscription and support revenue $150,941 $143,159 $142,022 Professional services and other revenue 13,892 12,754 8,244 Total revenue 164,833 155,913 150,266 Cost of revenue: Cost of subscription and support revenue 53,311 50,664 48,011 Cost of professional services and other revenue 13,313 13,954 7,836 Total cost of revenue 66,624 64,618 55,847 Gross profit 98,209 91,295 94,419 Operating expenses: Research and development 31,716 31,850 30,171 Sales and marketing 55,775 57,294 54,038 General and administrative 23,103 21,847 19,167 Merger-related 716 — 21 Total operating expenses 111,310 110,991 103,397 Loss from operations (13,101) (19,696) (8,978) Other income (expense), net (326) 547 (598) Loss before income taxes (13,427) (19,149) (9,576) Provision for income taxes 601 370 410 Net loss $(14,028) $(19,519) $(9,986) Net loss per share - basic and diluted $(0.39) $(0.57) $(0.30) Weighted-average number of common shares used in computing net loss per share - basic and diluted 35,808 34,376 33,189 Overview of Results of Operations for the Years Ended December 31, 2018 and 2017Total revenue increased by 6%, or $8.9 million, in 2018 compared to 2017 due to an increase in subscription and support revenue of 5%, or$7.8 million, primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existingcustomers. The increase in professional services and other revenue of 9%, or $1.1 million, was primarily related to the size and number of professionalservices engagements in 2018 compared to 2017. In addition, our revenue from premium offerings grew by $10.0 million, or 7%, in 2018 compared to2017. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability tocontinue to increase revenue.Our gross profit increased by $6.9 million, or 8%, in 2018 compared to 2017, primarily due to an increase in revenue. Our ability to continue tomaintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery. Loss from operations was$13.1 million in 2018 compared to $19.7 million in 2017. We expect operating loss to decrease from greater sales to both new and existing customersand from improved efficiencies throughout our organization as we continue to grow and scale our operations. 43 Table of ContentsAs of December 31, 2018, we had $29.3 million of unrestricted cash and cash equivalents, an increase of $3.2 million from $26.1 million atDecember 31, 2017, due primarily to $5.8 million of proceeds from exercises of stock options and $2.6 million of cash provided by operatingactivities. These increases were offset by cash outflows of $3.0 million in capitalized internal-use software costs, and $1.5 million in capitalexpenditures. There were also cash outflows of $311,000 in payments under capital lease obligations, $170,000 in payments of withholding tax onRSU vesting and $26,000 for payments on equipment financing.Revenue Year Ended December 31, 2018 2017 Change Revenue by Product Line Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Premium $160,285 97% $150,304 96% $9,981 7% Volume 4,548 3 5,609 4 (1,061) (19) Total $164,833 100% $155,913 100% $8,920 6% During 2018, revenue increased by $8.9 million, or 6%, compared to 2017, primarily due to an increase in revenue from our premium offerings,which consist of subscription and support revenue, as well as professional services and other revenue. The increase in premium revenue of$10.0 million, or 7%, is partially the result of a 3% increase in the number of premium customers from 2,167 at December 31, 2017 to 2,226 atDecember 31, 2018, and a $1.1 million, or 9%, increase in professional services revenue. During 2018, volume revenue decreased by $1.1 million, or19%, compared to 2017, driven by a decrease in customers as we continue to focus on the market for our premium solutions. Year Ended December 31, 2018 2017 Change Revenue by Type Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Subscription and support $150,941 92% $143,159 92% $7,782 5% Professional services and other 13,892 8 12,754 8 1,138 9 Total $164,833 100% $155,913 100% $8,920 6% 44 Table of ContentsDuring 2018, subscription and support revenue increased by $7.8 million, or 5%, compared to 2017. The increase was primarily related to a 3%increase in the number of premium customers from 2,167 at December 31, 2017 to 2,226 at December 31, 2018 and a 6% increase in the average annualsubscription revenue per premium customer during the year ended December 31, 2018. In addition, professional services and other revenue increasedby $1.1 million, or 9%, primarily related to the size and number of professional services engagements during 2018 compared to 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 inprocess. Year Ended December 31, 2018 2017 Change Revenue by Geography Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) North America $88,778 54% $91,358 59% $(2,580) (3)% Europe 27,754 17 24,425 16 3,329 14 Japan 21,960 13 16,881 11 5,079 30 Asia Pacific 25,766 16 22,539 14 3,227 14 Other 575 — 710 — (135) (19) International subtotal 76,055 46 64,555 41 11,500 18 Total $164,833 100% $155,913 100% $8,920 6% For purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprisedof revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending onthe timing of new customer contracts, revenue mix from a geographic region can vary from period to period.During 2018, total revenue for North America decreased $2.6 million, or 3%, compared to 2017. During 2018, total revenue outside of NorthAmerica increased $11.5 million, or 18%, compared to 2017. The increase in revenue from international regions is primarily related to increases inrevenue in Japan, Europe and Asia Pacific.Cost of Revenue Year Ended December 31, 2018 2017 Change Cost of Revenue Amount Percentage ofRelatedRevenue Amount Percentage ofRelatedRevenue Amount % (in thousands, except percentages) Subscription and support $53,311 35% $50,664 35% $2,647 5% Professional services and other 13,313 96 13,954 109 (641) (5) Total $66,624 40% $64,618 41% $2,006 3% During 2018, cost of subscription and support revenue increased $2.6 million, or 5%, compared to 2017. The increase resulted primarily fromincreases in network hosting, amortization and partner commission expenses of $1.9 million, $1.1 million, and $1 million respectively. There were alsoincreases in third-party software integrated with our service offering expense, employee-related expense, rent expense, and consultant expense of$866,000, $773,000, $268,000 and $253,000 respectively. These increases were offset in part by decreases in content delivery, depreciation,intangible amortization, and maintenance expenses of $2.1 million, $917,000, $380,000 and $103,000 respectively. 45 Table of ContentsDuring 2018, cost of professional services and other revenue decreased $641,000, or 5%, compared to 2017. This decrease corresponds to adecrease in consultant expense of $1.6 million. This decrease was offset in part by increases in employee-related and rent expenses of $715,000 and$150,000 respectively.Gross Profit Year Ended December 31, 2018 2017 Change Gross Profit Amount Percentage ofRelatedRevenue Amount Percentage ofRelatedRevenue Amount % (in thousands, except percentages) Subscription and support $97,630 65% $92,495 65% $5,135 6% Professional services and other 579 4 (1,200) (9) 1,779 nm Total $98,209 60% $91,295 59% $6,914 8% nm – not meaningfulThe overall gross profit percentage was 60% and 59% for the years ended December 31, 2018 and 2017, respectively. Subscription and supportgross profit increased $5.1 million, or 6%, compared to 2017. In addition, professional services and other gross profit increased $1.8 million comparedto 2017. 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 supportrevenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.Operating Expenses Year Ended December 31, 2018 2017 Change Operating Expenses Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Research and development $31,716 19% $31,850 20% $(134) 0% Sales and marketing 55,775 34 57,294 37 (1,519) (3) General and administrative 23,103 14 21,847 14 1,256 6 Merger-related 716 — — — 716 nm Total $111,310 68% $110,991 71% $319 0% nm – not meaningfulResearch and Development. During 2018, research and development expense decreased by $134,000, or 0%, compared to 2017 primarily due toa decrease in stock-based compensation of $282,000. This decrease was offset by increases in rent and employee-related expenses of $181,000 and$126,000 respectively. We expect our research and development expense to remain relatively unchanged in future periods.Sales and Marketing. During 2018, sales and marketing expense decreased by $1.5 million, or 3%, compared to 2017 primarily due to decreasesin travel, employee-related, and commission expenses of $1 million, $656,000, and $485,000 respectively. There were also decreases in stock-basedcompensation, computer maintenance and support, and consulting expenses of $373,000, $149,000, and $114,000 respectively. These decreases werepartially offset by increases in rent expense, executive severance, conference expense, and marketing programs expense of $659,000, $386,000,$270,000 and $118,000 respectively. We expect that our sales and marketing expense will increase in absolute dollars along with our revenue, as wecontinue to expand sales coverage and build brand awareness through what we believe are cost-effective channels. 46 Table of ContentsGeneral and Administrative. During 2018, general and administrative expense increased by $1.3 million, or 6%, compared to 2017 primarily dueto increases in consulting, employee-related, recruiting, and tax expenses of $1.2 million, $578,000, $464,000, and $184,000 respectively. Theseincreases were offset by decreases in legal, depreciation, and travel expenses of $716,000, $232,000, and $130,000 respectively. In future periods, weexpect general and administrative expense to remain relatively unchanged.Merger-Related. During 2018, merger-related expenses increased by $716,000 primarily due to costs incurred in connection with the entry into adefinitive agreement in February 2019 to acquire the online video player related assets from Ooyala, Inc. and certain of its subsidiaries. In futureperiods, we expect merger-related expense to increase.Other Expense, Net Year Ended December 31, 2018 2017 Change Other Expense Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Interest income, net $227 — % $124 — % $103 83% Interest expense (8) — (26) — 18 (69) Other (expense) income, net (545) — 449 — (994) (221) Total $(326) — % $547 — % $(873) (160)% The interest expense during 2018 is primarily comprised of interest paid on capital leases and an equipment financing. The change in other(expense) income, net during the year ended December 31, 2018 was primarily due to realized foreign currency exchange losses recorded during theyear ended December 31, 2018 compared to gains recorded in the corresponding period of the prior year.Provision for Income Taxes Year Ended December 31, 2018 2017 Change Provision for Income Taxes Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Provision for income taxes $601 — % $370 — % $231 62% During 2018 and 2017, the provision for income taxes was primarily comprised of income tax expenses related to foreign jurisdictions.Overview of Results of Operations for the Years Ended December 31, 2017 and 2016Total revenue increased by 4%, or $5.6 million, in 2017 compared to 2016 due to an increase in subscription and support revenue of 1%, or$1.1 million, primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existingcustomers. The increase in professional services and other revenue of 55%, or $4.5 million, primarily related to the size and number of professionalservices engagements in 2017 compared to 2016. The increases are offset by the loss of a major customer, during the first quarter of 2017, and a$1.5 million reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016. In addition,our revenue from premium offerings grew by $7.5 million, or 5%, in 2017 compared to 2016. Our ability to continue to provide the productfunctionality and performance that our customers require will be a major factor in our ability to continue to increase revenue. 47 Table of ContentsOur gross profit decreased by $3.1 million, or 3%, in 2017 compared to 2016, primarily due to increases in the cost of subscription and supportrevenue and the cost of professional services revenue without corresponding increases in revenue. Cost of subscription and support revenue increaseddue to additional content delivery network expenses and network hosting services incurred in order to support the launch of a major customer. Cost ofprofessional services revenue increased due to a higher level of contractor costs and project hours during the year ended December 31, 2017. Ourability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery. Loss fromoperations was $19.7 million in 2017 compared to $9.0 million in 2016. Loss from operations in 2017 included stock-based compensation expenseand amortization of acquired intangible assets of $7.2 million and $2.7 million, respectively. Loss from operations in 2016 included stock-basedcompensation expense and amortization of acquired intangible assets of $6.0 million and $3.1 million, respectively. We expect operating income toimprove from increased sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to growand scale our operations.As of December 31, 2017, we had $26.1 million of unrestricted cash and cash equivalents, a decrease of $10.7 million from $36.8 million atDecember 31, 2016, due primarily to $6.4 million of cash used in operating activities, $3.0 million in capitalized internal-use software costs, and$1.1 million in capital expenditures. There were also cash outflows of $489,000 in payments under capital lease obligations, $307,000 for payments onequipment financing and $268,000 in payments of withholding tax on RSU vesting.Revenue Year Ended December 31, 2017 2016 Change Revenue byProduct Line Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Premium $150,304 96% $142,840 95% $7,464 5% Volume 5,609 4 7,426 5 (1,817) (24) Total $155,913 100% $150,266 100% $5,647 4% During 2017, revenue increased by $5.6 million, or 4%, compared to 2016, primarily due to an increase in revenue from our premium offerings,which consist of subscription and support revenue, as well as professional services and other revenue. The increase in premium revenue of $7.5 million,or 5%, is partially the result of an 8% increase in the number of premium customers from 2,007 at December 31, 2016 to 2,167 at December 31, 2017, inaddition to a $4.5 million, or 55%, increase in professional services revenue. The increases are offset by the loss of a major customer and a $1.5 millionreduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016. During 2017, volumerevenue decreased by $1.8 million, or 24%, compared to 2016, as we continue to focus on the market for our premium solutions. Year Ended December 31, 2017 2016 Change Revenue by Type Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Subscription and support $143,159 92% $142,022 95% $1,137 1% Professional services and other 12,754 8 8,244 5 4,510 55 Total $155,913 100% $150,266 100% $5,647 4% During 2017, subscription and support revenue increased by $1.1 million, or 1%, compared to 2016. The increase was primarily related to thecontinued growth of our customer base for our premium offerings, including sales to both new and existing customers during 2017. The increases areoffset by the loss of a major customer during the first quarter of 2017. In addition, professional services and other revenue increased by $4.5 million, or 48 Table of Contents55%, primarily related to the size and number of professional services engagements during 2017 compared to the prior year. During 2017, the increasein professional services revenue was primarily related to an increase in OTT application development projects. Professional services and other revenuewill vary from period to period depending on the number of implementations and other projects that are in process. Year Ended December 31, 2017 2016 Change Revenue by Geography Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) North America $91,358 59% $92,912 62% $(1,554) (2)% Europe 24,425 16 25,196 17 (771) (3) Japan 16,881 11 15,230 10 1,651 11 Asia Pacific 22,539 14 15,617 10 6,922 44 Other 710 0 1,311 1 (601) (46) International subtotal 64,555 41 57,354 38 7,201 13 Total $155,913 100% $150,266 100% $5,647 4% For purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprisedof revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending onthe timing of new customer contracts, revenue mix from a geographic region can vary from period to period.During 2017, total revenue for North America decreased $1.6 million, or 2%, compared to 2016. The reduction in revenue for North America isprimarily related to the loss of a major customer in the first quarter of 2017 partially offset by increases in sales to new and existing customers. During2017, total revenue outside of North America increased $7.2 million, or 13%, compared to 2016. The increase in revenue from international regions isprimarily related to an increase in revenue in Asia Pacific and Japan. The increase in revenue from Asia Pacific and Japan is primarily related to anincrease in revenue from professional services engagements related to OTT application development projects. These increases were partially offset by a$1.5 million reduction in revenue due to changes in foreign exchange rates compared to the exchange rates that were in effect during 2016.Cost of Revenue Year Ended December 31, 2017 2016 Change Cost of Revenue Amount Percentage ofRelatedRevenue Amount Percentage ofRelatedRevenue Amount % (in thousands, except percentages) Subscription and support $50,664 35% $48,011 34% $2,653 6% Professional services and other 13,954 109 7,836 95 6,118 78 Total $64,618 41% $55,847 37% $8,771 16% During 2017, cost of subscription and support revenue increased $2.7 million, or 6%, compared to 2016. The increase resulted primarily fromincreases in content delivery network expenses, amortization of capitalized internal-use software development costs, partner commission expense andnetwork hosting services of $1.2 million, $1.2 million, $799,000 and $791,000, respectively. Partner commission expense primarily relates topayments to third parties for the use of technology that is integrated with our Video Cloud product. There were also increases in maintenance expense,employee-related expense, costs associated with third-party software integrated with our service offering and stock-based compensation expense of$474,000, $316,000, $248,000 and $115,000, respectively. These increases were partially offset by decreases in depreciation expense, costs 49 Table of Contentsassociated with the closure of certain facilities, and bandwidth costs, of $1.2 million, $843,000 and $426,000, respectively.During 2017, cost of professional services and other revenue increased $6.1 million, or 78%, compared to 2016. This increase corresponds to theincrease in professional services revenue and resulted primarily from increases in contractor and employee-related expenses of $4.4 million and$1.4 million, respectively. There was an increase in the mix of contractor expenses versus internal expenses in order to support various professionalservices projects.Gross Profit Year Ended December 31, 2017 2016 Change Gross Profit Amount Percentage ofRelatedRevenue Amount Percentage ofRelatedRevenue Amount % (in thousands, except percentages) Subscription and support $92,495 65% $94,011 66% $(1,516) (2)% Professional services and other (1,200) (9) 408 5 (1,608) nm Total $91,295 59% $94,419 63% $(3,124) (3)% nm – not meaningfulThe overall gross profit percentage was 59% and 63% for the years ended December 31, 2017 and 2016, respectively. The decrease is primarilydue to an increase in revenue from professional services engagements, which has a lower gross margin as compared to subscription and supportrevenue. Subscription and support gross profit decreased $1.5 million, or 2%, compared to 2016 due to additional content delivery network expensesand network hosting services incurred in order to support the launch of a major customer. In addition, professional services and other gross profitdecreased $1.6 million compared to 2016 due to the increase in contractor expenses in order to support various professional services projects.Operating Expenses Year Ended December 31, 2017 2016 Change Operating Expenses Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Research and development $31,850 20% $30,171 20% $1,679 6% Sales and marketing 57,294 37 54,038 36 3,256 6 General and administrative 21,847 14 19,167 13 2,680 14 Merger-related — — 21 — (21) (100) Total $110,991 71% $103,397 69% $7,594 7% Research and Development. During 2017, research and development expense increased by $1.7 million, or 6%, compared to 2016 primarily dueto increases in employee-related, computer maintenance and support, stock-based compensation and contractor expenses of $1.7 million, $465,000,$288,000 and $246,000, respectively. These increases were partially offset by decreases in recruiting and relocation expense, travel expense, andamortization of acquired intangible assets of $382,000, $299,000 and $116,000, respectively. In future periods, we expect that our research anddevelopment expense will increase in absolute dollars as we continue to add employees, develop new features and functionality for our products,introduce additional software solutions and expand our product and service offerings. 50 Table of ContentsSales and Marketing. During 2017, sales and marketing expense increased by $3.3 million, or 6%, compared to 2016 primarily due to employee-related expense, commission expense, marketing programs and stock-based compensation expense of $2.2 million, $825,000, $565,000 and $430,000,respectively. There were also increases in computer maintenance and support and rent expense of $361,000 and $168,000, respectively. Theseincreases were partially offset by decreases in travel expense, amortization of acquired intangible assets, contractor expense, and recruiting andrelocation expense of $508,000, $267,000, $258,000 and $244,000, respectively. We expect that our sales and marketing expense will increase inabsolute dollars along with our revenue, as we continue to expand sales coverage and build brand awareness through what we believe are cost-effectivechannels. We expect that such increases may fluctuate from period to period, however, due to the timing of marketing programs.General and Administrative. During 2017, general and administrative expense increased by $2.7 million, or 14%, compared to 2016 primarilydue to increases in outside accounting and legal fees, employee-related expense, and stock-based compensation expense of $2.2 million, $929,000 and$364,000, respectively. There were also increases in commission and travel expenses of $209,000 and $109,000, respectively. These increases wereoffset by decreases in contractor and recruiting and relocation expenses of $241,000 and $182,000, respectively, and the reversal of a sales tax accrualof $635,000. In future periods, we expect general and administrative expense to remain relatively unchanged.Merger-related. During 2017, merger-related expenses decreased $21,000, or 100%, when compared to 2016 due to a $21,000 decrease in costsassociated with the retention of certain employees of Unicorn.Other Expense, Net Year Ended December 31, 2017 2016 Change Other Expense Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Interest income, net $124 — % $99 — % $25 25% Interest expense (26) — (63) — 37 (59) Other expense, net 449 — (634) — 1,083 (171) Total $547 — % $(598) — % $1,145 (191)% The interest expense during 2017 is primarily comprised of interest paid on capital leases and an equipment financing. The increase in otherexpenses, net was primarily due to foreign currency exchange gains recorded during 2017 upon collection of foreign denominated accounts receivable,compared to losses recorded in the corresponding period of the prior year.Provision for Income Taxes Year Ended December 31, 2017 2016 Change Provision for Income Taxes Amount Percentage ofRevenue Amount Percentage ofRevenue Amount % (in thousands, except percentages) Provision for income taxes $370 — % $410 — % $(40) (10)% During 2017 and 2016, the provision for income taxes was primarily comprised of income tax expenses related to foreign jurisdictions. 51 Table of ContentsLiquidity and Capital ResourcesCash and cash equivalents.Our cash and cash equivalents at December 31, 2018 were held for working capital purposes and were invested primarily in money market funds.We do not enter into investments for trading or speculative purposes. At December 31, 2018 and 2017, we had $9.9 million and $7.8 million,respectively, of cash and cash equivalents held by subsidiaries in international locations, including subsidiaries located in Japan and the UnitedKingdom. As a result of changes in tax law, these earnings can be repatriated to the United States tax-free but will still be subject to foreignwithholding taxes. On February 13, 2019, we entered into a definitive agreement to acquire a significant portion of the assets of Ooyala, Inc. andcertain of its subsidiaries in exchange for 1,056,763 unregistered shares of common stock of Brightcove Inc. and approximately $6.25 million of cash.We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs over atleast the next 12 months. Year Ended December 31, Condensed Consolidated Statements of Cash Flow Data 2018 2017 2016 (in thousands) Cash flows provided by (used in) operating activities 2,550 (6,441) 11,077 Cash flows used in investing activities (4,531) (4,112) (5,293) Cash flows provided by (used in) financing activities 5,250 (544) 3,633 Accounts receivable, net.Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. The fluctuations varydepending on the timing of our billing activity, cash collections, and changes to our allowance for doubtful accounts. In many instances we receivecash payment from a customer prior to the time we are able to recognize revenue on a transaction. We record these payments as deferred revenue, whichhas a positive effect on our accounts receivable balances.Cash flows provided by (used in) operating activities.Cash used in operating activities consists primarily of net loss 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 byoperating activities during the year ended December 31, 2018 was $2.6 million. The cash flows provided by operating activities resulted from netnon-cash charges of $13.8 million and changes in our operating assets and liabilities of $2.8 million, partially offset by net losses of $14 million.Increases of cash included decreases in accounts receivable and prepaid expenses of $2.8 million and $294,000, respectively, and increases in accountspayable and accrued expense of $1.2 million and $326,000 respectively. These inflows were offset in part by decreases in deferred revenue of$1.3 million. Net non-cash expenses consisted primarily of $6.8 million for depreciation and amortization expense and $6.6 million for stock-basedcompensation expense.Cash flows used in investing activities.Cash used in investing activities during the year ended December 31, 2018 was $4.5 million, consisting primarily of $3.0 million for thecapitalization of internal-use software costs and $1.5 million in capital expenditures to support the business.Cash flows provided by (used in) financing activities.Cash provided by financing activities for the year ended December 31, 2018 was $5.3 million, consisting of proceeds received on the exercise ofcommon stock options of $5.8 million, offset in part by payments under capital lease obligation, withholding tax on RSU vesting, and equipmentfinancing of $311,000, $170,000 and $26,000, respectively. 52 Table of ContentsCredit facility.On December 14, 2018, we entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providingfor up to a $30.0 million asset based line of credit (the “Line of Credit”). Borrowings under the Line of Credit are secured by substantially all of ourassets, 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 (the “LIBOR ratemargin”) and (B) 4%. Under the Loan Agreement, we must comply with certain financial covenants, including maintaining a minimum asset coverageratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold basedon non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under theLine 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 December 31, 2018. As we have not drawn on the Line of Credit, there are noamounts outstanding as of December 31, 2018.-Net operating loss carryforwards.As of December 31, 2018, we had federal and state net operating losses of approximately $161.8 million and $76.8 million, respectively, whichare available to offset future taxable income, if any, through 2038. We had federal and state net operating losses of approximately $13.8 million and$0.7 million, respectively, which are available to offset future taxable income, if any, indefinitely. We had federal and state research and developmenttax credits of $6.9 million and $4.4 million, respectively, which expire in various amounts through 2038. Our net operating loss and tax credit amountsare subject to annual limitations under Section 382 change of ownership rules of the U.S. Internal Revenue Code of 1986, as amended.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 netdeferred 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 netdeferred 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 December 31, 2018 and 2017.Contractual Obligations and CommitmentsOur principal commitments consist primarily of obligations under our leases for our office space and contractual commitments for capital leasesand equipment financing as well as content delivery network services, hosting and other support services. Other than these lease obligations andcontractual commitments, we do not have commercial commitments under lines of credit, standby repurchase obligations or other such debtarrangements. The following table summarizes these contractual obligations at December 31, 2018: Payment Due by Period Total Less than1 Year 1 -3Years 3 - 5Years More than5 Years Operating lease obligations $21,516 $6,752 $10,476 $3,300 $988 Capital lease obligations 277 243 34 — — Outstanding purchase obligations 20,415 17,415 3,000 — — Total $42,208 $24,410 $13,510 $3,300 $988 Anticipated Cash FlowsWe 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 53 Table of Contentsanticipate that such operating costs, as well as planned capital expenditures will constitute a material use of our cash resources. As a result, our net cashflows 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 will be sufficient to meet our working capital and capital expenditures for at least the next 12months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, our introduction of newproducts and enhancements, and our expansion of sales and marketing and product development activities. To the extent that our cash and cashequivalents, and cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bankcredit 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 toacquire businesses, technologies and products that will complement our existing operations. In the event funding is required, we may not be able toobtain bank credit arrangements or equity or debt financing on terms acceptable to us or at all.Off-Balance Sheet ArrangementsWe do not have any special purpose entities or off-balance sheet arrangements.Recent Accounting PronouncementsFor information on recent accounting pronouncements, see Recently Issued and Adopted Accounting Standards in the notes to the condensedconsolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market RiskWe 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 instrumentsFinancial instruments meeting fair value disclosure requirements consist of cash equivalents, accounts receivable and accounts payable. The fairvalue of these financial instruments approximates their carrying amount.Foreign currency exchange riskOur results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in theeuro, British pound, Australian dollar and Japanese yen. Except for revenue transactions in Japan, we enter into transactions directly with substantiallyall of our foreign customers.Percentage of revenues and expenses in foreign currency is as follows: Twelve Months Ended December 31, 2018 2017 Revenues generated in locations outside the United States 49% 45% Revenues in currencies other than the United States dollar (1) 31% 29% Expenses in currencies other than the United States dollar (1) 16% 15% 54 Table of Contents(1)Percentage of revenues and expenses denominated in foreign currency for the years ended December 31, 2018 and 2017: Twelve Months EndedDecember 31, 2018 Revenues Expenses Euro 6% 1% British pound 7 6 Japanese Yen 13 4 Other 5 5 Total 31% 16% Twelve Months EndedDecember 31, 2017 Revenues Expenses Euro 6% 1% British pound 7 6 Japanese Yen 11 4 Other 5 4 Total 29% 15% As of December 31, 2018 and 2017, we had $7.2 million and $7.3 million, respectively, of receivables denominated in currencies other than theU.S. dollar. We also maintain cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange ratemovements.In addition, although our foreign subsidiaries have intercompany accounts that are eliminated upon consolidation, these accounts expose us toforeign currency exchange rate fluctuations. Exchange rate fluctuations on short-term intercompany accounts are recorded in our consolidatedstatements of operations under “other income (expense), net”, while exchange rate fluctuations on long-term intercompany accounts are recorded as acomponent 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 higherproportion of our local currency denominated expenses. Relative to foreign currency exposures existing at December 31, 2018, a 10% unfavorablemovement in foreign currency exchange rates would expose us to significant losses in earnings or cash flows or significantly diminish the fair value ofour foreign currency financial instruments. For the year ended December 31, 2018, we estimated that a 10% unfavorable movement in foreign currencyexchange rates would have decreased revenues by $5.2 million, decreased expenses by $2.9 million and decreased operating income by $2.3 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 andexpenses to U.S. dollar denominated revenue and expenses does not change from current levels. Since a portion of our revenue is deferred revenue thatis 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 theexpense is incurred. All of the potential changes noted above are based on sensitivity analyses performed on our financial results as of December 31,2018.Interest rate riskWe had cash and cash equivalents totaling $29.3 million at December 31, 2018. Cash and cash equivalents were invested primarily in moneymarket funds and are held for working capital purposes. We do not use derivative financial instruments in our investment portfolio. Declines in interestrates, however, would reduce 55 Table of Contentsfuture interest income. While we continue to incur interest expense in connection with our capital leases, the interest expense is fixed and not subjectto changes in market interest rates. In the event that we borrow under our line of credit, the related interest expense recorded would be subject tochanges in the rate of interest.Inflation riskWe do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to becomesubject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to doso could harm our business, financial condition and results of operations. 56 Table of ContentsItem 8.Financial Statements and Supplementary DataBrightcove Inc.Index to Consolidated Financial Statements Page No. Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets as of December 31, 2018 and 2017 F-2 Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016 F-3 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2018, 2017 and 2016 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 F-6 Notes to Consolidated Financial Statements F-7 57 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofBrightcove Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Brightcove Inc. (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period endedDecember 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidatedfinancial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accountingprinciples.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2019 expressed anunqualified opinion thereon.Adoption of ASU No. 2014-09As discussed in Note 3 to the consolidated financial statements, the Company changed its method for recognizing revenue as a result of the adoption ofAccounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14,2016-08, 2016-10 and 2016-12 effective January 1, 2018.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respectto the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits includedperforming procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing proceduresthat respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2010.Boston, MassachusettsFebruary 21, 2019 F-1 Table of ContentsBrightcove Inc.Consolidated Balance Sheets December 31, 2018 2017 (in thousands, except shareand per share data) Assets Current assets: Cash and cash equivalents $29,306 $26,132 Accounts receivable, net of allowance of $190 and $146 at December 31, 2018 and December 31, 2017,respectively 23,264 25,236 Prepaid expenses 4,866 3,991 Other current assets 7,070 3,045 Total current assets 64,506 58,404 Property and equipment, net 9,703 9,143 Intangible assets, net 5,919 8,236 Goodwill 50,776 50,776 Deferred tax asset — 87 Other assets 2,452 969 Total assets $133,356 $127,615 Liabilities and stockholders’ equity Current liabilities: Accounts payable $7,712 $6,142 Accrued expenses $13,746 13,621 Capital lease liability 236 228 Equipment financing — 26 Deferred revenue 39,846 39,370 Total current liabilities 61,540 59,387 Deferred revenue, net of current portion 146 244 Deferred tax liability 28 — Other liabilities 1,028 1,228 Total liabilities 62,742 60,859 Commitments and contingencies (Note 6) Stockholders’ equity: Undesignated preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued — — Common stock, $0.001 par value; 100,000,000 shares authorized; 36,752,469 and 34,933,408 shares issued atDecember 31, 2018 and 2017, respectively 37 35 Additional paid-in capital 251,122 238,700 Treasury stock, at cost; 135,000 shares (871) (871) Accumulated other comprehensive loss (952) (809) Accumulated deficit (178,722) (170,299) Total stockholders’ equity 70,614 66,756 Total liabilities and stockholders’ equity $133,356 $127,615 See accompanying notes. F-2 Table of ContentsBrightcove Inc.Consolidated Statements of Operations Year Ended December 31, 2018 2017 2016 (in thousands, except per share data) Revenue: Subscription and support revenue $150,941 $143,159 $142,022 Professional services and other revenue 13,892 12,754 8,244 Total revenue 164,833 155,913 150,266 Cost of revenue: (1) (2) Cost of subscription and support revenue 53,311 50,664 48,011 Cost of professional services and other revenue 13,313 13,954 7,836 Total cost of revenue 66,624 64,618 55,847 Gross profit 98,209 91,295 94,419 Operating expenses: (1) (2) Research and development 31,716 31,850 30,171 Sales and marketing 55,775 57,294 54,038 General and administrative 23,103 21,847 19,167 Merger-related 716 — 21 Total operating expenses 111,310 110,991 103,397 Loss from operations (13,101) (19,696) (8,978) Other income (expense), net (326) 547 (598) Loss before income taxes (13,427) (19,149) (9,576) Provision for income taxes 601 370 410 Net loss $(14,028) $(19,519) $(9,986) Net loss per share — basic and diluted $(0.39) $(0.57) $(0.30) Weighted-average number of common shares used in computing net loss per share — basic and diluted 35,808 34,376 33,189 See accompanying notes. F-3 Table of ContentsBrightcove Inc.Consolidated Statements of Comprehensive Loss Year Ended December 31, 2018 2017 2016 (in thousands) Net loss $(14,028) $(19,519) $(9,986) Other comprehensive (loss) income: Foreign currency translation adjustments (143) 363 (284) Comprehensive loss $(14,171) $(19,156) $(10,270) See accompanying notes. F-4 Table of ContentsBrightcove Inc.Consolidated Statements of Stockholders’ Equity(in thousands, except share data) Common Stock AdditionalPaid-inCapital Treasury Stock AccumulatedOtherComprehensiveLoss AccumulatedDeficit TotalStockholders’Equity Shares Par Value Shares Value Balance at December 31, 2015 32,810,631 $33 $220,458 (135,000) $(871) $(888) $(140,597) $78,135 Issuance of common stock upon exercise of stock options 886,085 1 4,554 — — — — 4,555 Issuance of common stock pursuant to restricted stockunits 425,904 — — — — — — — Return of common stock issued pursuant to settlementagreement — — — — — — — — Withholding tax on restricted stock units vesting — — (405) — — — — (405) Stock-based compensation expense — — 6,181 — — — — 6,181 Issuance of common stock upon net exercise of stockwarrants 20,528 — — — — — — — Foreign currency translation adjustment — — — — — (284) (284) Net loss — — — — — — (9,986) (9,986) Balance at December 31, 2016 34,143,148 34 230,788 (135,000) (871) (1,172) (150,583) 78,196 Issuance of common stock upon exercise of stock options 229,127 — 520 — — — — 520 Issuance of common stock pursuant to restricted stockunits 561,133 1 (1) — — — — — Withholding tax on restricted stock units vesting — — (268) — — — — (268) Stock-based compensation expense — — 7,464 — — — — 7,464 Impact of adoption of ASU 2016-09 as of January 1,2017 — — 197 — — — (197) — Foreign currency translation adjustment — — — — — 363 — 363 Net loss — — — — — — (19,519) (19,519) Balance at December 31, 2017 34,933,408 35 238,700 (135,000) (871) (809) (170,299) 66,756 Issuance of common stock upon exercise of stock options 1,173,288 1 5,756 — — — — 5,757 Issuance of common stock pursuant to restricted stockunits 645,773 1 (1) — — — — — Withholding tax on restricted stock units vesting — — (170) — — — — (170) Stock-based compensation expense — — 6,837 — — — — 6,837 Impact of adoption of ASU 2014-09 as of January 1,2018 — — — — — — 5,605 5,605 Foreign currency translation adjustment — — — — — (143) — (143) Net loss — — — — — — (14,028) (14,028) Balance at December 31, 2018 36,752,469 $37 $251,122 (135,000) $(871) $(952) $(178,722) $70,614 F-5 Table of ContentsBrightcove Inc.Consolidated Statements of Cash Flows Year Ended December 31, 2018 2017 2016 (in thousands) Operating activities Net loss $(14,028) $(19,519) $(9,986) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 6,796 7,257 7,796 Stock-based compensation 6,649 7,243 6,012 Deferred income taxes 118 38 (47) Provision for reserves on accounts receivable 199 203 230 Loss on disposal of equipment — — 155 Changes in assets and liabilities: Accounts receivable 2,791 (3,811) (559) Prepaid expenses and other current assets 294 (1,484) (894) Other assets (536) 56 (299) Accounts payable 1,197 1,758 733 Accrued expenses 326 (2,930) 3,172 Deferred revenue (1,256) 4,748 4,764 Net cash provided by (used in) operating activities 2,550 (6,441) 11,077 Investing activities Cash paid for purchase of intangible asset — — (300) Purchases of property and equipment, net of returns (Note 2) (1,538) (1,102) (1,307) Capitalized internal-use software costs (2,993) (3,010) (3,887) Decrease in restricted cash — — 201 Net cash used in investing activities (4,531) (4,112) (5,293) Financing activities Proceeds from exercise of stock options 5,757 520 4,555 Payments of withholding tax on RSU vesting (170) (268) (405) Proceeds from equipment financing — — 604 Payments on equipment financing (Note 9) (26) (307) (271) Payments under capital lease obligation (311) (489) (850) Net cash provided by (used in) financing activities 5,250 (544) 3,633 Effect of exchange rate changes on cash and cash equivalents (95) 416 (241) Net increase (decrease) in cash and cash equivalents 3,174 (10,681) 9,176 Cash and cash equivalents at beginning of period 26,132 36,813 27,637 Cash and cash equivalents at end of period $29,306 $26,132 $36,813 Supplemental disclosure of cash flow information Cash paid for income taxes $384 $500 $351 Cash paid for interest $8 $26 $63 Supplemental disclosure of non-cash operating activities Capitalization of stock-based compensation related to internal use software $188 $221 $169 Supplemental disclosure of non-cash investing and financing activities Unpaid internal-use software costs $— $28 $20 Unpaid purchases of property and equipment $160 $138 $83 See accompanying notes. F-6 Table of ContentsBrightcove Inc.Notes to Consolidated Financial StatementsYears Ended December 31, 2018, 2017 and 2016(in thousands, except share and per share data, unless otherwise noted)1. Business DescriptionBrightcove Inc. (the Company) is a global provider of cloud services for video which enable its customers to publish and distribute video toInternet-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, 2004.2. Summary of Significant Accounting PoliciesThe accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below andelsewhere in these notes to the consolidated financial statements.The Company believes that a significant accounting policy is one that is both important to the portrayal of the Company’s financial conditionand results, and requires management’s most difficult, subjective, or complex judgments, often as the result of the need to make estimates about theeffect of matters that are inherently uncertain.Basis of PresentationThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in theUnited States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generallyaccepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the FinancialAccounting Standards Board (FASB).Use of Estimates and UncertaintiesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reportedamounts expensed during the reporting period.Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition and revenue reserves,contingent liabilities, intangible asset valuations, amortization periods, expected future cash flows used to evaluate the recoverability of long-livedassets, the determination of the fair value of stock awards issued, and the recoverability of the Company’s deferred tax assets and related valuationallowance.Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates arerecorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that itbelieves to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historicalexperience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. F-7 Table of ContentsThe Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including,but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customer concentration,management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompanybalances and transactions have been eliminated in consolidation.Subsequent Events ConsiderationsThe Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements toprovide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated asrequired. The Company has evaluated all subsequent events and determined that, other than as reported herein and described below, there are nomaterial recognized or unrecognized subsequent events.On February 13, 2019, the Company entered into a definitive agreement to acquire a significant portion of the assets of Ooyala, Inc. and certainof its subsidiaries, or “Ooyala”, a provider of cloud video ad insertion technology, in exchange for 1,056,763 unregistered shares of common stock ofBrightcove Inc. and approximately $6.25 million of cash, which includes up to $500 as a reimbursement of Ooyala’s audit fees incurred in connectionwith the transaction. Pursuant to the purchase agreement, approximately $2.65 million of the cash will be placed into an escrow account to settlecertain claims for indemnification for breaches or inaccuracies in Ooyala’s representations and warranties, covenants, and agreements. The escrowamount is the equivalent of 18% of the purchase price, and this amount will remain in escrow for 20 months. The expected acquisition will beaccounted for as a purchase transaction, and as such the results of operations from the acquired assets will be consolidated with the Companybeginning on the closing date of the acquisition. In connection with the acquisition of Ooyala, the Company incurred $716 of merger-related costsduring 2018, which the Company recorded as an expense in its consolidated statements of operations for the year ended December 31, 2018. At thistime, the Company has not completed its evaluation of the purchase accounting related to this transaction.Foreign Currency TranslationThe reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency ofeach subsidiary. All assets and liabilities in the balance sheets of entities whose functional currency is a currency other than the U.S. dollar aretranslated into U.S. dollar equivalents at exchange rates as follows: (1) asset and liability accounts at period-end rates, (2) income statement accounts atweighted-average exchange rates for the period, and (3) stockholders’ equity accounts at historical exchange rates. The resulting translationadjustments are excluded from income (loss) and reflected as a separate component of stockholders’ equity. Foreign currency transaction gains andlosses are included in net loss for the period. The Company may periodically have certain intercompany foreign currency transactions that are deemedto be of a long-term investment nature; exchange adjustments related to those transactions are made directly to a separate component of stockholders’equity.Cash and Cash EquivalentsThe Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cashequivalents. Management determines the appropriate classification of investments at the time of purchase, and re-evaluates such determination at eachbalance sheet date. The Company did not have any short-term or long-term investments at December 31, 2018 or 2017.Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in interest-bearing money market accounts. Cashequivalents are carried at cost, which approximates their fair market value. F-8 Table of ContentsCash and cash equivalents as of December 31, 2018 and 2017 consist of the following: December 31, 2018 Description ContractedMaturity Amortized Cost Fair MarketValue Balance PerBalanceSheet Cash Demand $21,007 $21,007 $21,007 Money market funds Demand 8,299 8,299 8,299 Total cash and cash equivalents $29,306 $29,306 $29,306 December 31, 2017 Description ContractedMaturity Amortized Cost Fair MarketValue Balance PerBalanceSheet Cash Demand $17,972 $17,972 $17,972 Money market funds Demand 8,160 8,160 8,160 Total cash and cash equivalents $26,132 $26,132 $26,132 Disclosure of Fair Value of Financial InstrumentsThe carrying amounts of the Company’s financial instruments, which include cash, cash equivalents, accounts receivable, accounts payable,accrued expenses, capital lease liabilities and equipment financing, approximated their fair values at December 31, 2018 and 2017, due to the short-term nature of these instruments.The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates.The use of different market assumptions and/or estimation methodologies could have a significant impact on the estimated fair value amounts. SeeNote 5 for further discussion.RevenueThe Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted onJanuary 1, 2018 using the applied the modified retrospective method. For further discussion of the Company’s accounting policies related to revenue,see Note 3.Cost of RevenueCost of revenue primarily consists of costs related to supporting and hosting the Company’s product offerings and delivering professionalservices. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of theCompany’s data centers, customer support team and the Company’s professional services staff, in addition to third-party service provider costs such asdata center and networking expenses, allocated overhead, amortization of capitalized internal-use software development costs and intangible assetsand depreciation expense.Allowance for Doubtful AccountsThe Company offsets gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is theCompany’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable and is based upon historical losspatterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. Accountbalances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.Provisions for allowances for doubtful accounts are recorded in general and administrative expense. F-9 Table of ContentsBelow is a summary of the changes in the Company’s allowance for doubtful accounts for the years ended December 31, 2018, 2017 and 2016: Balance atBeginningof Period Provision Write-offs Balance atEnd ofPeriod Year ended December 31, 2018 $146 $199 $(155) $190 Year ended December 31, 2017 154 203 (211) 146 Year ended December 31, 2016 332 230 (408) 154 Off-Balance Sheet Risk and Concentration of Credit RiskThe Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedgingarrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalentsand trade accounts receivable. The Company maintains its cash and cash equivalents principally with accredited financial institutions of high creditstanding. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. TheCompany generally has not experienced any material losses related to receivables from individual customers, or groups of customers. The Companydoes not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management tobe probable in the Company’s accounts receivable.For the years ended December 31, 2018, 2017 and 2016, no individual customer accounted for more than 10% of total revenue. As ofDecember 31, 2018 and 2017, no individual customer accounted for more than 10% of accounts receivable, net.Concentration of Other RisksThe Company is dependent on certain content delivery network providers who provide digital media delivery functionality enabling theCompany’s on-demand application service to function as intended for the Company’s customers and ultimate end-users. The disruption of theseservices could have a material adverse effect on the Company’s business, financial position, and results of operations.Software Development CostsCosts incurred to develop software applications used in the Company’s on-demand application services consist of (a) certain external direct costsof materials and services incurred in developing or obtaining internal-use computer software, and (b) payroll and payroll-related costs for employeeswho are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, andtesting activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities,training, maintenance and general and administrative or overhead costs are expensed as incurred. Capitalization begins when the preliminary projectstage is complete, management, with the relevant authority, authorizes and commits to the funding of the software project, it is probable the projectwill be completed, the software will be used to perform the functions intended and certain functional and quality standards have been met. Qualifiedcosts incurred during the operating stage of the Company’s software applications relating to upgrades and enhancements are capitalized to the extent itis probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades andenhancements to, internal-use software are expensed as incurred. These capitalized costs are amortized on a straight-line basis over the expected usefullife of the software, which is estimated to be three years. Capitalized internal-use software development costs are classified as “Software” within“Property and Equipment, net” in the accompanying consolidated balance sheets.During the years ended December 31, 2018, 2017 and 2016, the Company capitalized $3,152, $3,239 and $4,038, respectively, of internal-usesoftware development costs. The Company recorded amortization expense F-10 Table of Contentsassociated with its capitalized internal-use software development costs of $2,962, $1,867 and $690 for the years ended December 31, 2018, 2017 and2016, respectively.Property and EquipmentProperty and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Leaseholdimprovements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale, the cost of assetsdisposed of, and the related accumulated depreciation, are removed from the accounts, and any resulting gain or loss is included in the determinationof net income or loss in the period of retirement.Property and equipment consists of the following: Estimated Useful Life(in Years) December 31, 2018 2017 Computer equipment 3 $14,076 $17,157 Software 3 - 6 21,208 17,996 Furniture and fixtures 5 2,929 2,396 Leasehold improvements Shorter of leaseterm or theestimated useful life 1,665 1,366 39,878 38,915 Less accumulated depreciation and amortization 30,175 29,772 $9,703 $9,143 Depreciation and amortization expense, which includes amortization expense associated with capitalized internal-use software developmentcosts, for the years ended December 31, 2018, 2017 and 2016 was $4,479, $4,523 and $4,860, respectively.Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions toproperty and equipment.Long-Lived AssetsThe Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. During this review, the Company re-evaluates the significant assumptions used indetermining the original cost and estimated lives of long-lived assets. Although the assumptions may vary from asset to asset, they generally includeoperating results, changes in the use of the asset, cash flows, and other indicators of value. Management then determines whether the remaining usefullife continues to be appropriate, or whether there has been an impairment of long-lived assets based primarily upon whether expected futureundiscounted cash flows are sufficient to support the assets’ recovery. If impairment exists, the Company adjusts the carrying value of the asset to fairvalue, generally determined by a discounted cash flow analysis.For the years ended December 31, 2018, 2017 and 2016, the Company has not identified any impairment of its long-lived assets.Business CombinationsThe Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method ofaccounting. Amounts paid for each acquisition are allocated to the F-11 Table of Contentsassets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company then allocates the purchase price in excess ofnet tangible assets acquired to identifiable intangible assets based on detailed valuations that use information and assumptions provided bymanagement. Any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed is allocated togoodwill. If the fair value of the assets acquired exceeds the purchase price, the excess is recognized as a gain.Significant management judgments and assumptions are required in determining the fair value of acquired assets and liabilities, particularlyacquired intangible assets. The valuation of purchased intangible assets is based upon estimates of the future performance and cash flows from theacquired business. Each asset is measured at fair value from the perspective of a market participant.If different assumptions are used, it could materially impact the purchase price allocation and adversely affect our results of operations, financialcondition and cash flows.Intangible Assets and GoodwillIntangible assets that have finite lives are amortized over their estimated useful lives based on the pattern of consumption of the economicbenefit or, if that pattern cannot be readily determined, on a straight-line basis and are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable, as discussed above.Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carryingvalue may not be recoverable. Conditions that could trigger a more frequent impairment assessment include, but are not limited to, a significantadverse change in certain agreements, significant underperformance relative to historical or projected future operating results, an economic downturnin customers’ industries, increased competition, a significant reduction in our stock price for a sustained period or a reduction of our marketcapitalization relative to net book value.The Company has determined, based on its organizational structure, that it had one reporting unit as of December 31, 2018 and 2017. TheCompany evaluates impairment by comparing the estimated fair value of its reporting unit to its carrying value. The Company estimates fair valueprimarily utilizing the market approach, which calculates fair value based on the market values of comparable companies or comparable transactions.The Company adopted ASU 2017-04 during the year ended December 31, 2018. The updated guidance eliminates Step 2 of the impairment test,which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record animpairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. For the year ended December 31,2018, the Company has not identified any impairment of its goodwill.Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, other events, andcircumstances from non-owner sources. Accumulated other comprehensive loss is presented separately on the consolidated balance sheets and consistsentirely of cumulative foreign translation adjustments as of December 31, 2018 and 2017.Net Loss per ShareThe Company calculates basic and diluted net loss per common share by dividing the net loss by the weighted-average number of commonshares outstanding during the period. The Company has excluded (a) all unvested restricted shares that are subject to repurchase and (b) the Company’sother potentially dilutive shares, which include warrants to purchase common stock and outstanding common stock options and unvested restrictedstock units, from the weighted-average number of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred. F-12 Table of ContentsThe following outstanding common shares have been excluded from the computation of dilutive net loss per share as of December 31, 2018,2017 and 2016: Year Ended December 31, 2018 2017 2016 Options outstanding 2,738 4,127 4,291 Restricted stock units outstanding 3,034 2,050 1,668 Warrants — — 19 Income TaxesThe Company accounts for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilitiesare recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. Inaddition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not thatsome or all of the deferred tax assets will not be realized.The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-notthreshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interest and penalties, ifapplicable, related to uncertain tax positions would be recognized as a component of income tax expense. The Company has no recorded liabilities foruncertain tax positions as of December 31, 2018 or 2017.Stock-Based CompensationAt December 31, 2018, the Company had five stock-based compensation plans, which are more fully described in Note 7.The Company values its shares of common stock in connection with the issuance of stock-based equity awards using the closing price of theCompany’s shares of common stock on the NASDAQ Global Market on the date of the grant. Accounting guidance requires employee stock-basedpayments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on theestimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vestingperiods. The Company uses the straight-line amortization method for recognizing stock-based compensation expense associated with equity awards toemployees.For stock options issued under the Company’s stock-based compensation plans, the fair value of each option grant is estimated on the date ofgrant. For service-based options, the Company recognizes compensation expense on a straight-line basis over the requisite service period of the award.The fair value of each option grant issued under the Company’s stock-based compensation plans was estimated using the Black-Scholes option-pricing model. The expected volatility of options granted has been determined using a weighted-average of the historical volatility measures of a peergroup of companies that issued options with substantially similar terms as well as the historical volatility of the Company’s own common stock. Theexpected life of options has been determined utilizing the “simplified method”. The simplified method is based on the average of the vesting tranchesand the contractual life of each grant. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of thestock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yieldis assumed to be zero. F-13 Table of ContentsThe weighted-average fair value of options granted during the years ended December 31, 2018, 2017 and 2016, was $4.11, $3.08 and $4.01 pershare, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table: Year Ended December 31, 2018 2017 2016 Risk-free interest rate 2.88% 2.08% 1.75% Expected volatility 43% 42% 45% Expected life (in years) 6.2 6.1 6.2 Expected dividend yield — — — For restricted stock units issued under the Company’s stock-based compensation plans, the fair value of each grant is calculated based on theCompany’s stock price on the date of grant. For performance-based awards with service-based vesting conditions, the Company recognizescompensation expense based upon a review of the Company’s expected achievement against the specified targets.As of December 31, 2018, there was $16,967 of total unrecognized stock-based compensation expense related to stock-based awards that isexpected to be recognized over a weighted-average period of 2.77 years. The following table summarizes stock-based compensation expense asincluded in the consolidated statement of operations for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Cost of subscription and support revenue $481 $439 $324 Cost of professional services and other revenue 242 251 217 Research and development 1,281 1,563 1,275 Sales and marketing 2,377 2,750 2,320 General and administrative 2,268 2,240 1,876 $6,649 $7,243 $6,012 Upon the adoption of ASU 2016-09 on January 1, 2017, we have elected to recognize prospectively gross stock-based compensation expensewith actual forfeitures recognized as they occur. Prior to the adoption of ASU 2016-09, we estimated forfeitures at the time of grant and revised thoseestimates in subsequent periods if actual forfeitures differed from estimates.For the years ended December 31, 2018, 2017 and 2016, stock-based compensation expense for stock options granted to non-employees in theaccompanying consolidated statements of operations was not material.See Note 7 for a summary of the stock option and restricted stock activity under the Company’s stock-based compensation plans for the yearended December 31, 2018.Advertising CostsAdvertising costs are charged to operations as incurred. The Company incurred advertising costs of $2,657, $2,485 and $2,137 for the yearsended December 31, 2018, 2017 and 2016, respectively.Recent Accounting Pronouncements and StandardsRecently Issued Accounting PronouncementsIn February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), Amendments to the FASB AccountingStandards Codification, which replaces the existing guidance for F-14 Table of Contentsleases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, lease arrangementsexceeding a twelve month term must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-useasset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense foroperating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoptionof ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. This guidance is effective for annual andinterim periods beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, whichprovides an additional, optional transition method with which to adopt the new leases standard. This additional transition method allows for acumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, rather than in the earliest period presented in thefinancial statements, as originally required by ASU 2016-02. The Company will to adopt the standard using the additional transition methodintroduced by ASU 2018-11. The Company completed its scoping assessment and determined that less than 15 leases will be impacted by the newstandard. While the Company is still in the process of determining the effect that the new standard will have on its consolidated financial statementsand related disclosures, the Company will be recognizing a significant amount of additional assets and corresponding liabilities on its consolidatedbalance sheet, as a result of its existing operating lease portfolio.Recently Adopted Accounting StandardsIn August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments, which adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standardaddresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for fiscal years, and interimperiods within those years, beginning after December 15, 2017. The amendment requires the use of the retrospective transaction approach for adoption.The adoption of ASU 2016-15 did not have any effect on the Company’s consolidated financial statements or disclosures.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires an entity to reconcileand explain the period-over-period change in total cash, cash equivalents and restricted cash within its statement of cash flows. ASU 2016-18 iseffective for annual and interim periods beginning after December 15, 2017. A reporting entity must apply the amendments in ASU 2016-18 using afull retrospective approach. The adoption of ASU 2016-18 did not have a material effect on the Company’s consolidated financial statements ordisclosures.In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendmentchanges the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The ASU iseffective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The adoption ofASU 2017-01 did not have a material effect on the Company’s consolidated financial statements or disclosures.In May 2017 the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to applymodification accounting in Topic 718. ASU 2017-09 is effective for financial statements issued for annual reporting periods beginning afterDecember 15, 2017 and interim periods within those years. The adoption of ASU 2017-09 did not have a material effect on the Company’sconsolidated financial statements and related disclosures.On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act reduces the U.S. federal corporate taxrate from 34% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferredand creates new taxes on certain foreign sourced earnings. In December 2017, the Securities and Exchange Commission (“SEC”) issued guidance F-15 Table of Contentsunder Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers toconsider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (includingcomputations) in reasonable detail to complete its accounting for the change in tax law. As of December 31, 2018, the Company had completed itsaccounting for all of the tax effects of the enactment of the Act, including the effects on its existing deferred tax balances and the one-time transitiontax. The Company has not recognized any material adjustment to the provisional tax expense estimate previously recorded related to the Act. Refer toNote 9, Income Taxes, for additional information regarding this new tax legislation.The Company has taken into consideration the other impacts of the Act that became effective in 2018, including the provisions related to GlobalIntangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income, Base Erosion Anti-Abuse Tax, as well as other provisions which wouldlimit the deductibility of future expenses. Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policyelection to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expenserelated to GILTI in the year the tax is incurred as a period expense only. For the year ended December 31, 2018, the Company made the accountingpolicy election to recognize GILTI as a period expense.3. Revenue from Contracts with CustomersThe Company primarily derives revenue from the sale of its online video platform, which enables its customers to publish and distribute video toInternet-connected devices quickly, easily and in a cost-effective and high-quality manner. Revenue is derived from three primary sources: (1) thesubscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, whichinclude initiation, set-up and customization services.In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic606), which modifies how all entities recognize revenue, and consolidates revenue recognition guidance into one ASC Topic (ASC Topic606, Revenue from Contracts with Customers). The Company adopted ASC 606 on January 1, 2018 and applied the modified retrospective method ofadoption with a cumulative catch-up adjustment to the opening balance of retained earnings at January 1, 2018. Under this method, the Companyapplied the revised guidance for the year of adoption and applied ASC Topic 605, Revenue Recognition (“ASC 605”), in the prior years. As a result, theCompany applied ASC 606 only to contracts that were not yet completed as of January 1, 2018. The Company recognized a cumulative catch-upadjustment to the opening balance of accumulated deficit at the effective date for contracts that still require performance by the entity at the date ofadoption. ASC 606 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue todepict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. 1)Identify the contract with a customer 2)Identify the performance obligations in the contract 3)Determine the transaction price 4)Allocate the transaction price to performance obligations in the contract 5)Recognize revenue when or as the Company satisfies a performance obligationThe Company satisfies performance obligations as discussed in further detail below. Revenue is recognized at the time the related performanceobligation is satisfied by transferring a promised service to a customer. F-16 Table of ContentsDisaggregation of RevenueThe Company classifies its customers by including them in either premium or volume offerings. For premium offerings, the Companyorganizes its go-to-market approach by focusing its sales and marketing teams on selling primarily to (i) media companies, who generally want todistribute video content to a broad audience and (ii) enterprises and organizations, who generally use video for marketing or enterprise communicationpurposes.The following table summarizes revenue from contracts with customers by business unit for the years ended December 31, 2018, 2017 and 2016. Year Ended December 31, 2018 2017 2016 Revenue by Business Unit Media $88,748 $85,562 $84,380 Enterprise 71,537 64,742 58,460 Volume 4,548 5,609 7,426 Total 164,833 155,913 150,266 Subscription and SupportThe Company’s subscription arrangements provide customers the right to access its hosted software applications. Customers do not have theright to take possession of the Company’s software during the hosting arrangement. Contracts for premium customers generally have a term of one yearand are non-cancellable. These contracts generally provide the customer with a maximum annual level of entitlement, and provide the rate at which thecustomer must pay for actual usage above the annual entitlement allowance. These subscription arrangements are considered stand ready obligationsthat are providing a series of distinct services that are substantially the same and are transferred with the same pattern to the customer. As such, thesesubscription arrangements are treated as a single performance obligation and the related fees are recognized as revenue ratably over the term of theunderlying arrangement.Under ASC 605, if usage exceeded the annual allowance level for a particular customer arrangement, the associated revenue was recognized inthe period that the additional usage occurred. Under ASC 606, when the transaction price includes a variable amount of consideration, an entity isrequired to estimate the consideration that is expected to be received for a particular customer arrangement. The Company evaluates variableconsideration for usage-based fees at contract inception and re-evaluates quarterly over the course of the contract. Specifically, the Company estimatesthe revenue pertaining to a customer’s usage that is expected to exceed the annual entitlement allowance and allocates such revenue to the distinctservice within the related contract that gives rise to the variable payment. Estimates of variable consideration include analyzing customer usageagainst the applicable entitlement limit at the end of each reporting period and estimating the amount and timing of additional amounts to be invoicedin connection with projected usage. Estimates of variable consideration relating to customer usage do not include amounts for which it is probable thata significant reversal will occur. Determining the amount of variable consideration to recognize as revenue involves significant judgment on the part ofmanagement and it is possible that actual revenue will deviate from estimates over the course of a customer’s committed contract term.Contracts with customers that are month-to-month arrangements (volume customers) have a maximum monthly level of usage and provide therate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage feesare recognized as revenue during the related period of performance. Contracts with customers that are invoiced on a pay-as-you-go basis, where there isno monthly or annual commitment for usage, provide the rate at which the customer must pay for actual usage for a particular period. Fees that areinvoiced on a pay-as-you-go basis are recognized as revenue during the period of performance. F-17 Table of ContentsProfessional Services and Other RevenueProfessional services and other revenue consist of services such as implementation, software customizations and project management forcustomers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signingand the remainder due when the related services have been completed, or on a time and materials basis. Professional services and other revenue sold ona stand-alone basis are recognized as the services are performed, subject to any refund or other obligation.Contracts with Multiple Performance ObligationsThe Company periodically enters into multiple-element service arrangements that include platform subscription fees, support fees, and, in certaincases, other professional services. These contracts include multiple promises that the Company evaluates to determine if the promises are separateperformance obligations. Performance obligations are identified based on services to be transferred to a customer that are both capable of being distinctand are distinct within the context of the contract. Once the Company determines the performance obligations, the Company determines thetransaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company thenallocates the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method. The transactionprice post allocation is recognized as revenue as the related performance obligation is satisfied.Costs to Obtain a ContractCommissions are paid to internal sales representatives as compensation for obtaining contracts. Under the new guidance, the Companycapitalizes commissions that are incremental, as a result of costs incurred to obtain a customer contract, if those costs are not within the scope ofanother topic within the accounting literature and meet the specified criteria. Assets recognized for costs to obtain a contract are amortized over theperiod of performance for the underlying customer contracts. The commission expense on contracts with new customers was previously recorded overthe respective contract term. Under the new guidance, the commission expense on contracts with new customers will be recorded over the average lifeof a customer given the commission amount associated with sales to new customers is not commensurate with the commission amount associated withthe contract renewal for those same customers. The commission amount associated with the renewal of a contract in addition to any commissionamount related to incremental sales was previously recorded as expense in the quarter the commission was earned; however, under ASC 606 thesecommission amounts are recorded as expense over the term of the renewed contract. These assets are periodically assessed for impairment. F-18 Table of ContentsFinancial Statement Impact of Adoption ASC 606The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recordedas an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenueguidance, the following adjustments were made on the condensed consolidated balance sheet as of January 1, 2018. As Reported Adjustments Adjusted December 31,2017 Subscriptionand SupportRevenue Costs toObtain aContract January 1,2018 Assets Current assets: Cash and cash equivalents $26,132 $26,132 Accounts receivable, net 25,236 926 26,162 Prepaid expenses 3,991 3,991 Other current assets 3,045 1,861 3,384 8,290 Total current assets 58,404 2,787 3,384 64,575 Property and equipment, net 9,143 9,143 Intangible assets, net 8,236 8,236 Goodwill 50,776 50,776 Deferred tax asset 87 87 Other assets 969 978 1,947 Total assets $127,615 $2,787 $4,362 $134,764 Liabilities and stockholders’ equity Current liabilities: Accounts payable $6,142 $6,142 Accrued expenses 13,621 13,621 Capital lease liability 228 228 Equipment financing 26 26 Deferred revenue 39,370 1,429 40,799 Total current liabilities 59,387 1,429 — 60,816 Deferred revenue, net of current portion 244 115 359 Other liabilities 1,228 1,228 Total liabilities 60,859 1,544 — 62,403 Commitments and contingencies Stockholders’ equity: Undesignated preferred stock — — Common stock 35 35 Additional paid-in capital 238,700 238,700 Treasury stock (871) (871) Accumulated other comprehensive loss (809) (809) Accumulated deficit (170,299) 1,243 4,362 (164,694) Total stockholders’ equity 66,756 1,243 4,362 72,361 Total liabilities and stockholders’ equity $127,615 $2,787 $4,362 $134,764 Subscription and SupportUnder ASC 606, the Company estimates the variable consideration to be received and recognizes those amounts, subject to constraint, as theCompany satisfies its performance obligation. In conjunction with the F-19 Table of ContentsJanuary 1, 2018 adoption of ASC 606, the Company reduced accumulated deficit by $1,243 reflecting the recognition of revenue primarily relating tovariable consideration, for contracts that still require performance by the entity at the date of adoption.Costs to Obtain a ContractUnder the new guidance, the commission expense on contracts with new customers will be recorded over the average life of a customer given thecommission amount associated with sales to new customers is not commensurate with the commission amount associated with the contract renewal forthose same customers. The commission amount associated with the renewal of a contract in addition to any related incremental sale is recorded asexpense over the term of the renewed contract. The net impact of these changes resulted in a $4,362 reduction to accumulated deficit for contracts thatstill require performance by the Company at the date of adoption.Income TaxesThe adoption of ASC 606 primarily resulted in an acceleration of revenue and the reduction of expense as of December 31, 2017, which in turngenerated additional deferred tax liabilities. As the Company fully reserves its net deferred tax assets in the jurisdictions impacted by the adoption ofASC 606, this impact was offset by a corresponding reduction to the valuation allowance. F-20 Table of ContentsImpact of New Revenue Guidance on Financial Statement Line ItemsThe following tables compare the reported condensed consolidated balance sheet, statement of operations and cash flows, as of andfor the year ended December 31, 2018, to the pro-forma amounts had the previous guidance been in effect. As of December 31, 2018 Balance Sheet Asreported Pro forma as ifthe previousaccountingguidance wasin effect Assets Current assets: Cash and cash equivalents $29,306 29,306 Accounts receivable, net 23,264 22,294 Prepaid expenses 4,866 4,866 Other current assets 7,070 1,857 Total current assets 64,506 58,323 Property and equipment, net 9,703 9,703 Intangible assets, net 5,919 5,919 Goodwill 50,776 50,776 Deferred tax asset — — Other assets 2,452 1,004 Total assets $133,356 $125,725 Liabilities and stockholders’ equity Current liabilities: Accounts payable $7,712 $7,712 Accrued expenses 13,746 13,746 Capital lease liability 236 236 Equipment financing — — Deferred revenue 39,846 38,422 Total current liabilities 61,540 60,116 Deferred revenue, net of current portion 146 146 Deferred tax liability 28 28 Other liabilities 1,028 1,028 Total liabilities 62,742 61,318 Commitments and contingencies Stockholders’ equity: Undesignated preferred stock — — Common stock 37 37 Additional paid-in capital 251,122 251,122 Treasury stock (871) (871) Accumulated other comprehensive loss (952) (952) Accumulated deficit (178,722) (184,929) Total stockholders’ equity 70,614 64,407 Total liabilities and stockholders’ equity $133,356 $125,725 Total reported assets were $7,631 greater than the pro-forma balance sheet, which assumes the previous guidance remained in effect as ofDecember 31, 2018. This was largely due to impacts of variable consideration and costs to obtain a contract. F-21 Table of ContentsTotal reported liabilities were $1,424 greater than the pro-forma balance sheet, which assumes the previous guidance remained in effect as ofDecember 31, 2018. This was largely due to the impact of variable consideration.The following summarizes the significant changes on the Company’s condensed consolidated statement of operations for the year endedDecember 31, 2018 as a result of the adoption of ASC 606 on January 1, 2018 compared to if the Company had continued to recognize revenues underASC 605. Year Ended December 31, 2018 Statement of Operations As reported Pro forma as if theprevious accountingguidance was ineffect Revenue: Subscription and support revenue $150,941 $151,116 Professional services and other revenue 13,892 13,892 Total revenue 164,833 165,008 Cost of revenue: Cost of subscription and support revenue 53,311 53,311 Cost of professional services and other revenue 13,313 13,313 Total cost of revenue 66,624 66,624 Gross profit 98,209 98,384 Operating expenses: Research and development 31,716 31,716 Sales and marketing 55,775 56,552 General and administrative 23,103 23,103 Merger-related 716 716 Total operating expenses 111,310 112,087 Loss from operations (13,101) (13,703) Other income (expense), net (326) (326) Loss before income taxes (13,427) (14,029) Provision for income taxes 601 601 Net loss $(14,028) $(14,630) Net loss per share — basic and diluted $(0.39) $(0.41) Weighted-average number of common shares used in computing net lossper share 35,808 35,808 The primary difference in subscription and support revenue relates to the impacts of applying the variable consideration guidance under ASC606. Under the previous guidance, subscription and support revenue would have been approximately $175 higher, for the year ended December 31,2018 as revenue for usage based fees, for contracts with annual entitlement allowances, was recognized in the month of such usage. Under ASC 606,usage based fees, for contracts with annual entitlement allowances, are recognized as revenue over the term of the underlying arrangement.Sales and marketing expense, under the previous guidance, would have increased by approximately $777 for the year ended December 31, 2018.Sales and marketing expense would have increased by $777 for the year ended December 31, 2018, due to a portion of the commission payments beingrecorded immediately to expense at the time a liability was recorded. In addition, certain commission amounts that were amortized to expense over theunderlying term of the arrangement are now amortized over the average customer life under ASC 606. F-22 Table of ContentsThe net impact of accounting for revenue under the new guidance decreased net loss per share by $0.02 per basic and diluted share for the yearended December 31, 2018. Year Ended December 31, 2018 Statement of Cash Flows As reported Pro forma as if theprevious accountingguidance was ineffect Operating activities Net loss $(14,028) $(14,630) Adjustments to reconcile net loss to net cash provided by operatingactivities: Depreciation and amortization 6,796 6,796 Stock-based compensation 6,649 6,649 Deferred income taxes 118 118 Provision for reserves on accounts receivable 199 199 Changes in assets and liabilities: Accounts receivable 2,791 2,835 Prepaid expenses and other current assets 294 262 Other assets (536) (65) Accounts payable 1,197 1,197 Accrued expenses 326 326 Deferred revenue (1,256) (1,137) Net cash provided by operating activities $2,550 $2,550 The adoption of ASC 606 had no impact on the Company’s cash flows from operations. The aforementioned impacts resulted in offsetting shiftsin cash flows between net loss and various working capital balances.The following summarizes the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers. AccountsReceivable,net ContractAssets(current) DeferredRevenue(current) DeferredRevenue(non-current) TotalDeferredRevenue Balance at January 1, 2018 $26,162 $3,124 $40,799 $359 $41,158 Balance at December 31, 2018 23,264 1,640 39,846 146 39,992 Revenue recognized during the year ended December 31, 2018 from amounts included in deferred revenue at the beginning of the period wasapproximately $40.5 million. During the year ended December 31, 2018, the Company did not recognize revenue from performance obligationssatisfied or partially satisfied in previous periods.The assets recognized for costs to obtain a contract were $5.9 million and $5.4 million as of December 31, 2018 and January 1, 2018,respectively. Amortization expense recognized during the year ended December 31, 2018 related to costs to obtain a contract was $7.2 million.Transaction Price Allocated to Future Performance ObligationsASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have notyet been satisfied as December 31, 2018. ASC 606 provides certain practical expedients that limit the requirement to disclose the aggregate amount oftransaction price allocated to unsatisfied performance obligations. F-23 Table of ContentsSubscription and Support RevenueAs of December 31, 2018, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and supportcontracts was approximately $109.4 million, of which approximately $90.7 million is expected to be recognized over the next 12 months. TheCompany expects to recognize substantially all of the remaining unsatisfied performance obligations by the end of 2020. The Company applied thepractical expedient to not disclose the amount of transaction price allocated to unsatisfied performance obligations for variable consideration that theCompany is able to allocate to one or more of the performance obligations in its contracts.Professional ServicesThe Company applied the practical expedient to not disclose the amount of transaction price allocated to unsatisfied performance obligationswhen the performance obligation is part of a contract that has an original expected duration of one year or less. The Company does not have materialfuture obligations associated with professional services that extend beyond one year.4. Intangible Assets and GoodwillFinite-lived intangible assets consist of the following as of December 31, 2018: Description WeightedAverageEstimatedUseful Life(in years) GrossCarryingValue AccumulatedAmortization NetCarryingValue Developed technology 7 $14,223 $11,082 $3,141 Customer relationships 11 6,257 3,479 2,778 Non-compete agreements 3 1,912 1,912 — Tradename 3 368 368 — Total $22,760 $16,841 $5,919 Finite-lived intangible assets consist of the following as of December 31, 2017: Description WeightedAverageEstimatedUseful Life(in years) GrossCarryingValue AccumulatedAmortization NetCarryingValue Developed technology 7 $14,223 $9,431 $4,792 Customer relationships 11 6,257 2,813 3,444 Non-compete agreements 3 1,912 1,912 — Tradename 3 368 368 — Total $22,760 $14,524 $8,236 The following table summarizes amortization expense related to intangible assets for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Cost of subscription and support revenue $1,651 $2,031 $2,031 Research and development — 11 126 Sales and marketing 666 692 959 $2,317 $2,734 $3,116 F-24 Table of ContentsThe estimated remaining amortization expense for each of the five succeeding years and thereafter is as follows: Year Ending December 31, Amount 2019 $1,603 2020 1,584 2021 1,328 2022 370 2023 285 2024 and thereafter 749 Total $5,919 The carrying amount of goodwill was $50,776 as of December 31, 2018 and 2017.5. Fair Value MeasurementsASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for instruments measured at fair value thatdistinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observableinputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of theCompany. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing theasset or liability, and are developed based on the best information available in the circumstances.ASC 820 identifies fair value as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-basedmeasurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company usesvaluation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs areprioritized as follows: • Level 1: Observable inputs, such as quoted prices for identical assets or liabilities in active markets; • Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly, such as quoted prices forsimilar assets or liabilities, or market-corroborated inputs; and • Level 3: Unobservable inputs for which there is little or no market data which require the reporting entity to develop its own assumptionsabout how market participants would price the assets or liabilities.The valuation techniques that may be used to measure fair value are as follows:A. Market approach — Uses prices and other relevant information generated by market transactions involving identical or comparable assets orliabilities.B. Income approach — Uses valuation techniques to convert future amounts to a single present amount based on current market expectationsabout those future amounts, including present value techniques, option-pricing models, and excess earnings method.C. Cost approach — Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). F-25 Table of ContentsThe following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input as of December 31, 2018and 2017: December 31, 2018 QuotedPrices inActiveMarkets forIdenticalItems(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Total Assets: Money market funds $8,299 $— $— $8,299 Total assets $8,299 $— $— $8,299 December 31, 2017 QuotedPrices inActiveMarkets forIdenticalItems(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Total Assets: Money market funds $8,160 $— $— $8,160 Total assets $8,160 $— $— $8,160 Realized gains and losses from sales of the Company’s investments are included in “Other income (expense), net”.The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may beelected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting.The Company did not elect to remeasure any of its existing financial assets or liabilities, and did not elect the fair value option for any financial assetsand liabilities transacted in the years ended December 31, 2018 or 2017.6. Commitments and ContingenciesOperating Lease CommitmentsThe Company leases its facilities under non-cancelable operating leases. These operating leases expire at various dates through January 2024.Future minimum rental commitments under operating leases at December 31, 2018 are as follows: Year Ending December 31, OperatingLeaseCommitments 2019 $6,752 2020 5,355 2021 5,122 2022 2,192 2023 1,108 2024 and thereafter 988 $21,517 F-26 Table of ContentsCertain amounts included in the table above relating to co-location leases for the Company’s servers include usage based charges in addition tobase rent.The Company’s primary office lease has the option to renew the lease for two successive periods of five years each. In connection with the officelease, the Company entered into a letter of credit in the amount of $2.4 million.Certain of the Company’s operating leases include escalating payment amounts and lease incentives. The Company is recognizing the relatedrent expense on a straight-line basis over the term of the lease. The lease incentives are considered an inseparable part of the lease agreement, and arerecognized as a reduction of rent expense on a straight-line basis over the term of the lease. As of December 31, 2018 and 2017, the Company haddeferred rent and rent incentives of $1,264 and $1,464, respectively, of which $876 and $1,102, respectively, is classified as a long-term liability in theaccompanying consolidated balance sheets. Rent expense for the years ended December 31, 2018, 2017 and 2016 was $7,857, $6,608 and $6,334,respectively. Income from sublease rental activity amounted to $92, $285 and $219, respectively, for the years ended December 31, 2018, 2017 and2016. The Company’s existing sublease agreement expired in June 2018, and as of December 31, 2018, the Company was not party to any subleaseagreements.Capital Lease CommitmentsThe Company leases certain computer equipment and support under non-cancelable capital leases. The lease arrangements expire at variousdates through April 2020. Future minimum rental commitments under capital leases at December 31, 2018 are as follows: Year Ending December 31, Capital LeaseCommitments 2019 $243 2020 $34 Less – interest on capital leases 7 $270 At December 31, 2018, total assets under capital leases were $353 and related accumulated amortization was $83.In addition to the operating lease and capital lease commitments discussed above, as of December 31, 2018, the Company had non-cancelablecommitments of $17,415 and $3,000 payable in 2019 and 2020, respectively, primarily for content delivery network services, hosting and othersupport services.Legal MattersOn May 22, 2017, a lawsuit was filed against Brightcove and two individuals by Ooyala, Inc. (“Ooyala”) and Ooyala Mexico S. de R.L. de C.V.(“Ooyala Mexico”). The lawsuit, which was filed in the United States District Court for the District of Massachusetts, concerned allegations that thetwo individuals, who were former employees of Ooyala Mexico, misappropriated customer information and other trade secrets and used thatinformation in working for Brightcove. The complaint was amended on June 1, 2017 to remove claims against the two former employees of OoyalaMexico. The remaining claims against Brightcove were for violation of the Defend Trade Secrets Act of 2016 (18 U.S.C. §1836), violation of theMassachusetts trade secret statute (M.G.L. c. 93, §42), violation of Massachusetts Chapter 93A (M.G.L. c. 93A, §11), and tortious interference withadvantageous business relationships. Ooyala and Ooyala Mexico also filed a motion for preliminary injunction (amended at the same time thecomplaint was amended), seeking to enjoin Brightcove from using any of the allegedly misappropriated information or communicating with customerswhose information was taken, and F-27 Table of Contentsseeking the return of any information that was allegedly taken. On June 16, 2017, Brightcove filed an opposition to the motion for preliminaryinjunction, and also moved to dismiss the lawsuit. The motion to dismiss was denied on September 6, 2017. The court issued a preliminary injunctionon July 10, 2018. The injunction required Brightcove to delete any Ooyala confidential information obtained from the former Ooyala employees andprohibited Brightcove from using such information to pursue business with twenty-two specified Latin American prospective customers. OnOctober 19, 2018, the parties settled the matter for an immaterial amount, and the case was dismissed on October 24, 2018.On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against Brightcove and its subsidiary Brightcove Holdings, Inc. in theUnited States District Court for the District of Delaware. The complaint alleged that Brightcove infringed five patents related to file compressiontechnology. The complaint sought monetary damages and injunctive relief. On December 1, 2017, Realtime filed an amended complaint, adding twoadditional patents to its claims. Brightcove filed a motion to dismiss on January 26, 2018. The plaintiff filed an opposition to the motion to dismiss onFebruary 9, 2018 and Brightcove filed a reply on February 16, 2018. A ruling on the motion to dismiss was not issued by the court. On July 31, 2018,Brightcove filed a Motion to Transfer Venue, which motion was opposed by the plaintiff. On October 18, 2018, Brightcove, via its insurer, entered intoa Patent License Agreement which provides Brightcove a license to the patents-in-suit (as well as additional patents and patent applications owned byRealtime) in exchange for a one-time payment, which is immaterial in amount. As a result of entering into the Patent License Agreement, the case wasdismissed on October 31, 2018.On January 30, 2019, Uniloc 2017 LLC filed a complaint against the Company and its subsidiary, Brightcove Holdings, Inc. in the United StatesDistrict Court for the District of Delaware. The complaint alleges that Brightcove infringed four patents and seeks monetary damages and other relief.The Company cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Companyreasonably estimate the potential loss, if any.The Company, from time to time, is party to litigation arising in the ordinary course of business. Management does not believe that the outcomeof these claims will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company based onthe status of proceedings at this time.Guarantees and Indemnification ObligationsThe Company typically enters into indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Companyindemnifies 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 tothe Company’s technology. The term of these indemnification agreements is generally perpetual after execution of the agreement. Based on whencustomers first subscribe for the Company’s service, the maximum potential amount of future payments the Company could be required to make undercertain of these indemnification agreements is unlimited, however, more recently the Company has typically limited the maximum potential value ofsuch potential future payments in relation to the value of the contract. Based on historical experience and information known as of December 31, 2018,the Company has not incurred any costs for the above guarantees and indemnities. The Company has received requests for indemnification fromcustomers in connection with patent infringement suits brought against the customer by a third party. To date, the Company has not agreed that therequested 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 standardpublished specification documentation in effect at the time of delivery of the licensed products and services to the customer for the warranty period ofthe product or service. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes theestimated fair value of these agreements is immaterial. F-28 Table of Contents7. Stockholders’ EquityCommon StockCommon stockholders are entitled to one vote per share. Holders of common stock are entitled to receive dividends, when and if declared by theBoard.Treasury StockThe Company has recorded 135,000 shares as treasury stock as of December 31, 2018 and 2017.Equity Incentive PlansAt December 31, 2018, the Company had five stock-based compensation plans, the Amended and Restated 2004 Stock Option and IncentivePlan (the 2004 Plan), the 2012 Stock Incentive Plan (the 2012 Plan), the Brightcove Inc. 2012 RSU Inducement Plan (the RSU Plan), the BrightcoveInc. 2014 Stock Option Inducement Plan (the 2014 Stock Inducement Plan), and the 2018 Inducement Plan (the 2018 plan). The 2004 Plan and the2012 Plan provided for the issuance of incentive and non-qualified stock options, restricted stock, and other equity awards to the Company’semployees, officers, directors, consultants and advisors. In conjunction with the effectiveness of the 2012 Plan, the Board voted that no further stockoptions or other equity-based awards may be granted under the 2004 Plan.The number of shares reserved and available for issuance under the 2012 Plan automatically increases each January 1, beginning in 2013, by 4%of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number of shares asdetermined by the Company’s compensation committee subject to an overall overhang limit of 30%. This number is subject to adjustment in the eventof a stock split, stock dividend or other change in the Company’s capitalization.In 2012, the Company adopted the RSU Plan in connection with the acquisition of Zencoder. The restricted stock units were settled in shares ofthe Company’s common stock upon vesting.In 2014, the Company adopted the 2014 Stock Inducement Plan in connection with the Unicorn asset purchase agreement.Effective April 11, 2018, the Company adopted the 2018 Plan. The 2018 Plan provides for the issuance of stock options and restricted stockunits to the Company’s Chief Executive Officer (“CEO”).During 2018, the Company granted an aggregate of 1,169,000 restricted stock units to certain key executives, which contain both performance-based and service-based vesting conditions. The Company measures compensation expense for these performance-based awards based upon a review ofthe Company’s expected achievement against specified financial performance targets. Compensation cost is recognized on a ratable basis over therequisite service period for each series of grants to the extent management has deemed that such awards are probable of vesting based upon theexpected achievement against the specified targets. On a periodic basis, management reviews the Company’s expected performance and adjusts thecompensation cost, if needed, at such time.At December 31, 2018, 2,105,806 shares were available for issuance under all stock-based compensation plans. F-29 Table of ContentsThe following is a summary of the stock option activity for all stock option plans during the year ended December 31, 2018: Number ofShares Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm(In Years) AggregateIntrinsicValue (1) Outstanding at December 31, 2017 3,924,313 $7.33 Granted 1,234,184 8.99 Exercised (1,173,288) 4.91 $4,897 Cancelled (1,247,554) 8.54 Outstanding at December 31, 2018 2,737,655 $8.57 6.84 $678 Exercisable at December 31, 2018 1,413,875 $8.36 4.83 $545 (1)The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stockon December 31, 2018 of $7.04 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.The aggregate intrinsic value for options exercised during the years ended December 31, 2017 and 2016 was $1,243 and $5,159, respectively.The Company has entered into restricted stock unit (RSU) agreements with certain of its employees pursuant to the 2012 Plan and the RSU Plan.Vesting occurs periodically at specified time intervals, ranging from three months to four years, and in specified percentages. Upon vesting, the holderwill receive one share of the Company’s common stock for each unit vested.The following table summarizes the RSU activity during the year ended December 31, 2018: Shares WeightedAverageGrantDateFairValue Unvested by December 31, 2017 2,218,704 $7.44 Granted 2,218,036 8.43 Vested and issued (645,773) 7.33 Cancelled (757,385) 7.44 Unvested by December 31, 2018 3,033,582 $8.07 WarrantsIn September 2006, the Company issued fully vested warrants to purchase an aggregate of 46,713 shares of Series B Preferred Stock, at a purchaseprice of $3.21 per share, to two lenders in connection with a line of credit agreement.In August 2016, the remaining 28,028 shares exercisable under the warrants were exercised pursuant to a net exercise provision, which resulted inthe issuance of 20,528 common shares. F-30 Table of ContentsCommon Stock Reserved for Future IssuanceAt December 31, 2018, the Company has reserved the following shares of common stock for future issuance: December 31,2018 Common stock options outstanding 2,737,655 Restricted stock unit awards outstanding 3,033,582 Shares available for issuance under all stock-based compensation plans 2,105,806 Total shares of authorized common stock reserved for future issuance 7,877,043 8. Income TaxesLoss before the provision for income taxes consists of the following: Year Ended December 31, 2018 2017 2016 Domestic $(15,026) $(20,528) $(10,756) Foreign 1,599 1,379 1,180 Total $(13,427) $(19,149) $(9,576) The provision for income taxes in the accompanying consolidated financial statements consists of the following: Year Ended December 31, 2018 2017 2016 Current provision: Federal $— $— $— State 19 21 33 Foreign 464 311 424 Total current 483 332 457 Deferred (benefit): Federal — — — State — — — Foreign 118 38 (47) Total deferred 118 38 (47) Total provision $601 $370 $410 F-31 Table of ContentsA reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2018 2017 2016 Tax at statutory rates (21.0)% (34.0)% (34.0)% State income taxes (5.5) (4.1) (6.1) Change in tax rate — 103.9 0.1 Permanent differences 7.0 7.1 11.7 Foreign rate differential 1.4 (0.7) (1.1) Research and development credits (6.1) (3.7) (6.7) Change in valuation allowance 29.2 (66.3) 40.8 Other, net (0.5) (0.3) (0.4) Effective tax rate 4.5% 1.9% 4.3% The income tax effect of each type of temporary difference and carryforward as of December 31, 2018 and 2017 is as follows: As of December 31, 2018 2017 Deferred tax assets: Net operating loss carry-forwards $41,440 $37,964 Tax credit carry-forwards 10,327 9,173 Stock-based compensation 974 1,856 Fixed Assets 179 267 Account receivable reserves 136 189 Accrued compensation 910 851 Capitalized start-up costs 92 138 Other temporary differences 325 371 Total deferred tax assets 54,383 50,809 Deferred tax liabilities: Other deferred tax liabilities (1,520) — Intangible assets (3,100) (3,611) Total deferred tax liabilities (4,620) (3,611) Valuation allowance (49,791) (47,111) Net deferred tax asset (liability) $(28) $87 The Company is required to compute income tax expense in each jurisdiction in which it operates. This process requires the Company to projectits current tax liability and estimate its deferred tax assets and liabilities, including net operating loss (NOL) and tax credit carry-forwards. In assessingthe 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 taxassets will not be realized.The Company has provided a valuation allowance against its remaining U.S. net deferred tax assets as of December 31, 2018 and 2017, as basedupon 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. The increase in thevaluation allowance from 2017 to 2018 of $2.7 million principally relates to the current year taxable loss. The Company maintains net deferred taxliabilities for temporary differences related to its foreign subsidiaries. F-32 Table of ContentsAs of December 31, 2018, the Company had federal and state net operating losses of approximately $161.8 million and $76.8 million,respectively, which are available to offset future taxable income, if any, through 2038. The Company had federal and state net operating losses ofapproximately $13.8 million and $0.7 million, respectively, which are available to offset future taxable income, if any, indefinitely. The Company alsohad federal and state research and development tax credits of $6.9 million and $4.4 million, respectively, which expire in various amounts through2038. The net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules under the U.S.Internal Revenue Code of 1986, as amended. This could limit the amount of tax attributes that can be utilized annually to offset future taxable incomeor tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change.Subsequent ownership changes may further affect the limitation in future years. The Company has not conducted an assessment to determine whetherthere may have been a Section 382 ownership change from June 30, 2014, the date of the most recent completed study, through December 31, 2018. Ifa change in ownership were to have occurred during that period, and resulted in the restriction of net operating loss and tax credit carryforwards, thereduction in the related deferred tax asset would be offset with a corresponding reduction in the valuation allowance.On January 1, 2009, the Company adopted the provision for uncertain tax positions under ASC 740, Income Taxes. The adoption did not have animpact on the Company’s retained earnings balance. At December 31, 2018 and 2017, the Company had no recorded liabilities for uncertain taxpositions.At December 31, 2018 and 2017, the Company had no accrued interest or penalties related to uncertain tax positions.The Company files income tax returns in the U.S. federal tax jurisdiction, various state and various foreign jurisdictions. The Company iscurrently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2015through 2018. Since the Company is in a U.S. loss carryforward position, carryforward tax attributes generated in prior years may still be adjusted uponfuture examination if they have or will be used in a future period. Additionally, certain non-U.S. jurisdictions are no longer subject for income taxexaminations by authorities for tax years before 2013.On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act reduces the U.S. federal corporate taxrate from 34% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferredand creates new taxes on certain foreign sourced earnings. In December 2017, the SEC issued SAB 118, which directs taxpayers to consider the impactof the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) inreasonable detail to complete its accounting for the change in tax law.As of December 31, 2018, the Company had completed its accounting for all of the tax effects of the enactment of the Act, including the effectson its existing deferred tax balances and the one-time transition tax. The Company had not recognized any material adjustment to the provisional taxexpense estimate previously recorded related to the Act.No additional U.S. income taxes or foreign withholding taxes have been provided for any additional outside basis differences inherent in theCompany’s foreign entities as these amounts continue to be indefinitely reinvested in foreign operations based on management’s current intentions.Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition taxand additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.9. DebtOn December 14, 2018, we entered into an amended and restated loan and security agreement with a lender (the “Loan Agreement”) providingfor up to a $30.0 million asset based line of credit (the “Line of Credit”). F-33 Table of ContentsUnder the Line of Credit, we can borrow up to $30.0 million. 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, thegreater of (A) the prime rate and (B) 4%, and (ii) for LIBOR advances, the greater of (A) the LIBOR rate plus 225 basis points (the “LIBOR rate margin”)and (B) 4%. Under the Loan Agreement, we must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. Ifthe outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold basedon non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under theLine 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 December 31, 2018 and there were no borrowings outstanding.10. Accrued ExpensesAccrued expenses consist of the following: December 31, 2018 2017 Accrued payroll and related benefits $4,777 $4,436 Accrued sales and other taxes 1,639 1,363 Accrued professional fees and outside contractors 1,253 2,021 Accrued content delivery 2,979 2,390 Accrued other liabilities 3,098 3,411 Total $13,746 $13,621 11. Segment InformationDisclosure requirements about segments of an enterprise and related information establishes standards for reporting information regardingoperating segments in annual financial statements and requires selected information of those segments to be presented in interim financial reportsissued to stockholders. Operating segments are identified as components of an enterprise about which separate discrete financial information isavailable for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assessperformance. The Company’s chief decision maker is its chief executive officer. The Company and the chief decision maker view the Company’soperations and manage its business as one operating segment.Geographic DataTotal revenue to unaffiliated customers by geographic area, based on the location of the customer, was as follows: Year Ended December 31, 2018 2017 2016 Revenue: North America $88,778 $91,358 $92,912 Europe 27,754 24,425 25,196 Japan 21,960 16,881 15,230 Asia Pacific 25,766 22,539 15,617 Other 575 710 1,311 Total revenue $164,833 $155,913 $150,266 F-34 Table of ContentsNorth America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was$83,435, $85,459 and $87,302 during the years ended December 31, 2018, 2017 and 2016, respectively. Other than the United States and Japan, noother country contributed more than 10% of the Company’s total revenue during the years ended December 31, 2018 and 2017.As of December 31, 2018 and December 31, 2017, property and equipment at locations outside the U.S. was not material.12. 401(k) Savings PlanThe Company maintains a defined contribution savings plan covering all eligible U.S. employees under Section 401(k) of the Internal RevenueCode. Company contributions to the plan may be made at the discretion of the Board. During the years ended December 31, 2018, 2017 and 2016, theCompany has made contributions to the plan of $424, $425 and $336, respectively.13. Quarterly Financial Data (unaudited)The following table presents certain unaudited quarterly financial information for the eight quarters in the period ended December 31, 2018. Thisinformation has been prepared on the same basis as the audited financial statements and includes all adjustments (consisting only of normal recurringadjustments) necessary to present fairly the unaudited quarterly results of operations set forth herein. For the three months ended: Dec. 31,2018 Sep. 30,2018 Jun. 30,2018 Mar. 31,2018 Dec. 31,2017 Sep. 30,2017 Jun. 30,2017 Mar. 31,2017 Revenue $40,864 $41,121 $41,654 $41,194 $40,101 $39,487 $38,753 $37,572 Gross profit 24,387 24,803 25,036 23,983 23,783 22,983 22,175 22,354 Loss from operations (2,527) (3,141) (5,017) (2,416) (1,331) (5,349) (7,884) (5,132) Net loss (2,617) (3,502) (5,652) (2,257) (1,372) (5,396) (7,678) (5,073) Basic and diluted net loss per share (0.07) (0.10) (0.16) (0.06) (0.04) (0.16) (0.22) (0.15) F-35 Table of ContentsItem 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of ourdisclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officerand principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f)or 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples, and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018 using the criteria set forth bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework (2013). Based on thisassessment and those criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2018.The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by Ernst & Young LLP, anindependent registered public accounting firm, as stated in their report which is included herein.Changes in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting. 58 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofBrightcove Inc.Opinion on Internal Control over Financial ReportingWe have audited Brightcove Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in InternalControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). In our opinion, Brightcove Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2018, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), theconsolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive loss,stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and our report datedFebruary 21, 2019 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We area public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could havea material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that 59 Table of Contentscontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ Ernst & Young LLPBoston, MassachusettsFebruary 21, 2019 60 Table of ContentsItem 9B.Other InformationNone.PART III Item 10.Directors, Executive Officers, and Corporate GovernanceIncorporated by reference from the information in our Proxy Statement for our 2018 Annual Meeting of Stockholders, which we will file with theSEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 11.Executive CompensationIncorporated by reference from the information in our Proxy Statement for our 2018 Annual Meeting of Stockholders, which we will file with theSEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersIncorporated by reference from the information in our Proxy Statement for our 2018 Annual Meeting of Stockholders, which we will file with theSEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 13.Certain Relationships and Related Transactions and Director IndependenceIncorporated by reference from the information in our Proxy Statement for our 2018 Annual Meeting of Stockholders, which we will file with theSEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 14.Principal Accountant Fees and ServicesIncorporated by reference from the information in our Proxy Statement for our 2018 Annual Meeting of Stockholders, which we will file with theSEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.PART IV Item 15.Exhibits, Financial Statements and Schedules(a)(1) Financial Statements.The response to this portion of Item 15 is set forth under Item 8 above.(a)(2) Financial Statement Schedules.All schedules have been omitted because they are not required or because the required information is given in the Consolidated FinancialStatements or Notes thereto set forth under Item 8 above. 61 Table of Contents(a)(3) Exhibits.The exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K. Exhibits 2.1* (1) Agreement and Plan of Merger, dated as of July 26, 2012, by and among the Registrant, Zebra Acquisition Corporation,Zencoder Inc. and the Securityholders’ Representative named therein.2.2* (2) Asset Purchase Agreement and Plan of Reorganization, dated as of January 6, 2014, by and among the Registrant, CactiAcquisition LLC, Unicorn Media, Inc., Unicorn Media of Arizona, Inc., U Media Limited and the Securityholders’Representative named therein.3.1* (3) Eleventh Amended and Restated Certificate of Incorporation.3.2* (4) Amended and Restated By-Laws.4.1* (5) Form of Common Stock certificate of the Registrant.4.2* (6) Second Amended and Restated Investor Rights Agreement dated January 17, 2007, by and among the Registrant, theinvestors listed therein, and Jeremy Allaire, as amended.4.3* (7) Warrant to Purchase Stock dated August 31, 2006 issued by the Registrant to TriplePoint Capital LLC.4.4* (8) Brightcove Inc. RSU Inducement Plan.4.5* (9) Form of Restricted Stock Unit Award Agreement under the Brightcove Inc. 2012 RSU Inducement Plan.4.6* (10) Brightcove Inc. 2018 Inducement Plan.4.7* (11) Form of Stock Option Agreement under the Brightcove Inc. 2018 Inducement Plan.4.8* (12) Form of Performance-Based Restricted Stock Unit Agreement under the Brightcove Inc. 2018 Inducement Plan.10.1* (13) Form of Indemnification Agreement between the Registrant and its directors and executive officers.10.2†* (14) Amended and Restated 2004 Stock Option and Incentive Plan of the Registrant, together with forms of award agreement.10.3†* (15) 2012 Stock Incentive Plan of the Registrant.10.4†* (16) Form of Incentive Stock Option Agreement under the 2012 Stock Incentive Plan.10.5† (17) Form of Non-Qualified Stock Option Agreement for Company Employees under the 2012 Stock Incentive Plan.10.6* (18) Lease dated February 28, 2007 between Mortimer B. Zuckerman, Edward H. Linde and Michael A. Cantalupa, as Trusteesof One Cambridge Center Trust and Brightcove Inc., as amended.10.7* (19) Lease dated June 15, 2011 between BP Russia Wharf LLC and Brightcove Inc.10.8* (20) Loan and Security Agreement dated March 30, 2011 between Silicon Valley Bank and Brightcove Inc., as amended.10.9* (21) Second Loan Modification Agreement dated April 29, 2013 between Silicon Valley Bank and Brightcove Inc.10.10* (22) Third Loan Modification Agreement dated October 3, 2014 between Silicon Valley Bank and Brightcove Inc. 62 Table of ContentsExhibits 10.11* (23) Loan and Security Agreement dated November 19, 2015 between Silicon Valley Bank and Brightcove Inc.10.12†* (24) Employment Agreement dated August 8, 2011 between the Registrant and Jeremy Allaire.10.13†* (25) Employment Agreement dated August 8, 2011 between the Registrant and David Mendels.10.14†* (26) Employment Agreement dated August 8, 2011 between the Registrant and Edward Godin.10.15†* (27) Employment Agreement dated August 8, 2011 between the Registrant and Andrew Feinberg.10.16* (28) Employment Separation Agreement dated January 2, 2013 between the Registrant and Edward Godin.10.17†* (29) Amended and Restated Employment Agreement dated July 25, 2013 between Brightcove Inc. and Jeremy Allaire10.18†* (30) Letter Agreement dated August 25, 2014 between the Registrant and Christopher Menard related to Mr. Menard’sresignation and separation from employment with the Registrant.10.19†* (31) Employment Agreement dated October 1, 2014 between the Registrant and Jon Corley.10.20†* (32) Employment Agreement dated October 1, 2014 between the Registrant and Paul Goetz.10.21†* (33) Employment Agreement dated November 3, 2014 between the Registrant and Kevin R. Rhodes.10.22†* (34) Non-Employee Director Compensation Policy.10.23†* (35) Senior Executive Incentive Bonus Plan.10.24†* (36) Form of Restricted Stock Unit Award Agreement under the 2012 Stock Incentive Plan.10.25†* (37) Form of Restricted Stock Unit Award Agreement for Company Employees under the 2012 Stock Incentive Plan.10.26†* (38) Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the 2012 Stock Incentive Plan.10.27* (39) Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the 2012 Stock Incentive Plan.10.28†* (40) Separation Agreement dated July 24, 2017 between the Registrant and David Mendels.10.29†* (41) Amendment to Employment Agreement dated July 24, 2017 between the Registrant and Andrew Feinberg.10.30†* (42) Employment Agreement dated September 20, 2017 between the Registrant and David Plotkin.10.31*† (43) Amendment to Employment Agreement dated April 11, 2018 between the Registrant and Andrew Feinberg.10.32*† (44) Employment Agreement dated April 11, 2018 between the Registrant and Jeff Ray.10.34†* (45) Non-Employee Director Compensation Policy, as amended and restated on April 11, 2018.10.35†* (46) Employment Agreement dated May 3, 2018 between the Registrant and Robert Noreck.10.36* (47) Second Amended and Restated Loan and Security Agreement dated December 14, 2018 between Silicon Valley Bank andBrightcove Inc.21.1** Subsidiaries of the Registrant.23.1** Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 63 Table of ContentsExhibits 24.1** Power of Attorney (included on signature page).31.1** Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 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** XBRL Instance Document.101.SCH** XBRL Taxonomy Extension Schema Document.101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF** XBRL Taxonomy Extension Definition Linkbase Document.101.LAB** XBRL Taxonomy Extension Label Linkbase Document.101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document. (1)Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 26, 2012.(2)Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2014.(3)Filed as Exhibit 3.2 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(4)Filed as Exhibit 3.3 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(5)Filed as Exhibit 4.1 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(6)Filed as Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(7)Filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(8)Filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 14,2012.(9)Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 14,2012.(10)Filed as Exhibit 4.4 to Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 1, 2018.(11)Filed as Exhibit 4.5 to Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 1, 2018.(12)Filed as Exhibit 4.6 to Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 1, 2018.(13)Filed as Exhibit 10.1 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(14)Filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(15)Filed as Exhibit 10.3 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(16)Filed as Exhibit 10.4 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012. 64 Table of Contents(17)Filed as Exhibit 10.5 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(18)Filed as Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(19)Filed as Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(20)Filed as Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(21)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2013.(22)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2014.(23)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015.(24)Filed as Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(25)Filed as Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(26)Filed as Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(27)Filed as Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 24,2011.(28)Filed as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2013.(29)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2013.(30)Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3,2014.(31)Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3,2014.(32)Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3,2014.(33)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 10, 2014.(34)Filed as Exhibit 10.14 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(35)Filed as Exhibit 10.15 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(36)Filed as Exhibit 10.16 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(37)Filed as Exhibit 10.17 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(38)Filed as Exhibit 10.18 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(39)Filed as Exhibit 10.19 to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and ExchangeCommission on February 6, 2012.(40)Filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange commission on July 26, 2017.(41)Filed as Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange commission on July 26, 2017.(42)Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on October 26,2017. 65 Table of Contents(43)Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018.(44)Filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018.(45)Filed as Exhibit 99.5 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018.(46)Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2018.(47)Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 14, 2018.*Incorporated herein by reference.**Filed herewith.• The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed”for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated byreference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extentthat the Registrant specifically incorporates it by reference.†Indicates a management contract or any compensatory plan, contract or arrangement. Item 16.Form 10-K SummaryNot applicable. 66 Table of ContentsSignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized on the 21st day of February, 2019. BRIGHTCOVE INC.By: /s/ Jeff Ray Jeff Ray Chief Executive Officer 67 Table of ContentsPOWER OF ATTORNEYEach person whose individual signature appears below hereby constitutes and appoints Robert Noreck and David Plotkin, and each of them, withfull power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in hisor her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file anyand all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith,with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do andperform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute orsubstitutes may lawfully do or cause to be done by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Name Title Date/s/ Jeff RayJeff Ray Chief Executive Officer(Principal Executive Officer) and Director February 21, 2019/s/ Robert NoreckRobert Noreck Chief Financial Officer(Principal Financial Officer) February 21, 2019/s/ Deborah BesemerDeborah Besemer Chairperson of the Board of Directors February 21, 2019/s/ Kristin FrankKristin Frank Director February 21, 2019/s/ Gary HaroianGary Haroian Director February 21, 2019/s/ Derek HarrarDerek Harrar Director February 21, 2019/s/ Diane HessanDiane Hessan Director February 21, 2019/s/ Scott KurnitScott Kurnit Director February 21, 2019/s/ Thomas E. WheelerThomas E. Wheeler Director February 21, 2019 68 Exhibit 21.1Subsidiaries of the Registrant Name Jurisdiction of OrganizationBrightcove UK Ltd UKBrightcove Singapore Pte. Ltd. SingaporeBrightcove K.K. JapanBrightcove Korea KoreaBrightcove Australia Pty Ltd AustraliaBrightcove India Pte. Ltd. IndiaBrightcove Holdings, Inc. DelawareZencoder Inc. DelawareBrightcove FZ-LLC United Arab EmiratesCacti Acquisition LLC DelawareBrightcove S. de R.L. de C.V. MexicoOthello Acquisition Corporation Delaware Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-8 No. 333-179966) pertaining to the Amended and Restated 2004 Stock Option and Incentive Plan ofBrightcove Inc. and the Brightcove Inc. 2012 Stock Incentive Plan, (2)Registration Statement (Form S-8 No. 333-183315) pertaining to the Brightcove Inc. 2012 RSU Inducement Plan, (3)Registration Statement (Form S-8 No. 333-187051) pertaining to the Brightcove Inc. 2012 Stock Incentive Plan, (4)Registration Statement (Form S-8 No. 333-193701) pertaining to the Brightcove Inc. 2014 Stock Option Inducement Plan and theBrightcove Inc. 2012 Stock Incentive Plan, (5)Registration Statement (Form S-8 No. 333-202540) pertaining to the Brightcove Inc. 2012 Stock Incentive Plan, (6)Registration Statement (Form S-8 No. 333-209770) pertaining to the Brightcove Inc. 2012 Stock Incentive Plan, (7)Registration Statement (Form S-8 No. 333-216140) pertaining to the Brightcove Inc. 2012 Stock Incentive Plan, (8)Registration Statement (Form S-8 No. 333-223308) pertaining to the Brightcove Inc. 2012 Stock Incentive Plan, and (9)Registration Statement (Form S-8 No. 333-224578) pertaining to the Brightcove Inc. 2018 Inducement Plan;of our reports dated February 21, 2019, with respect to the consolidated financial statements of Brightcove Inc. and the effectiveness of internal controlover financial reporting of Brightcove Inc. included in this Annual Report (Form 10-K) of Brightcove Inc. for the year ended December 31, 2018. /s/ Ernst & Young LLPBoston, MassachusettsFebruary 21, 2019 Exhibit 31.1CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OFTHE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002I, Jeff Ray, certify that: 1.I have reviewed this Annual Report on Form 10-K of Brightcove Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date: February 21, 2019 By: /s/ Jeff Ray Jeff Ray Chief Executive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OFTHE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002I, Robert Noreck, certify that: 1.I have reviewed this Annual Report on Form 10-K of Brightcove Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date: February 21, 2019 By: /s/ Robert Noreck Robert Noreck Chief Financial Officer (Principal Financial Officer) Exhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Brightcove Inc. for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the “Report”), Jeff Ray, as Chief Executive Officer of Brightcove Inc., hereby certifies, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fully complies withthe requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of Brightcove Inc. Date: February 21, 2019 By: /s/ Jeff Ray Jeff Ray Chief Executive Officer (Principal Executive Officer)In connection with the Annual Report on Form 10-K of Brightcove Inc. for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the “Report”), Robert Noreck, as Chief Financial Officer of Brightcove Inc., hereby certifies, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairlypresents, in all material respects, the financial condition and results of operations of Brightcove Inc. Date: February 21, 2019 By: /s/ Robert Noreck Robert Noreck Chief Financial Officer (Principal Financial Officer)
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