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Brightcove Inc. (BCOV - Snapshot Report) reported a loss of 2 cents per share in the third quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 11 cents.

Revenues

Revenues jumped 29.3% from the year-ago quarter to $28.5 million, slightly better than the consensus mark of $27.0 million. Revenues were higher than management’s guided range of $26.8 million to $27.3 million.

The year-over-year increase was primarily driven by a 23.4% surge in Subscription and Support revenues and more than a twofold increase in Professional Services and Other revenues.

Brighcove’s revenues from premium offerings jumped 30.0% year over year to $25.9 million. Premium refers to Brighcove’s traditional video cloud customers, the enterprise edition of app cloud and Zencoder customers on annual contracts. Revenues from volume offerings surged 26.0% year over year to $2.6 million.

Brightcove’s customer base expanded by 53 customers from the year-ago quarter to 6374, which includes 1759 premium customers and 4615 volume customers.

During the quarter, Brightcove’s product was chosen by new customers such as, Green Mountain Roasters, The Coca Cola Export Corporation, IBM (IBM - Analyst Report), Golf Digest Online, EVS, UTV and Sanofi-Aventis Groupe.

Revenues from non-media customers (61% of total revenue) grew 25.0% year over year, while revenues from media customers (39% of total revenue) increased 35% from the year-ago quarter.

Region wise, revenues from North America (60% of total revenue) increased 23.0% year over year to $17.0 million. Europe (24% of total revenue) jumped 46.0% year over year to $7.1 million. Asia-Pacific including Japan (16% of total revenue) soared 33.0% from the year-ago quarter to $4.4 million.

Margins

Gross margin remained flat on a year-over-year basis at 69.0% in the reported quarter. 

Operating expenses as percentage of revenues were 72.0%, much lower than 85.0% reported in the year-ago quarter. Research & development, sales & marketing and general & administrative expenses as percentage of revenues declined 200 bps, 710 bps and 180 bps, respectively.

Loss from operations (including stock-based compensation) was $0.5 million, narrower than $2.7 million reported in the year-ago quarter. Net loss (including stock based compensation) of $0.5 million or 2 cents per share.

Balance Sheet and Cash Flow

Exiting the third quarter, Brightcove had cash, cash equivalents and investments of $34.1 million, up from $30.5 million reported in the prior quarter. Brightcove’s cash flow from operations was $4.8 million in the third quarter. Free cash flow was $2.8 million in the quarter.

Outlook

For the fourth quarter, Brightcove expects revenues in the range of $28.0 million to $28.5 million. Non-GAAP operating income is expected to be $0.35 million to $0.65 million. Non-GAAP loss is expected in the range of 9 cents to 10 cents per share.

For fiscal 2013, Brightcove raised its revenue outlook. Currently, revenues are expected to be in the range of $108.0 million to $108.5 million. Net loss is expected in the range of 5 cents to 6 cents per share.

Recommendation

We believe that strong demand for cloud-based solutions, security and mobile products, and online videos along with strategic acquisitions are the positives for the stock over the long term. However, intense competition from Akamai Technologies (AKAM - Analyst Report) and Limelight Networks Inc. (LLNW - Snapshot Report) and sluggish macro-economic environment are the near-term headwinds.

Currently, Brightcove has a Zacks Rank #3 (Hold).

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