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Cloud-based solutions provider Brightcove Inc.’s (BCOV - Snapshot Report) second quarter 2012 non-GAAP loss of 10 cents per share improved from a loss of 91 cents reported in the previous-year quarter and was narrower than the Zacks Consensus Estimate of a loss of 13 cents. However, including stock-based compensation of 5 cents, the loss per share came in at 14 cents.

Quarter Details

Revenue increased 41.2% from the year-ago quarter to $21.6 million, primarily driven by Subscription and support revenue (42.8% increase year-over-year) and Professional services and other revenue (12.5% increase year-over-year). Reported revenue also beat the Zacks Consensus Estimate of $20.0 million.

Gross profit (including stock based compensation) increased 46.7% from the previous-year quarter to 15.2 million, while gross margin increased 250 basis points boosted by the prudent revenue mix.

Operating expenses increased 23.7% from the previous-year quarter to $19.1 million due to 21.0% year-over-year increase in the Research & development expenses, 15.5% year-on-year rise in Sales & Marketing expenses and 30.3% jump in General & Administrative expenses.

Loss from operations (including stock based compensation) improved from $5.07 million reported in the previous-year quarter to $3.41 million on higher revenue base.

Net loss (including stock-based compensation) of $3.86 million improved from loss of $5.46 million in the previous-year quarter.

Exiting the second quarter, Brightcove had cash, cash equivalents and investments of $58.6 million, down $2.0 million from the previous quarter. The company does not have any long-term debt.

Outlook

For the third quarter, the company expects revenues in the range of $21.1 million to $21.6 million. Non-GAAP net loss is expected in the range of 12 cents to 11 cents. The Zacks Consensus Estimate is pinned at a loss of 10 cents.

For fiscal 2012, management expects revenue to be in the range of $85.3 million to $86.0 million, and non-GAAP net loss per share is expected in the range of 47 cents to 44 cents.

Recommendation

We believe that strong demand for cloud-based solutions, security and mobile products, and online video along with strategic acquisitions are the positives for the stock over the long term.

However, intense competition from Akamai Technologies Inc. (AKAM - Analyst Report) and Limelight Networks, Inc. (LLNW - Snapshot Report) coupled with sluggish macro-economic environment are the near-term headwinds.

We maintain our Neutral recommendation on a long-term basis (6-12 months). Currently, Brightcove has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.

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