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Brightcove Inc. (BCOV - Snapshot Report) reported a loss of 13 cents in the fourth quarter of 2012, wider than the Zacks Consensus Estimate of a loss of 7 cents. However, loss per share was narrower than a loss of 75 cents reported in the year-ago quarter.

Revenues

Revenues jumped 31.3% from the year-ago quarter to $24.3 million, slightly better than the consensus mark. The year-over-year surprise was primarily driven by a 34.2% surge in Subscription and Support revenues, which fully offset an 8.4% plunge in Professional services and Other revenues.

Brighcove’s revenues from premium offerings jumped 29% year over year to $21.8 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 53.0% year over year to $2.5 million.

Brightcove’s customer base expanded 64% from the year-ago quarter to 6367, which includes 1625 premium customers and 4742 volume customers. Sequentially, both premium and volume customers increased by 52 and 172, respectively.

Brightcove added a number of major companies to its customer base that includes the likes of insurance provider Allstate (ALL - Analyst Report) and biopharmaceutical company Bristol Meyers Squibb (BMY - Analyst Report). Brightcove also entered into a partnership with Viacom and NBC.

Revenues from non-media customers (60% of total revenues) grew 60% year over year, while media customers (40% of total revenue) increased 17% from the year-ago quarter. Recurring dollar retention rate was 89% in the fourth quarter.

Region wise, revenues from North America (64% of total revenue) increased 29% year over year to $15.6 million. Europe (23% of total revenue) jumped 33.0% year over year to $5.6 million. Asia-Pacific including Japan (13% of total revenue) soared 35.0% from the year-ago quarter to $3.1 million.

Margins

Gross margin increased 20 basis points (“bps”) on a year-over-year basis to 69.8% in the reported quarter.

Operating expenses soared 27.7% year over year to $20.7 million due to 27.5% year-over-year increase in research & development expenses, 20.6% year-on-year rise in sales & marketing expenses and a 46.1% jump in general & administrative expenses.

Loss from operations (including stock-based compensation) was $3.7 million, wider than $3.3 million reported in the year-ago quarter on a higher revenue base.

Net loss (including stock based compensation) of $3.7 million was narrower than a loss of $3.8 million incurred in the prior-year quarter.

Balance Sheet and Cash flow

Exiting the fourth quarter, Brightcove had cash, cash equivalents and investments of $30.0 million, down from $30.8 million reported in the third quarter. Brightcove generated cash flow of $2.7 million in the fourth quarter. Free cash flow was $2.5 million in the quarter.

Outlook

For the first quarter, Brightcove expects revenues in the range of $23.5 million to $24.0 million, which represents 18% to 21% year-over-year growth. Non-GAAP operating loss is expected to be $2.0 million to $2.3 million. Non-GAAP loss is expected in the range of 8 cents to 10 cents per share.

For fiscal 2013, Brightcove expects revenues to be in the range of $102.0 million to $105.0 million, which represents 16% to 19% year-over-year growth. Non-GAAP loss is expected to be $4.5 million to $6.5 million. Non-GAAP net loss per share is expected in the range of 18 cents to 25 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 and sluggish macro-economic environment are the near-term headwinds.

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

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