Brightcove shares dropped by more than 37% Friday, the day after the company announced that Rovio, the company known for the popular Angry Birds franchise, is not renewing its contract with the online media publishing company, and that Brightcove's chief financial officer is leaving.
Rovio, one of Brightcove’s major European customers, won’t reup when its contract comes due in late August, Brightcove CEO David Mendels said on the company’s second quarter call. He said Rovio represents 3.8% of Brightcove’s revenue and just under 15% of its streams through the first half of 2014.
“Although they are still using our services today, we expect them to extend an internally-built contact management system that they've had under development for several years to handle their digital content delivery needs and to bring their technology needs in-house,” he said.
Even with the coming loss of Rovio, Brightcove has managed to score new high profile customers, including the All England Lawn Tennis Club, which hosts Wimbledon, Legendary Pictures and Japan’s Asahi Broadcasting. Brightcove ended the period with 5,995 customers, versus 6,386 total customers at the end of the year-ago quarter. About 1,833 customers were in the “premium” category, about where it was at the end of the second quarter of 2013. With Rovio’s coming departure, Brightcove’s retention rate for the third quarter is expected to be in the mid-80% range.
Mendels attributed the lumpiness to “an early fragmented market” as customers, including large broadcasters, continue to iron out their strategies. “We continue to see ourselves winning more than losing, but we haven't achieved a breakout. And so what we're seeing is a market that remains very fragmented,” he said.
Also factoring into the recent trouble is the slower-than-anticipated adoption of Once, a cloud-based ad insertion platform that was born out of Brightcove’s $49 million acquisition of Unicorn Media.
Revenues for Once are now about $1.5 million below original estimates for 2014, Mendels said.
“We are seeing the implementation of Once across a customer's portfolio taking longer than we originally expected,” he added, but said the company remains “excited about the prospects for Once” as Brightcove transitions the product into its traditional contracting model and makes that part of the business more predictable.
Brightcove also announced that Chris Menard, its EVP and CFO, is leaving to pursue other career opportunities. Menard will stay on until August 28 and then will serve in an advisory role up to November 30. Chris Stagno, Brightcove's chief accounting officer, will serve as interim CFO.
Brightcove posted second quarter revenues of $31 million, up 15% year-on-year-, paired with a net loss of $4.3 million, or 13 cents per share. It expects third quarter revenue to be in the range of $30 million to $30.5 million.
Brightcove shares were down $3.87 (37.68%) to $6.40 each in afternoon trading Friday.