Source: https://investor.brightcove.com/node/11811/html
Timestamp: 2019-04-22 08:11:37+00:00

Document:
As of July 23, 2018 there were 35,917,891 shares of the registrants common stock, $0.001 par value per share, outstanding.
Brightcove Inc. (the Company) is a global provider of cloud services for video which enable its customers to publish and distribute video to Internet-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. At June 30, 2018, the Company had nine wholly-owned subsidiaries: Brightcove UK Ltd, Brightcove Singapore Pte. Ltd., Brightcove Korea, Brightcove Australia Pty Ltd, Brightcove Holdings, Inc., Brightcove Kabushiki Kaisha (Brightcove KK), Zencoder Inc. (Zencoder), Brightcove FZ-LLC, and Cacti Acquisition LLC.
The accompanying interim condensed consolidated financial statements are unaudited. These condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and related notes, together with Managements Discussion and Analysis of Financial Condition and Results of Operations, contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2017.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, other than the changes resulting from adopting new revenue recognition guidance which also impacted the accounting for the costs to obtain a contract as described in Note 2, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2017 contained in the Companys Annual Report on Form 10-K and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Companys financial position for the three and six months ended June 30, 2018 and 2017. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, other than those disclosed in this Report on Form 10-Q.
The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the condensed consolidated financial statements. As of June 30, 2018, other than the changes to revenue recognition as described in Note 2, the Companys significant accounting policies and estimates, which are detailed in the Companys Annual Report on Form 10-K for the year ended December 31, 2017, have not changed.
The Company primarily derives revenue from the sale of its online video platform, which enables its 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 subscription to its technology and related support; (2) hosting, bandwidth and encoding services; and (3) professional services, which include initiation, set-up and customization services.
opening balance of retained earnings at the effective date for contracts that still require performance by the entity at the date of adoption. ASC 606 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company classifies its customers by including them in either premium or volume offerings. For premium offerings, the Company organizes its go-to-market approach by focusing its sales and marketing teams on selling primarily to (i) media companies, who generally want to distribute video content to a broad audience and (ii) digital marketers in a wide range of enterprises and organizations, who generally use video for marketing or enterprise communication purposes.
The following table summarizes revenue from contracts with customers by business unit for the three and six months ended June 30, 2018.
The Companys subscription arrangements provide customers the right to access its hosted software applications. Customers do not have the right to take possession of the Companys software during the hosting arrangement. Contracts for premium customers generally have a term of one year and are non-cancellable. These contracts generally provide the customer with a maximum annual level of entitlement, and provide the rate at which the customer must pay for actual usage above the annual entitlement allowance. These subscription arrangements are considered stand ready obligations that are providing a series of distinct services that are substantially the same and are transferred with the same pattern to the customer. As such, these subscription arrangements are treated as a single performance obligation and the related fees are recognized as revenue ratably over the term of the underlying arrangement.
Under ASC 605, if usage exceeded the annual allowance level for a particular customer arrangement, the associated revenue was recognized in the period that the additional usage occurred. Under ASC 606, when the transaction price includes a variable amount of consideration, an entity is required to estimate the consideration that is expected to be received for a particular customer arrangement. The Company evaluates variable consideration for usage-based fees at contract inception and re-evaluates quarterly over the course of the contract. Specifically, the Company estimates the revenue pertaining to a customers usage that is expected to exceed the annual entitlement allowance and allocates such revenue to the distinct service within the related contract that gives rise to the variable payment. Estimates of variable consideration include analyzing customer usage against the applicable entitlement limit at the end of each reporting period and estimating the amount and timing of additional amounts to be invoiced in connection with projected usage. Estimates of variable consideration relating to customer usage do not include amounts for which it is probable that a significant reversal will occur. Determining the amount of variable consideration to recognize as revenue involves significant judgment on the part of management 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 the rate at which the customer must pay for actual usage above the monthly allowable usage. The monthly volume subscription and support and usage fees are recognized as revenue during the related period of performance. Contracts with customers that are invoiced on a pay-as-you-go basis, where there is no monthly or annual commitment for usage, provide the rate at which the customer must pay for actual usage 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 for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the remainder due when the related services have been completed, or on a time and materials basis. Professional services and other revenue sold on a stand-alone basis are recognized as the services are performed, subject to any refund or other obligation.
The Company periodically enters into multiple-element service arrangements that include platform subscription fees, support fees, and, in certain cases, other professional services. These contracts include multiple promises that the Company evaluates 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 within the context of the contract. Once the Company determines the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method. The transaction price post allocation is recognized as revenue as the related performance obligation is satisfied.
Commissions are paid to internal sales representatives as compensation for obtaining contracts. Under the new guidance, the Company capitalizes commissions that are incremental, as a result of costs incurred to obtain a customer contract, if those costs are not within the scope of another topic within the accounting literature and meet the specified criteria. Assets recognized for costs to obtain a contract are amortized over the period of performance for the underlying customer contracts. The commission expense on contracts with new customers was previously recorded over the respective contract term. Under the new guidance, the commission expense on contracts with new customers will be recorded over the average life of a customer given the commission amount associated with sales to new customers is not commensurate with the commission amount associated with the contract renewal for those same customers. The commission amount associated with the renewal of a contract in addition to any commission amount related to incremental sales was previously recorded as expense in the quarter the commission was earned; however, under ASC 606 these commission amounts are recorded as expense over the term of the renewed contract. These assets are periodically assessed for impairment.
The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made on the condensed consolidated balance sheet as of January 1, 2018.
Under ASC 606, the Company estimates the variable consideration to be received and recognizes those amounts, subject to constraint, as the Company satisfies its performance obligation. In conjunction with the January 1, 2018 adoption of ASC 606, the Company reduced accumulated deficit by $1,243 reflecting the recognition of revenue primarily relating to variable consideration, for contracts that still require performance by the entity at the date of adoption.
Under the new guidance, the commission expense on contracts with new customers will be recorded over the average life of a customer given the commission amount associated with sales to new customers is not commensurate with the commission amount associated with the contract renewal for those same customers. The commission amount associated with the renewal of a contract in addition to any related incremental sale is recorded as expense over the term of the renewed contract. The net impact of these changes resulted in a $4,362 reduction to accumulated deficit for contracts that still require performance by the Company at the date of adoption.
The adoption of ASC 606 primarily resulted in an acceleration of revenue and the reduction of expense as of December 31, 2017, which in turn generated additional deferred tax liabilities that ultimately reduced the Companys net deferred tax asset position. As the Company fully reserves its net deferred tax assets in the jurisdictions impacted by the adoption of ASC 606, this impact was offset by a corresponding reduction to the valuation allowance.
The following tables compare the reported condensed consolidated balance sheet, statement of operations and cash flows, as of and for the three and six months ended June 30, 2018, to the pro-forma amounts had the previous guidance been in effect.
Total reported assets were $7,038 greater than the pro-forma balance sheet, which assumes the previous guidance remained in effect as of June 30, 2018. This was largely due to impacts of variable consideration and costs to obtain a contract.
Total reported liabilities were $1,013 greater than the pro-forma balance sheet, which assumes the previous guidance remained in effect as of June 30, 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 three months and six months ended June 30, 2018 as a result of the adoption of ASC 606 on January 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605.
The primary difference in subscription and support revenue relates to the impacts of applying the variable consideration guidance under ASC 606. Under the previous guidance, subscription and support revenue would have been approximately $58 and $12 lower, respectively, for the three and six months ended June 30, 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 $129 and $408, respectively, for the three and six months ended June 30, 2018, due to a portion of the commission payments being recorded immediately to expense at the time a liability was recorded. In addition, certain commission amounts that were amortized to expense over the underlying term of the arrangement are now amortized over the average customer life under ASC 606.
The net impact of accounting for revenue under the new guidance had no impact on net loss per share for the three months ended June 30, 2018 and increased net loss per share by $0.02 per basic and diluted share the six months ended June 30, 2018.
The adoption of ASC 606 had no impact on the Companys cash flows from operations. The aforementioned impacts resulted in offsetting shifts in 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.
Revenue recognized during the six months ended June 30, 2018 from amounts included in deferred revenue at the beginning of the period was approximately $31.5 million. During the six months ended June 30, 2018, the Company did not recognize revenue from performance obligations satisfied or partially satisfied in previous periods.
The assets recognized for costs to obtain a contract were $5.8 million and $5.4 million as of June 30, 2018 and January 1, 2018, respectively. Amortization expense recognized during the three and six months ended June 30, 2018 related to costs to obtain a contract was $2.0 million and $3.8 million, respectively.
As of June 30, 2018, the total aggregate transaction price allocated to the unsatisfied performance obligations for subscription and support contracts was approximately $109.4 million, of which approximately $86.3 million is expected to be recognized over the next 12 months. The Company expects to recognize substantially all of the remaining unsatisfied performance obligations by the end of 2020. The Company applied the practical expedient to not disclose the amount of transaction price allocated to unsatisfied performance obligations for variable consideration that the Company is able to allocate to one or more of the performance obligations in its contracts.
The Company applied the practical expedient to not disclose the amount of transaction price allocated to unsatisfied performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less. The Company does not have material future obligations associated with professional services that extend beyond one year.
The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and trade accounts receivable. The Company maintains its cash and cash equivalents principally with accredited financial institutions of high credit standing. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. The Company routinely assesses the creditworthiness of its customers. The Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Companys accounts receivable.
At June 30, 2018 and December 31, 2017, no individual customer accounted for 10% or more of accounts receivable, net. For the three and six months ended June 30, 2018 and 2017, no individual customer accounted for 10% or more of total revenue.
The Company is dependent on certain content delivery network providers who provide digital media delivery functionality enabling the Companys on-demand application service to function as intended for the Companys customers and ultimate end-users. The disruption of these services could have a material adverse effect on the Companys business, financial position, and results of operations.
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Management determines the appropriate classification of investments at the time of purchase, and re-evaluates such determination at each balance sheet date. The Company did not have any short-term or long-term investments at June 30, 2018 or December 31, 2017.
Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value.
The Company recorded stock-based compensation expense of $1,832 and $1,686 for the three months ended June 30, 2018 and 2017, respectively, and $3,500 and $3,476 for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was $18,308 of unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.60 years.
Effective April 11, 2018, the Company adopted the 2018 Inducement Plan (2018 Plan). The 2018 Plan provides for the issuance of stock options and restricted stock units to the Companys Chief Executive Officer (CEO). In connection with the approval of the 2018 Plan, the Company granted 440,000 stock options and 400,000 restricted stock units to the CEO.
During the quarter ended June 30, 2018, the Company granted 445,000 restricted stock units to certain key executives, including the 400,000 restricted stock units to the CEO under the 2018 Plan. These restricted stock units contain both performance-based and service-based vesting conditions. The Company measures compensation expense for these performance-based awards based upon a review of the Companys expected achievement against specified financial performance targets. Compensation cost is recognized on a ratable basis over the requisite service period for each series of grants to the extent management has deemed that such awards are probable of vesting based upon the expected achievement against the specified targets. On a periodic basis, management reviews the Companys expected performance and adjusts the compensation cost, if needed, at such time.
The following is a summary of the status of the Companys stock options as of June 30, 2018 and the stock option activity during the six months ended June 30, 2018.
(1) The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Companys common stock on June 30, 2018 of $9.65 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.
For the three months ended June 30, 2018 and 2017, the Company recorded income tax expense of $154 and $108, respectively. For the six months ended June 30, 2018 and 2017, the Company recorded income tax expense of $266 and $187 respectively. The income tax expense relates principally to the Companys foreign operations.
The Company has evaluated the positive and negative evidence bearing upon the realizability of its U.S. net deferred tax assets. As required by the provisions of Accounting Standards Codification (ASC) 740, Income Taxes, management has determined that it is more-likely-than-not that the Company will not utilize the benefits of federal and state U.S. net deferred tax assets for financial reporting purposes. Accordingly, the net deferred tax assets are subject to a valuation allowance at June 30, 2018 and December 31, 2017. Based on the level of historical income in Japan and future projections, the Company believes it is probable it will realize the benefits of its future deductible differences. As such, the Company has not recorded a valuation allowance against its net deferred tax assets in Japan as of June 30, 2018 and December 31, 2017. The Companys income tax return reporting periods since December 31, 2012 are open to income tax audit examination by the federal and state tax authorities. In addition, because the Company has net operating loss carryforwards, the Internal Revenue Service is permitted to audit earlier years and propose adjustments up to the amount of net operating losses generated in those years. There are currently no federal, state or foreign audits in progress.
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 tax rate from 34% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In December 2017, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 118, which directs taxpayers to consider the impact of the U.S. legislation as provisional when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.
As of June 30, 2018, the Company had not yet completed its accounting for all of the tax effects of the enactment of the Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. The Company will continue to refine its calculations as additional analysis is completed. The Company expects that any additional changes will be offset by an increase or decrease in the Companys valuation allowance as any transition tax will result in use of the net operating loss deferred tax asset, which is fully offset by a valuation allowance along with all other net deferred tax assets.
No additional U.S. income taxes or foreign withholding taxes have been provided for any additional outside basis differences inherent in the Company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 tax and 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. The Company is still in the process of analyzing the impact of the Act on its indefinite reinvestment assertion.
The Company, from time to time, is party to litigation arising in the ordinary course of business. Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company based on the status of proceedings at this time.
On 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, concerns allegations that the two individuals, who are former employees of Ooyala Mexico, misappropriated customer information and other trade secrets and used that information in working for Brightcove. The complaint was amended on June 1, 2017 to remove claims against the two former employees of Ooyala Mexico. The remaining claims against Brightcove are 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), and tortious interference with advantageous business relationships. Ooyala and Ooyala Mexico also filed a motion for preliminary injunction (amended at the same time the complaint was amended), seeking to enjoin Brightcove from using any of the allegedly misappropriated information or communicating with customers whose information was allegedly taken, and seeking the return of any information that was taken. On June 16, 2017, Brightcove filed an opposition to the motion for preliminary injunction, and also moved to dismiss the lawsuit. Brightcoves motion to dismiss was denied on September 6, 2017. The court issued a preliminary injunction on July 10, 2018. The injunction requires Brightcove to delete any Ooyala confidential information obtained from the former Ooyala employees and prohibits Brightcove from using such information to pursue business with twenty-two specified Latin American prospective customers. The parties are now engaged in discovery. The Company cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Company reasonably estimate the potential loss, if any.
On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against Brightcove and Brightcoves subsidiary Brightcove Holdings Inc. (collectively, in this paragraph, Brightcove) in the United States District Court for the District of Delaware. The complaint alleges that Brightcove infringed five patents related to file compression technology. The complaint seeks monetary damages and injunctive relief. On December 1, 2017, Realtime filed an amended complaint, adding two additional patents to its claims. Brightcove filed a motion to dismiss on January 26, 2018. Realtime filed an opposition to the motion to dismiss on February 9, 2018 and Brightcove filed a reply on February 16, 2018. A ruling on the motion to dismiss has not yet been issued by the court. The Company cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Company reasonably estimate the potential loss, if any.
The Company typically enters into indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies 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 claim by third parties with respect to the Companys technology. The term of these indemnification agreements is generally perpetual after execution of the agreement. Based on when customers first subscribe for the Companys service, the maximum potential amount of future payments the Company could be required to make under certain of these indemnification agreements is unlimited, however, more recently the Company has typically limited the maximum potential value of such potential future payments in relation to the value of the contract. Based on historical experience and information known as of June 30, 2018, the Company has not incurred any costs for the above guarantees and indemnities. The Company has received requests for indemnification from customers in connection with patent infringement suits brought against the customer by a third party. To date, the Company has not agreed that the requested 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 standard published specification documentation in effect at the time of delivery of the licensed products and services to the customer for the warranty period of the product or service. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial.
On November 19, 2015, the Company entered into an amended and restated loan and security agreement with a lender (the Loan Agreement) providing for up to a $20.0 million asset-based line of credit (the Line of Credit) with an expiration date of November 11, 2018. Under the Line of Credit, the Company can borrow up to $20.0 million. Borrowings under the Line of Credit are secured by substantially all of the Companys assets, excluding intellectual property. Outstanding amounts under the Line of Credit accrue interest at a rate equal to the prime rate or the LIBOR rate plus 2.5%. Under the Loan Agreement, the Company must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold based on non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the lender under the Line of Credit to declare all amounts borrowed under the Line of Credit, together with accrued interest and fees, to be immediately due and payable. The Company was in compliance with all covenants under the Line of Credit as of June 30, 2018. As the Company has not drawn on the Line of Credit, there are no amounts outstanding as of June 30, 2018.
North America is comprised of revenue from the United States, Canada and Mexico. Revenue from customers located in the United States was $21,570 and $20,585 during the three months ended June 30, 2018 and 2017, respectively, and $42,824 and $42,613 during the six months ended June 30, 2018 and 2017, respectively. Other than the United States and Japan, no other country contributed more than 10% of the Companys total revenue during the three and six months ended June 30, 2018 and 2017.
As of June 30, 2018 and December 31, 2017, property and equipment at locations outside the U.S. was not material.
In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), Amendments to the FASB Accounting Standards Codification, which replaces the existing guidance for leases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, lease arrangements exceeding 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-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. This guidance is effective for annual and interim periods beginning after December 15, 2018 and requires retrospective application. The Company is currently assessing the impact that adopting ASU 2016-02 will have on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for fiscal years, and interim periods 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 a material 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 reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statement of cash flows. ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The adoption of ASU 2016-18 did not have a material effect on the Companys consolidated financial statements or disclosures.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendment changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The adoption of ASU 2017-01 did not have a material effect on the Companys consolidated financial statements or disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles  Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. 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 an impairment charge based on the excess of a reporting units carrying amount over its fair value, determined in Step 1. ASU 2017-04 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted ASU 2017-04 during the three months ended March 31, 2018, prior to its annual testing of goodwill impairment. The adoption of ASU 2017-04 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 apply modification accounting in Topic 718. ASU 2017-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2017 and interim periods within those years. Earlier application is permitted. The adoption of ASU 2017-09 did not have a material effect on the Companys consolidated 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 tax rate from 34% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In December 2017, the SEC issued guidance under SAB No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act directing taxpayers to consider the impact of the U.S. legislation as provisional when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. As of June 30, 2018, the Company had not yet completed its accounting for all of the tax effects of the enactment of the Act; however, the Company has made a reasonable estimate of the effects on our existing deferred tax balances and one-time transition tax. Refer to Note 9, Income Taxes, for additional information regarding this new tax legislation.
In addition to the reduction in the federal corporate tax rate and the one-time transition tax, which the Company has accounted for with provisional estimates at June 30, 2018, the Company continues to analyze the provisions of tax reform that become effective for the Company in 2018 including the provisions related to Global Intangible Low Taxed Income, Foreign Derived Intangible Income, Base Erosion Anti-Abuse Tax, as well as other provisions which would limit the deductibility of future expenses.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017.
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never 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 Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange 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 future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words 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 are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled Risk Factors included in Item 1A of Part II of this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2017 and the risks discussed in our other SEC filings. Furthermore, such forward-looking statements speak only 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 or circumstances after the date of such statements.
We are a leading global provider of cloud-based services for video. We were incorporated in Delaware in August 2004 and our headquarters are in Boston, Massachusetts. Our suite of products and services reduce the cost and complexity associated with publishing, 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 Cloud enables 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 and video stitching service that addresses the limitations of traditional online video ad insertion technology. Brightcove Player, or Player, is a cloud-based service for creating and managing video player experiences. Brightcove OTT Flow, powered by Accedo, or OTT Flow, is a service for media companies and content owners to rapidly deploy high-quality, direct-to-consumer, live and on-demand video services across platforms. Brightcove Video Marketing Suite, or Video Marketing Suite, 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, live streaming, 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 to support our long-term revenue growth. We believe these investments will help us address some of the challenges facing our business such as demand for 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 sales personnel, the innovation of new features for existing products and the development of new products. We believe this strategy will help us retain our existing 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 and development and general and administrative expenses as a percentage of total revenue.
As of June 30, 2018, we had 494 employees and 3,936 customers, of which 1,732 used our volume offerings and 2,204 used our premium offerings. As of June 30, 2017, we had 513 employees and 4,304 customers, of which 2,225 used our volume offerings and 2,079 used our premium offerings.
We generate revenue by offering our products to customers on subscription-based, software as a service, or SaaS, model. Our revenue grew from $76.3 million in the six months ended June 30, 2017 to $82.8 million in the six months ended June 30, 2018, primarily related to an increase in sales of Video Cloud to both new and existing customers. Our consolidated net loss was $7.9 million and $12.8 million for the six months ended June 30, 2018 and 2017, respectively. Included in consolidated net loss for the six months ended June 30, 2018 was stock-based compensation expense and amortization of acquired intangible assets of $3.5 million and $1.3 million, respectively. Included in consolidated net loss for the six months ended June 30, 2017 was stock-based compensation expense and amortization of acquired intangible assets of $3.5 million and $1.4 million, respectively.
For the six months ended June 30, 2018 and 2017, our revenue derived from customers located outside North America was 45% and 40%, respectively. We expect the percentage of total net revenue derived from outside North America to increase in future periods as we continue to expand our international operations.
 Number of Customers. We define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue at the end of the quarter. We believe the number of customers is a key indicator of our market penetration, the productivity of our sales organization and the value that our products bring to our customers. We classify our customers by including them in 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. Our volume offerings include our Video Cloud Express customers and our Zencoder customers on month-to-month contracts and pay-as-you-go contracts.
As of June 30, 2018, we had 3,936 customers, of which 1,732 used our volume offerings and 2,204 used our premium offerings. As of June 30, 2017, we had 4,304 customers, of which 2,225 used our volume offerings and 2,079 used our premium offerings. Our go-to-market focus and growth strategy is to expand our premium customer base, as we believe our premium customers represent a greater opportunity for our solutions. Volume customers decreased in recent periods primarily due to our discontinuation of the promotional Video Cloud Express offering. As a result, we have experienced attrition of this base level offering without a corresponding addition of customers. We expect customers using our volume offerings to continue to decrease in 2018 and beyond as we continue to focus on the market 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 the previous recurring value of subscription revenue for the same period. We define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renew in a given period, including any increase or decrease in contract value. We define previous recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in that same period. We typically calculate our recurring dollar retention rate on a monthly basis. Recurring dollar retention rate provides visibility into our ongoing revenue. During the six months ended June 30, 2018 and 2017, the recurring dollar retention rate was 99% and 88%, respectively.
 Average Annual Subscription Revenue Per Premium Customer. We define average annual subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period, excluding professional services revenue, divided by the average number of premium customers for that period. We believe that this metric is important in understanding subscription revenue for our 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 all other premium customers.
Subscription 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 include functionality to publish and distribute video to Internet-connected devices, with higher levels of premium editions providing additional features and functionality. Customer arrangements are typically one year contracts, which include a subscription to Video Cloud, basic support and a pre-determined amount of video streams, bandwidth, transcoding and storage. We also offer gold support or platinum support to our premium customers for an additional fee, which includes extended phone support. The pricing for our premium editions is based on the value of our software, as well as the number of users, accounts and usage, which is comprised of video streams, bandwidth, transcoding and storage. Should a customers usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. 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 been designed for customers who have lower usage requirements and do not typically require advanced features and functionality. We discontinued the lower level pricing options for the Express edition of our volume offering and expect the total number of customers using the Express edition to continue to decrease. Customers who purchase the volume editions generally enter into month-to-month agreements. Volume customers are generally billed 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 on usage, which is comprised of minutes of video processed. The committed contracts include a fixed number of minutes of video processed. Should a customers usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. 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.
SSAI is offered to customers on a subscription basis, with varying levels of functionality, usage entitlements and support based on the size and complexity 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 to Player, basic support and a pre-determined amount of video streams. We also offer gold support or platinum support to our Player customers for an additional fee, which includes extended phone support. The pricing for Player is based on the number of users, accounts and usage, which is comprised of video streams. Should a customers usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual 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 size and 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 Pro and Enterprise customer arrangements are typically one-year contracts, which typically include a subscription to Video Cloud, Gallery, Brightcove Social (for Video Marketing Suite customers) or Brightcove Live (for Enterprise Video Suite customers), basic support and a pre-determined amount of video streams or plays (for Video Marketing Suite customers), viewers (for Enterprise Video Suite customers), bandwidth and storage or videos. We also generally offer gold support or platinum support to these customers for an additional fee, which includes extended phone support. The pricing for our Pro and Enterprise editions is based on the number of users, accounts and usage, which is comprised of video streams or plays, viewers, bandwidth and storage or videos.
Should a customers usage exceed the contractual entitlements, the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements. The Starter edition provides customers with the same basic functionality that is offered in our Pro and Enterprise editions but has been designed for customers who have lower usage requirements and do not typically seek advanced features and functionality. Customers who purchase the Starter edition may enter into one-year agreements or month-to-month agreements. Starter customers with month-to-month agreements are generally billed on a monthly basis and pay via a credit 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, software customizations and project management for customers who subscribe to our premium editions. These arrangements are priced either on a fixed fee basis with 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 subscription, support and professional services revenue primarily consists of costs related to supporting and hosting our product offerings and delivering our professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of our data centers, our customer support team and our professional services staff. In addition to these expenses, we incur third-party service provider costs such as data center and content delivery network, or CDN, expenses, allocated overhead, depreciation expense and amortization of capitalized internal-use software development costs and acquired intangible assets. We allocate overhead costs such as rent, utilities and supplies to all departments based on relative headcount. As such, general overhead expenses are reflected in cost of revenue in addition to each operating expense category. The costs associated with providing professional services are significantly higher as a percentage of related revenue than the costs associated with delivering our subscription and support services due to the labor costs of providing professional services.
Cost of revenue increased in absolute dollars from the first six months of 2017 to the first six months of 2018. In future periods we expect our cost of revenue will increase in absolute dollars as our revenue increases. Cost of revenue as a percentage of revenue could fluctuate from period to period depending on the growth of our professional services business and any associated costs relating to the delivery of subscription services and the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue, in any particular quarterly or annual period.
Research and Development. Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, incentive compensation and stock-based compensation, in addition to the costs associated with contractors and allocated overhead. We have focused our research and development efforts on expanding the functionality and scalability of our products and enhancing their ease of use, as well as creating new product offerings. We intend to continue to periodically release new features and functionality, expand our product offerings, 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 mix of revenue from new and existing products, features and functionality, as well as changes in the technology that our products must support, such as new operating systems or new Internet-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 intangible assets, in addition to costs associated with marketing and promotional events, corporate communications, advertising, other brand building and product marketing expenses and allocated overhead. Our sales and marketing expenses have increased in absolute dollars in each of the last three years. We intend to continue to invest in sales and marketing and expand the sale of our product offerings within our existing customer base, build brand awareness and sponsor additional marketing events. Accordingly, we expect sales and marketing expense to continue to be our most significant operating expense in future periods. Over the long term, we believe that sales and marketing expense as a percentage of revenue will decrease, but will vary depending upon the mix of revenue from new and existing customers and from small, medium-sized and enterprise customers, as well as changes in 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, in addition to the costs associated with professional fees, insurance premiums, other corporate expenses and allocated overhead. In future periods, we expect general and administrative expense to remain unchanged in future periods. Over the long term, we believe that general and administrative expenses as a percentage of revenue will decrease.
Other expense consists primarily of interest income earned on our cash, cash equivalents, and foreign exchange gains and losses.
As part of the process of preparing our consolidated financial statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We have provided a valuation allowance against our existing net deferred tax assets as of June 30, 2018 and as of December 31, 2017, with the exception of the deferred tax assets related to Brightcove KK.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States. Refer to Note 9, Income Taxes, for additional information regarding this new tax legislation.
Our cost of revenue, research and development, sales and marketing, and general and administrative expenses include stock-based compensation expense. Stock-based compensation expense represents the fair value of outstanding stock options and restricted stock awards, which is recognized as expense over the respective stock option and restricted stock award service periods. For both the six months ended June 30, 2018 and 2017, we recorded $3.5 million of stock-based compensation expense. We expect stock-based compensation expense to increase in absolute dollars in future periods.
With 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 three months ended June 30, 2018 and 2017, 48% and 47%, respectively, of our revenue was generated in locations outside the United States. For the six months ended June 30, 2018 and 2017, 48% and 44%, respectively, of our revenue was generated in locations outside the United States. During the three months ended June 30, 2018 and 2017, 32% and 29%, respectively, of our revenue was in currencies other than the U.S. dollar, as were some of the associated expenses. During the six months ended June 30, 2018 and 2017, 31% and 28% respectively, of our revenue was in currencies other than 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 in which we conduct business, our foreign currency-based revenue and expenses generally increase in value when translated into U.S. dollars. We expect our foreign currency-based revenue to remain relatively unchanged in absolute dollars and as a percentage of total revenue.
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
We consider the assumptions and estimates associated with revenue recognition, allowance for doubtful accounts, software development costs, income taxes, business combinations, intangible assets, goodwill and stock-based compensation to be our critical accounting policies and estimates. Other than the changes to revenue recognition under ASC 606 as described in Note 2, there have been no material changes to our critical accounting policies since December 31, 2017.
For a detailed explanation of the judgments made in these areas, refer to Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017, which we filed with the Securities and Exchange Commission on February 28, 2018.
Other than the changes to revenue recognition under ASC 606 as described in Note 2, we believe that our significant accounting policies, which are more fully described in the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, have not materially changed from those described in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
The following tables set forth our results of operations for the periods presented. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017.
Total revenue increased by $2.9 million, or 7%, in the three months ended June 30, 2018 compared to the three months ended June 30, 2017 due to an increase in subscription and support revenue of 7%, or $2.3 million, and an increase in professional services and other revenue of 17%, or $562,000. The increase in subscription and support revenue was primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existing customers. The increase in professional services revenue was primarily related to the size and number of professional services engagements during the three months ended June 30, 2018, compared to the corresponding quarter in the prior year. In addition, our revenue from premium offerings grew by $3.2 million, or 9%, in the three months ended June 30, 2018, compared to the three months ended June 30, 2017. Our ability to continue to provide the product functionality and performance that our customers require will be a major factor in our ability to continue to increase revenue.
Our gross profit increased by $2.9 million, or 13%, in the three months ended June 30, 2018 compared to the three months ended June 30, 2017, primarily due to an increase in revenue. Our ability to continue to maintain our overall gross profit will depend primarily on our ability to continue controlling our costs of delivery.
Loss from operations was $5.0 million in the three months ended June 30, 2018 compared to $7.9 million in the three months ended June 30, 2017. Loss from operations in the three months ended June 30, 2018 included stock-based compensation expense and amortization of acquired intangible assets of $1.8 million and $674,000, respectively. Loss from operations in the three months ended June 30, 2017 included stock-based compensation expense and amortization of acquired intangible assets of $1.7 million and $674,000, respectively. We expect our operating losses to decrease due to increased sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to grow and scale our operations.
As of June 30, 2018, we had $27.5 million of unrestricted cash and cash equivalents, an increase of $1.3 million from $26.1 million at December 31, 2017, due primarily to $4.2 million in proceeds from exercises of stock options and $254,000 of cash provided by operating activities. These increases were offset in part by $1.8 million in capitalization of internal-use software costs, $958,000 in capital expenditures, $193,000 in payments under capital lease obligations and $113,000 in payments of withholding tax on RSU vesting.
During the three months ended June 30, 2018, revenue increased by $2.9 million, or 7%, compared to the three months ended June 30, 2017, primarily due to an increase in revenue from our premium offerings, which consists of subscription and support revenue. The increase in premium revenue of $3.2 million, or 9%, is partially the result of a 6% increase in the number of premium customers from 2,079 at June 30, 2017 to 2,204 at June 30, 2018 and a 9% increase in the average annual subscription revenue per premium customer during the three months ended June 30, 2018. In the three months ended June 30, 2018, volume revenue decreased by $287,000, or 20%, compared to the three months ended June 30, 2017, as we continue to focus on the market for our premium solutions.
In the three months ended June 30, 2018, subscription and support revenue increased by $2.3 million, or 7%, compared to the three months ended June 30, 2017. The increase was primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existing customers and a 9% increase in the average annual subscription revenue per premium customer during the three months ended June 30, 2018. In addition, professional services and other revenue increased by $562,000, or 17% compared to the three months ended June 30, 2017. Professional services and other revenue will vary from period to period depending on the number of implementations and other projects that are in process.
For purposes of this section, we designate revenue by geographic regions based upon the locations of our customers. North America is comprised of revenue from the United States, Canada and Mexico. International is comprised of revenue from locations outside of North America. Depending on the timing of new customer contracts, revenue mix from a geographic region can vary from period to period.
In the three months ended June 30, 2018, total revenue for North America increased $759,000, or 3%, compared to the three months ended June 30, 2017. In the three months ended June 30, 2018, total revenue outside of North America increased $2.1 million, or 13%, compared to the three months ended June 30, 2017.
In the three months ended June 30, 2018, cost of subscription and support revenue remained relatively unchanged, compared to the three months ended June 30, 2017. There were increases in network hosting, partner commissions, and employee- related expenses of $400,000, $334,000 and $305,000 respectively. There were also increases in third-party software integrated with our service offering and amortization expense of $179,000 and $162,000, respectively. These increases were partially offset by decreases in content delivery network and depreciation expenses of $1.1 million and $288,000, respectively.
In the three months ended June 30, 2018, cost of professional services and other revenue remained relatively unchanged, compared to the three months ended June 30, 2017. There was an increase in employee-related expense of $147,000. This increase was partially offset by decreases in travel and consulting expenses of and $99,000 and $97,000 respectively.
The overall gross profit percentage was 60% and 57% for the three months ended June 30, 2018 and 2017, respectively. Subscription and support gross profit increased $2.3 million, or 10%, compared to the three months ended June 30, 2017. Professional services and other gross profit increased $545,000, or 217%, compared to the three months ended June 30, 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 support revenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.
Research and Development. In the three months ended June 30, 2018, research and development expense decreased by $536,000, or 6%, compared to the three months ended June 30, 2017 primarily due to decreases in employee-related and travel expenses of $390,000 and $96,000, respectively. We expect our research and development expense to remain relatively unchanged in future periods.
Sales and Marketing. In the three months ended June 30, 2018, sales and marketing expense decreased by $639,000, or 4%, compared to the three months ended June 30, 2017 primarily due to decreases in travel, employee-related, and commission expenses of $792,000, $397,000 and $160,000, respectively. These decreases were partially offset by increases in marketing programs, stock-based compensation expense and rent expense of $422,000, $266,000 and $142,000 respectively. Sales and marketing expense during the three months ended June 30, 2018 include costs associated with our annual user conference in addition to certain other annual marketing events. As a result, we expect sales and marketing expense to decrease for the remaining periods of 2018.
General and Administrative. In the three months ended June 30, 2018, general and administrative expense increased by $1.2 million, or 20%, compared to the three months ended June 30, 2017 primarily due to increases in executive severance, consulting, and employee-related expense of $735,000, $355,000, and $320,000 respectively. There were also increases in recruiting and bad debt expense of $255,000 and $139,000 respectively. These increases were partially offset by decreases in audit, legal and stock-based compensation expense of $291,000, $164,000 and $99,000 respectively. We expect general and administrative expense to remain relatively unchanged in future periods.
In the three months ended June 30, 2018, interest income, net, increased by $25,000, or 78%, compared to the corresponding period of the prior year.
The interest expense during the three months ended June 30, 2018 is primarily comprised of interest paid on capital leases. The increase in other (expense) income net during the three months ended June 30, 2018 was primarily due to realized foreign currency exchange gains recorded during the three months ended June 30, 2018 compared to losses recorded in the corresponding period of the prior year.
In the three months ended June 30, 2018 and 2017, the provision for income taxes was primarily comprised of income tax expenses related to foreign jurisdictions.
Total revenue increased by $6.5 million, or 9%, in the six months ended June 30, 2018 compared to the six months ended June 30, 2017 due largely to an increase in subscription and support revenue of $6.0 million, or 9%. The increase in subscription and support revenue was primarily related to continued growth of our customer base for our premium offerings including sales to both new and existing customers. Professional services and other revenue increased by $559,000, or 9%, during six months ended June 30, 2018, compared to the corresponding period in the prior year. The increase in professional services and other revenue was primarily related to the size and number of professional services engagements during the six months ended June 30, 2018, compared to the corresponding period in the prior year. In addition, our revenue from premium offerings grew by $7.1 million, or 10%, in the six months ended June 30, 2018, compared to the six months ended June 30, 2017 primarily due to a 6% increase in the number of premium customers from 2,079 at June 30, 2017 to 2,204 at June 30, 2018.
Our gross profit increased by $4.5 million, or 10%, in the six months ended June 30, 2018 compared to the six months ended June 30, 2017, primarily due to an increase in revenue.
Loss from operations was $7.4 million in the six months ended June 30, 2018 compared to $13.0 million in the six months ended June 30, 2017. Loss from operations in the six months ended June 30, 2018 included stock-based compensation expense and amortization of acquired intangible assets of $3.5 million and $1.3 million, respectively. Loss from operations in the six months ended June 30, 2017 included stock-based compensation expense and amortization of acquired intangible assets of $3.5 million and $1.4 million respectively.
During the six months ended June 30, 2018, revenue increased by $6.5 million, or 9%, compared to the six months ended June 30, 2017, primarily due to an increase in revenue from our premium offerings, which consists of subscription and support revenue, as well as professional services and other revenue. The increase in premium revenue of $7.1 million, or 10%, is partially the result of a 6% increase in the number of premium customers from 2,079 at June 30, 2017 to 2,204 at June 30, 2018, in addition to a $559,000, or 9%, increase in professional services revenue. In the six months ended June 30, 2018, volume revenue decreased by $555,000, or 19%, compared to the six months ended June 30, 2017, as we continue to focus on the market for our premium solutions.
In the six months ended June 30, 2018, subscription and support revenue increased by $6.0 million, or 9% primarily related to the continued growth of our customer base for our premium offerings including sales to both new and existing customers and an 9% increase in the average annual subscription revenue per premium customer during the six months ended June 30, 2018. In addition, professional services and other revenue increased by $559,000, or 9%, primarily related to the size and number of professional services engagements during the six months ended June 30, 2018 compared to the corresponding quarter in 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 in process.
In the six months ended June 30, 2018, total revenue for North America remaining relatively unchanged compared to the six months ended June 30, 2017. In the six months ended June 30, 2018, total revenue outside of North America increased $6.5 million, or 21%, compared to the six months ended June 30, 2017. The increase in revenue from international regions is primarily related to an increase in revenue in Asia Pacific and Japan.
In the six months ended June 30, 2018, cost of subscription and support revenue increased $1.3 million, or 5%, compared to the six months ended June 30, 2017. The increase resulted primarily from increases in network hosting services, partner commission expense and employee-related expense of $1.0 million and $580,000 and $550,000 respectively. There were also increases in amortization, third-party software integrated with our service offering, and rent expenses of $423,000, $183,000, and $173,000, respectively. These increases were partially offset by decreases in content delivery network and depreciation expenses of $1.0 million and $499,000 respectively.
In the six months ended June 30, 2018, cost of professional services and other revenue increased $708,000, or 11%, compared to the six months ended June 30, 2017. This increase resulted primarily from increases in consulting and employee-related expenses of $400,000 and 330,000 respectively. These increases were offset in part by a decrease in travel expense of $140,000.
The overall gross profit percentage was 59% and 58% for the six months ended June 30, 2018 and 2017, respectively. Subscription and support gross profit increased $4.6 million, or 10%, compared to the six months ended June 30, 2017. In addition, professional services and other gross profit decreased $149,000 compared to the six months ended June 30, 2017 due to the increase in mix of contractor expenses versus internal expenses in order to support various professional services projects. 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 support revenue and professional services and other revenue, and the type, timing and duration of service required in delivering certain projects.
Research and Development. In the six months ended June 30, 2018, research and development expense decreased by $955,000, or 6%, compared to the six months ended June 30, 2017 primarily due to decreases in employee-related, travel, consulting and stock-based compensation expenses of $458,000, $183,000, $145,000 and $99,000 respectively. These decreases were partially offset by an increase in rent expense of $100,000.
Sales and Marketing. In the six months ended June 30, 2018, sales and marketing expense decreased by $1.3 million, or 4%, compared to the six months ended June 30, 2017 primarily due to travel, employee-related, and consulting expenses of $1.4 million, $288,000 and $179,000, respectively. These decreases were partially offset by increases in rent, conference, and stock-based compensation expenses of $345,000, $242,000 and $185,000 respectively.
General and Administrative. In the six months ended June 30, 2018, general and administrative expense increased by $1.2 million, or 10%, compared to the six months ended June 30, 2017 primarily due to increases in executive severance, employee-related, consulting and recruiting expenses of $735,000, $614,000, $423,000 and $316,000, respectively. These increases were offset in part by decreases in audit, travel and legal expenses of $350,000, $172,000 and $169,000, respectively.
In the six months ended June 30, 2018, interest income, net, increased by $42,000, or 68%, compared to the corresponding period of the prior year.
The interest expense during the six months ended June 30, 2018 is primarily comprised of interest paid on capital leases and an equipment financing. The increase in other (expense) income, net during the six months ended June 30, 2018 was primarily due to foreign currency exchange gains recorded during the six months ended June 30, 2018 upon collection of foreign denominated accounts receivable, compared to losses recorded in the corresponding period of the prior year.
In the six months ended June 30, 2018 and 2017, the provision for income taxes was primarily comprised of income tax expenses related to foreign jurisdictions.
Our cash and cash equivalents at June 30, 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 June 30, 2018 and December 31, 2017, we had $9.2 million and $7.8 million, respectively, of cash and cash equivalents held by subsidiaries in international locations, including subsidiaries located in Japan and the United Kingdom. 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 foreign withholding taxes. The Company is still in the process of analyzing the impact of the Tax Cuts and Jobs Act on its indefinite reinvestment assertion. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs over at least the next 12 months.
Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. The fluctuations vary depending on the timing of our billing activity and cash collections. In many instances we receive cash payment from a customer prior to the time we are able to recognize revenue on a transaction. We record these payments as deferred revenue, which has a positive effect on our accounts receivable balances. We use days sales outstanding, or DSO, calculated on a quarterly basis, as a measurement of the quality and status of our receivables. We define DSO as (a) accounts receivable, net of allowance for doubtful accounts, divided by total revenue for the most recent quarter, multiplied by (b) the number of days in that quarter. DSO was 57 days at June 30, 2018 and 59 days at December 31, 2017.
Cash flows provided by (used in) operating activities.
Cash provided (used in) by 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 by operating activities during the six months ended June 30, 2018 was $254,000. The cash flow provided by operating activities primarily resulted from net non-cash charges of $7.0 million, and cash provided by changes in our operating assets and liabilities of $1.2 million, partially offset by net losses of $7.9 million. Net non-cash expenses consisted of $3.5 million for stock-based compensation expense and $3.4 million for depreciation and amortization expense. Cash provided from changes in our operating assets and liabilities consisted primarily of increases in accounts payable and deferred revenue of $924,000 and $812,000, respectively, and a decrease in accounts receivable of $296,000. These inflows were offset in part by increases in prepaid expenses and other assets of $488,000 and $276,000, respectively, and a decrease in accrued expenses of $62,000.
Cash flows used in investing activities.
Cash used in investing activities during the six months ended June 30, 2018 was $2.8 million, consisting primarily of $1.8 million for the capitalization of internal-use software costs and $958,000 in capital expenditures to support the business.
Cash flows provided by (used in) financing activities.
Cash provided by financing activities for the six months ended June 30, 2018 was $3.9 million, consisting of proceeds received on the exercise of common stock options of $4.2 million offset in part by payments under capital lease obligation, payments of withholding tax on RSU vesting, and equipment financing of $193,000, $113,000 and $26,000, respectively.
On November 19, 2015, we entered into an amended and restated loan and security agreement with a lender (the Loan Agreement) providing for up to a $20.0 million asset based line of credit (the Line of Credit) with an expiration date of November 11, 2018. Under the Line of Credit, we can borrow up to $20.0 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 equal to the prime rate or the LIBOR rate plus 2.5%. Under the Loan Agreement, we must comply with certain financial covenants, including maintaining a minimum asset coverage ratio. If the outstanding principal during any month is at least $15.0 million, the Company must also maintain a minimum net income threshold based on non-GAAP operating measures. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Line 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 June 30, 2018.
operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of the U.S. Internal Revenue Code of 1986, as amended. We completed an assessment to determine whether there may have been a Section 382 ownership change and determined that it is more likely than not that our net operating and tax credit amounts as disclosed are not subject to any material Section 382 limitations.
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 net deferred 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 net deferred 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 June 30, 2018 and December 31, 2017.
Our principal commitments consist primarily of obligations under our leases for our office space and contractual commitments for capital leases as well as content delivery network services, hosting and other support services. Other than these lease obligations and contractual commitments, we do not have commercial commitments under lines of credit, standby repurchase obligations or other such debt arrangements.
Our contractual obligations as of December 31, 2017 are summarized in our Annual Report on Form 10-K for the year ended December 31, 2017. In addition to the obligations outlined in our Annual Report on Form 10-K, we entered into an agreement to lease office space in Sydney, Australia with a non-cancelable commitment with total obligations of $1.2 million through June 30, 2023. As of June 30, 2018, our obligation was $1.2 million in connection with this agreement.
In June 2018, we entered into an agreement with a non-cancelable commitment, primarily for content delivery and network storage services, with obligations of $18.0 million through April 30, 2020. As of June 30, 2018, our obligation was $16.4 million in connection with this agreement.
For information on recent accounting pronouncements, see Recently Issued and Adopted Accounting Standards in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
We do not have any special purpose entities or off-balance sheet arrangements.
We 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 anticipate that such operating costs, as well as planned capital expenditures will constitute a material use of our cash resources. As a result, our net cash flows 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 12 months. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, our introduction of new products and enhancements, and our expansion of sales and marketing and product development activities. To the extent that our cash and cash equivalents, short and long-term investments and cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit 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 to acquire businesses, technologies and products that will complement our existing operations. In the event funding is required, we may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to us or at all.
We 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 instruments meeting fair value disclosure requirements consist of cash equivalents, accounts receivable and accounts payable. The fair value of these financial instruments approximates their carrying amount.
Our results of operations 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. Except for revenue transactions in Japan, we enter into transactions directly with substantially all of our foreign customers.
As of June 30, 2018 and December 31, 2017, we had $6.8 million and $7.3 million, respectively, of receivables denominated in currencies other than the U.S. dollar. We also maintain cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange rate movements.
In addition, although our foreign subsidiaries have intercompany accounts that are eliminated upon consolidation, these accounts expose us to foreign currency exchange rate fluctuations. Exchange rate fluctuations on short-term intercompany accounts are recorded in our consolidated statements of operations under other income (expense), net, while exchange rate fluctuations on long-term intercompany accounts are recorded in our consolidated balance sheets under accumulated other comprehensive income in stockholders equity, as they are considered part of our net investment and hence do not give rise to gains or losses.
currencies move in the same direction at the same time and the ratio of non-U.S. dollar denominated revenue and expenses to U.S. dollar denominated revenue and expenses does not change from current levels. Since a portion of our revenue is deferred revenue that is 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 the expense is incurred. All of the potential changes noted above are based on sensitivity analyses performed on our financial results as of June 30, 2018.
We had unrestricted cash and cash equivalents totaling $27.5 million at June 30, 2018. Cash and cash equivalents were invested primarily in money market funds and are held for working capital purposes. We do not use derivative financial instruments in our investment portfolio. Declines in interest rates, however, would reduce future interest income. We incurred $1,000 and $7,000 of interest expense during the three months ended June 30, 2018 and 2017, respectively, and $3,000 and $17,000 of interest expense during the six months ended June 30, 2018 and 2017, respectively, related to interest paid on capital leases. While we continue to incur interest expense in connection with our capital leases, the interest expense is fixed and not subject to changes in market interest rates. In the event that we borrow under our line of credit, which bears interest at the prime rate or the LIBOR rate plus the LIBOR rate margin, the related interest expense recorded would be subject to changes in the rate of interest.
As of June 30, 2018, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2018, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
On 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. (Ooyala Mexico). The lawsuit, which was filed in the United States District Court for the District of Massachusetts, concerns allegations that the two individuals, who are former employees of Ooyala Mexico, misappropriated customer information and other trade secrets and used that information in working for Brightcove. The complaint was amended on June 1, 2017 to remove claims against the two former employees of Ooyala Mexico. The remaining claims against us are 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), and tortious interference with advantageous business relationships. Ooyala and Ooyala Mexico also filed a motion for preliminary injunction (amended at the same time the complaint was amended), seeking to enjoin us from using any of the allegedly misappropriated information or communicating with customers whose information was taken, and seeking the return of any information that was allegedly taken. On June 16, 2017, we filed an opposition to the motion for preliminary injunction, and also moved to dismiss the lawsuit. Brightcoves motion to dismiss was denied on September 6, 2017.
The court issued a preliminary injunction on July 10, 2018. The injunction requires us to delete any Ooyala confidential information obtained from the former Ooyala employees and prohibits us from using such information to pursue business with twenty-two specified Latin American prospective customers. We are now engaged in discovery. We cannot yet determine 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.
On October 26, 2017, Realtime Adaptive Streaming LLC filed a complaint against us and our subsidiary Brightcove Holdings, Inc. in the United States District Court for the District of Delaware. The complaint alleges that Brightcove infringed five patents related to file compression technology. The complaint seeks monetary damages and injunctive relief. On December 1, 2017, Realtime filed an amended complaint, adding two additional patents to its claims. Brightcove filed a motion to dismiss on January 26, 2018. The plaintiff filed an opposition to the motion to dismiss on February 9, 2018 and Brightcove filed a reply on February 16, 2018. A ruling on the motion to dismiss has not yet been issued by the court. We cannot yet determine whether it is probable that a loss will be incurred in connection with this complaint, nor can the Company 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 the outcome of these claims will have a material adverse effect on our consolidated financial position, results of operations or cash flows based on the status of proceedings at this time.
You should carefully consider the risks described in our annual report on Form 10-K for the fiscal year ended December 31st, 2017, under the heading Part I  Item 1A. Risk Factors, together with all of the other information in this Quarterly Report on Form 10-Q. 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 currently consider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report and in our other public filings. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Our policy governing transactions in our securities by directors, officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.
We anticipate that, as permitted by Rule 10b5-1 and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule 10b5-1 and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan.
3.1 (1) Eleventh Amended and Restated Certificate of Incorporation.
3.2 (2) Amended and Restated By-Laws.
4.1 (3) Form of Common Stock certificate of the Registrant.
4.2 (4)** Brightcove Inc. 2018 Inducement Plan.
4.3 (5)** Form of Stock Option Agreement under the Brightcove Inc. 2018 Inducement Plan.
4.4 (6)** Form of Performance-Based Restricted Stock Unit Award Agreement under the Brightcove Inc. 2018 Inducement Plan.
10.1 (7)** Amendment to Employment Agreement, dated April 11, 2018, by and between the Registrant and Andrew Feinberg.
10.2 (8)** Employment Agreement, dated April 11, 2018, by and between the Registrant and Jeff Ray.
10.3 (9)** Non-Employee Director Compensation Policy of Brightcove Inc. dated April 11, 2018.
10.4 (10)** Employment Agreement dated May 3, 2018, by and between the Registrant and Robert Noreck.
32.1^ Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Filed as Exhibit 3.2 to Amendment No. 5 to Registrants Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.
(2) Filed as Exhibit 3.3 to Amendment No. 5 to Registrants Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.
(3) Filed as Exhibit 4.1 to Amendment No. 5 to Registrants Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 6, 2012, and incorporated herein by reference.
(4) 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, and incorporated herein by reference.
(5) 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, and incorporated herein by reference.
(6) 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, and incorporated herein by reference.
(7) Filed as Exhibit 99.1 to Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018, and incorporated herein by reference.
(8) Filed as Exhibit 99.2 to Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2018, and incorporated herein by reference.
(9) 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, and incorporated herein by reference.
(10) Filed as Exhibit 99.1 to Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2018, and incorporated herein by reference.
In connection with the Quarterly Report on Form 10-Q of Brightcove Inc. for the quarterly period ended June 30, 2018 as filed with the Securities and Exchange 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 with the 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 all material respects, the financial condition and results of operations of Brightcove Inc.
In connection with the Quarterly Report on Form 10-Q of Brightcove Inc. for the quarterly period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), Robert Noreck, as Chief Financial 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 with the 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 all material respects, the financial condition and results of operations of Brightcove Inc.

References: §1836
 §42
 §11
 §1836
 §42
 §11