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spk04: Greetings. Welcome to the Brightcove third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Brian Gagnon. You may begin.
spk10: Good afternoon, and welcome to Brightcove's third quarter 2020 earnings call. Today, we will discuss the results announced in our press release issued after market close. With me on the call are Jeff Ray, RYCO's Chief Executive Officer, and Rob Norick, RYCO's Chief Financial Officer. During the call, we will make statements related to our business that may be considered forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning our financial guidance for the fourth fiscal quarter of 2020 and the full year of 2020, expected profitability and positive free cash flow, our position to execute our go-to-market and grow strategy, our ability to expand our leadership position, our ability to maintain and upsell existing customers, as well as our ability to acquire new customers. Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming, or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that cause actual results to differ materially from expectations, including the effect of the COVID-19 pandemic on our business operations, as well as the impact on general economic and financial market conditions. For discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our most recently filed annual report on Form 10-K and as updated by our other SEC filings. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after market closed today, which can be found on our website at www.britecode.com. In terms of the agenda for today's call, Jeff will provide a summary review of our financial results, an update on our operations, and a review of our strategy. Rob will finish with additional details regarding our third quarter 2020 results, as well as our outlook for the fourth quarter and full year 2020. With that, let me turn the call over to Jeff.
spk06: Thanks, Brian, and thanks to all of you for joining today. I hope all of you and your families remain healthy and safe. Brightcove had an exceptional third quarter, which built upon and exceeded our record sales results in the second quarter. The strategic decisions and investments made across every aspect of the business over the past two and a half years are all coming together and delivering the performance we've long known this business is capable of achieving. The incredible customer wins we achieved this quarter demonstrate that video has become an essential tool for organizations who need to connect and communicate with their customers, employees, and partners. Our best-in-class platform and product portfolio, combined with our deep video technology expertise, is delivering the promise of video to enterprises and media companies alike, which is driving faster, more profitable growth in our business. Rob will provide the details later, but based on our third quarter performance and outlook for the fourth quarter, we are raising our guidance for the full year. In fact, our updated guidance is within the original range we provided at the beginning of the year, which is a remarkable achievement given the retention rate issues earlier this year in the overall economic uncertainty related to the COVID pandemic. Turning to our financial results briefly for the third quarter, we delivered revenue of $49.1 million, up 3% year-over-year and well ahead of our guidance. Adjusted EBITDA was $5.9 million, which was also well ahead of our guidance. I would like to spend some time highlighting what's driving our success in the market, why we are confident it is sustainable, and what we are doing to drive top-line performance. Brightcove, at its core, is a product-driven company. Over the past 15 years, we have developed the most scalable, high-performing video platform on the market. The recent introduction of solutions like Brightcove Beacon, Brightcove Campaign, Brightcove Engage, and Brightcove Virtual Event Experiences leverage the sophistication of our video platform with elegant, purpose-built apps that drive critical business value for our customers. With customers using video in new and exciting ways across their operation, they're looking for a partner they can trust with proven experience and easy-to-use products that can scale to meet all their needs. Brightcove's mission is to simplify the complexity of video so that any enterprise or media company can deliver exceptional video experiences to its audience. We believe our market momentum over the past six months demonstrates that Brightcove is the video partner of choice for enterprises and media companies. From a sales perspective, the changes we have discussed on prior earnings calls are paying off. This begins with a more targeted and bold demand generation strategy. With a focus on global field marketing and custom virtual events, like our recent Brightcove three-day virtual summit, we have enjoyed a robust pipeline to fuel growth in every region. Within our sales team, the significant number of new reps we have brought into the company this past year are quickly becoming productive, thanks to our comprehensive onboarding and sales engagement processes. We are seeing great success with our strategy of having dedicated reps focused on acquiring new logos, while others are responsible for selling back into our install base. We've developed a proactive and skilled sales organization that strategically engages customers to identify how Brightco can solve specific business problems. The changes to our product portfolio and go-to-market efforts are generating great improvement in sales activity. Our third quarter results were notable for the strong performance among new customers, existing customers, and by geography, with each region well ahead of plan. I would like to spend some time highlighting a few of the key drivers of our performance in the quarter. The first is the tremendous success we continue to have with Brightcove Beacons. Both our deal volume and average deal size for Brightcove Beacon are exceeding our expectations. We are transforming the delivery of an OTT service from a bespoke development project into a technology-rich platform deployment with leading capabilities in shorter timeframes. Brightcove Beacon has opened up several exciting opportunities due to its ease of use and flexibility to enable any organization to maintain an OTP offering. This gives customers greater freedom to use video in new ways that truly drive value. The second is our ability to deliver exciting live events with the best brands and partners in the world. We're seeing continued strength with our live events offering. The growing number of successful live virtual events is reinforcing the belief that hybrid model events increase ROI expand audience reach, and open up new opportunities to engage with customers and prospects. We are signing key wins in several different industries, including technology, fitness, sports, and media. Through the end of September, we have already helped more than 170 organizations pivot how they connect with their customers, employees, and fans. And we have a growing list of events that will be powered by Brightcove in the near future. Our virtual events momentum is just getting started, and we are honored to have partners with brands like Inbound 2020, HubSpot's annual user conference, AnitaBee.org's annual Grace Hopper Gala, and the USGA's US Open over the past few months. I'd like to highlight a few recent wins. South by Southwest is a recent win we are particularly proud of. For over 30 years, South by Southwest has gathered the world's most innovative minds in Austin, Texas. In 2019, the event had 280,000 attendees. This coming year will be an incredible pivot for the organization as it goes truly virtual for the first time. Using Brightco, South by Southwest will expand its reach to broader audiences in new and innovative ways using video to deliver its 2021 festival. We recently partnered with VMware to power its VMworld 2020 annual user conference. This event went virtual for the first time, and it was delivered flawlessly. VMworld hosted more than 80,000 attendees from 180 countries. who watched more than 1,000 speakers present at 900 live and on-demand sessions. The number of attendees continues to grow weekly as more customers and prospects engage with the on-demand content. Lastly, the event industry has had to reimagine a new world where virtual is the primary connection. In addition to adding major logos to the Brightco portfolio, our reach will expand with new agreements with the three biggest event planning companies in the world, Cvent, Rainfocus, and Jack Morton. Collectively, these leaders in the event industry have the strongest reputation and deepest understanding of how to build engaging event experiences. The fact that these industry leaders chose Brightcove as their video partner is a strong endorsement of the power and scalability of our platform. And in just a short period of time, we have delivered more than 200 events of all sizes with the help of these partners. All three have a unique approach to connecting with their audiences, and we play an essential role in their video strategy. Each of these partners extends our reach in the marketplace and provides us access to far more potential customers than we could target on our own. The future of events will certainly be a hybrid model, and video will remain a key component for connecting audiences. We believe virtual events will be a long-term demand driver for Brightco. In addition, we delivered a balanced mix of new customer wins and existing customers who continue to expand their engagement with Brightco. Some of the customer wins and renewals we signed in the quarter included Kupang Corporation, DAR Communications, Get After It Media, Hitachi, Boston Consulting Group, Chick-fil-A, Chipotle, Le Figaro, and Time USA. I would like to highlight a few of our key wins in the quarter. Among the more than 40 logos in our fitness portfolio is ClassPass, an online fitness brand that connects its customers with exercise classes from numerous geographically dispersed studios. Once COVID put a halt to traditional in-person fitness instruction, ClassPass pivoted its business by uploading BOD content from previous classes, as well as posting new live classes so that its members can continue to work out from home. We partnered with them as they experienced incredible growth over the past year and continue to be a reliable source for their content. Another growing vertical for us is faith-based organizations. Lifeway Christian Resources is a nonprofit ministry focused on the Southern Baptist Convention, which has 14 million members across 47,000 churches in the U.S. It needed to quickly transform its operations as COVID restrictions required its Bible study and church services be conducted virtually. This past quarter, Lifeway expanded its relationship with Brightcove because we are the only one to deliver on scale and exceptional viewer experiences. Lastly, we have all watched sports evolve dramatically during the pandemic. The Football Federation of Australia, a Brightcove customer since 2017, learned firsthand what it meant to deliver a new experience to fans. The FFA is the governing body of soccer futsal and beach soccer within Australia and uses Brightcove for all video on-demand content of A-League matches. Each club has its own Brightcove account to upload snackable content to engage with their grassroots audience. Besides the event partnerships I mentioned previously, we also had encouraging early traction with our recently launched Master License Partner Program. which allows partners to deliver our video technology and solutions as part of a broader managed service offering. We have already signed five partners to this program and are pleased with the level of interest for embedding Brightco into third-party services. We continue to believe a robust channel program will be an important contributor to growth by expanding our market reach and increasing our sales velocities. As we look to the future, we are mindful of the uncertainty in the economy. However, we feel the need for video will remain a focus for brands who understand the power it can deliver to unite, engage, and communicate. We are confident current market trends are sustainable and that video has reached an inflection point that will continue after COVID goes away. We've had much success this year, but acknowledge we still have work to do. As Rob will discuss, we had a good retention rate this quarter, but our goal is to build a stronger, more predictable renewal business. This is an area that I am intensely focused on, and our Chief Revenue Officer, Rick Hansen, is leading a comprehensive process to build a best-in-class renewals business. Just as we have successfully rebuilt our product development and go-to-market efforts, We will do the same with our renewal business in future quarters. The combination of our strong sales dynamic and an improved retention rate will be a powerful catalyst for improved, more profitable revenue growth. Before I turn it over to Rob, I'd like to welcome our two new board members, Dr. Tadal Neely and Richa Gupta Ranjan. Tadal is a Harvard Business School professor and member of Rakuten's advisory board. And Richa is the Director of Product Management for Google Finance. Their forward-thinking ideas and expertise will help shape the future of Brightco from a technology, leadership, and organizational perspective. We're excited to have them on board and look forward to their ongoing insight and guidance. To wrap up, I am excited by how the business is performing. The third quarter demonstrates that our strategy is working. and that we are on the right track to achieve our long-term strategic objectives. I am amazed by the dedication and passion of Brightcoats employees who have worked tirelessly to get us to this point. Facing tremendous personal challenges as they adapted to life during COVID, our team has always remained focused on ensuring our customers' success. We have a great team, And I know we have the right people to take this company to the next level. We're building a new chapter in the history of Brightco. One we are confident will generate significant value for shareholders as we continue to successfully execute on our strategy. With that, let me turn the call over to Rob to walk you through the numbers. Rob?
spk07: Thank you, Jeff, and good afternoon, everyone. I will begin with a detailed review of our third quarter and then I will finish with our outlook for the fourth quarter in the full year 2020. Total revenue in the third quarter was $49.1 million, which is well above our guidance range. This was driven by better than expected bookings throughout the quarter. Breaking revenue down further, subscription and support revenue was $46.3 million and professional services revenue was $2.8 million. 12-month backlog, which we define as the aggregate amount of committed subscription revenue related to future performance obligations in the next 12 months, was $109.6 million. This represents a 9% year-over-year increase. On a geographic basis, we generated 56% of our revenue in North America during the quarter and 44% internationally. Breaking down international revenue a little more, Europe generated 17% of our revenue and Japan and Asia Pacific generated 27% of revenue during the quarter. Let me now turn to the supplemental metrics we share on a quarterly basis. Our recurring dollar retention rate in the third quarter was 101%, which was above our target range of low to mid-90s. This was a notable improvement from recent quarters, driven primarily by extremely strong upsell activity at the time of renewal. While we don't specifically report gross dollar retention rate, it also showed some improvement from recent quarters. While we are pleased with the performance of this metric in the quarter, we still have more work to do to build a consistent renewals business. As Jeff mentioned, this is a key strategic priority for us and an area where we are investing significant resources. We expect this metric may continue to have some volatility in the near term before we feel the full impact of the changes we are making in the second half of 2021. Our customer count at the end of the third quarter was 3,381, of which 2,267 were classified as premium customers. Looking at our ARPU within our premium customer base, our annualized revenue per premium customer was $89,000, which was up 5% year-over-year and excludes our entry-level pricing for starter customers, which averaged $4,300 in annualized revenue. Looking at our results on a GAAP basis, our gross profit was $31 million, operating income was $1.3 million, and net income per share was $0.03 for the quarter. Turning to our non-GAAP results, our non-GAAP gross profit in the third quarter was $31.5 million, compared to $29.8 million in the year-ago period, and represented a gross margin of 64%. This was our strongest gross margin performance in four years, driven by the better-than-expected revenue performance, efficiencies gained with our providers, and the increasing diversification of our business. Subscription and support revenue represented 94% of our total revenue and generated a 67% gross margin in the quarter compared to a 65% gross margin in the third quarter of 2019. Non-GAAP income from operations was $4.5 million in the third quarter compared to $2.8 million in the third quarter of 2019. Adjusted EBITDA was $5.9 million in the third quarter compared to a $4.1 million in the year-ago period and above the high end of our guidance range for the quarter. For the first time in our history, we generated a double-digit adjusted EBITDA margin, a powerful indication of the scalability of our business model. Our focus is to continue to find ways to drive productivity improvements and reallocate existing spend towards our growth initiatives. Non-GAAP net income per share was $0.11 based on 40.6 million weighted average shares outstanding. This compares to net income per share of $0.06 on 40 million weighted average shares outstanding in the year-ago period. Turning to the balance sheet and cash flow, we ended the quarter with cash and cash equivalents of $30.3 million. During the third quarter, we generated $3.6 million in cash flow from operations, and free cash flow was $1.4 million. After taking into account $2.2 million in capital expenditures and capitalized internal use software. I would now like to finish by providing an updated outlook for the fourth quarter and the full year 2020. We are performing at a high level and have delivered the best two sales quarters in our history in the second and third quarters. We are also seeing positive trends in our pipeline and overall business activity. Having said that, we are mindful of the uncertain economic environment and the difficulty in predicting when sales cycles will close. We don't think it is prudent to assume we'll be as successful as we were in the third quarter in closing new business as we contemplate our guidance for the fourth quarter. For the fourth quarter, we are targeting revenue of $49.5 million to $50.5 million, including approximately $2.5 million of professional services revenue. From a profitability perspective, we are expecting non-GAAP operating income to be $2.9 million to $3.4 million and adjusted EBITDA to be between $4.2 million and $4.7 million. Non-GAAP net income per share is expected to be in the range of 7 cents to 8 cents based on 41.1 million weighted average shares outstanding. For the full year, we are targeting revenue of $193.2 million to $194.2 million, including approximately $9.5 million in professional services revenue. From a profitability perspective, we expect non-GAAP operating income of $12.7 million to $13.2 million, and adjusted EBITDA to be between $18 and $18.5 million. Non-GAAP net income per share is expected to be in the range of $0.29 to $0.30 based on 40.3 million weighted average shares outstanding. Our adjusted EBITDA guidance reflects the third consecutive year of annual growth. For the full year, we are now targeting free cash flow of $4 million to $5 million. To summarize, we had a great third quarter. Our market leadership and the superior performance of our platform and products puts Brightco in a great spot to benefit from the growing market for video solutions. We are executing very well through the challenging economic environment and believe we are well positioned to build upon our recent success to generate faster, more profitable growth. With that, we will now take your questions. Operator, we are ready to begin Q&A.
spk04: And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please, while we poll for questions. Our first question is from Eric Martinuzzi with Lake Street Capital Markets. Please proceed with your question.
spk03: Thanks. Congrats on the quarter and the outlook. Always good to not screw it up in my first quarter of coverage. Steve, I'm curious to know, obviously we've got a rising tide here. I'm wondering how much of the success in the quarter, just kind of stepping back and taking a look at the competitive landscape, is this rising tide lifting all boats, or do you feel like there's some share shift going on in favor of Brightco?
spk06: Hey, Eric. Yeah, welcome. Great timing on your part. This is Jeff. Yeah, certainly there's a rising tide in that there is a lot more I think, urgency in companies to make a decision on video. That being said, I think we're winning more than our fair share because when they start talking about quality of experience, quality of service, reliability, scalability, security, the fact that we have the best customer support organization on the planet, they end up picking us. So yes, the urgency is driving more interest and what may in the past have been a two- or three-month engagement may now be measured in single-digit numbers of weeks. We are pleased with our win rate.
spk03: Okay. And then the area of success that you saw that was definitely kind of Brightcove-specific, the pendulum swung really hard the other way in favor of the recurring dollar retention rate here in Q3. Can you kind of compare and contrast Q3 versus Q2 for somebody who's relatively fresh to the story? Why was Q2 where it was? Yeah, sure.
spk07: This is Rob. If you remember, if you go back to the Q2 call, we talked about having some challenges in two spaces. One was a couple of large media customers who left us or downsized their agreements. And the second was really around upsells at the time of renewal, so growing those customers. This quarter, we had success on both sides. We got that gross retention rate up from last quarter, not quite where it has historically been. But then we also saw a lot of success with upselling our existing customers at the time of renewal. So that's really what you saw happen from last quarter to this quarter. And again, as we think about that retention rate on a go-forward basis, it's a focus of ours. We certainly had a really strong quarter this quarter, but I do expect some volatility there. over the next few quarters until we get all of our plans implemented and we start seeing a consistent retention rate in the back half of 2021.
spk03: Okay. And then last question for me is on the gross margin. Obviously, you know, terrific success here with the revenue outperformance and you had some efficiencies. Is there anything we should keep in mind as we look to model for Q4 on the gross margins for the business?
spk07: Yeah, I think as you look at Q4, We should see some of that success going forward, but it could be a little volatile. As you saw in Q2, we saw some increased usage from our customers that didn't necessarily line up with the ratable revenue model. So as you look out at Q4, there is some potential for some of that happening again.
spk03: Okay. Thanks for taking my questions, and congrats again on the good quarter.
spk04: Thanks, Eric. Absolutely. Thanks, Eric. And our next question is from Mike Lattimore with Northland Capital Markets. Please proceed with your question.
spk09: Great, yeah. Excellent quarter. Two in a row now. Beautiful. Say, on the live events, what percent of bookings would you put in that kind of live events category in the quarter?
spk06: We don't break it out. I'll tell you that Rob wants to jump into. We don't break it out. Certainly, it's growing very, very quickly. I think what I'm most excited about is just the balanced performance, balanced in terms of geos, balanced in terms of types of business, even our core base business, if you want to call it legacy, even though we continue to refresh the whole technology stack. All of those were healthy, as were our target segments.
spk09: Great. And then just in terms of the pipeline, how would you characterize sort of the pipeline entering the fourth quarter here relative to when you were entering the third quarter? And any quantification of change would be great, too.
spk06: We feel good about it. It's a very, very healthy pipeline. In the past, the focus had been just building the pipeline, getting to the point where we had enough coverage to handle the pipeline. the plans, the booking plans. We're now at a point where we're happy with coverage, but I think more importantly, we're happy with the quality of the pipeline and the conversion rate.
spk09: Great. And then just as you mentioned on the revenue retention, obviously great in the quarter. You said a little bit of volatility maybe for a while. I guess, is there any particular area that would cause that? Is it the media side of things? Or what would cause potential volatility, I guess?
spk07: Yeah, the volatility we're going to continue to see on the media side of it. You know, as we go forward, particularly into next year, it's really two things. One, you've got the overall economic environment that can provide some headwinds to some of those media business models that we have out there. And the second piece is really on the media customers where it's a little bit more of a complex implementation. those customers are making their choices to migrate six to nine months out. So as we're putting all the plans in place in kind of Q4 of this year and starting to execute on the retention plans, we may not have an impact on that until the back half of next year.
spk09: Great. Thanks a lot. Congratulations.
spk05: Thank you.
spk04: Thanks, Mike. Take care. Our next question is from Lee Crow with B Reilly Securities. Please proceed with your question.
spk01: Great. Thanks for taking my questions and echoing the congrats on the good quarter and sequential execution. Wanted to start off on revenue guidance. If I kind of take the implied revenue guidance from last quarter for the full year and what that meant for Q4, And then I take your established Q4 guidance. It looks like you took up guidance for Q4 by about $4 million versus the implied Q2 guidance. I guess what are the kind of drivers of that $4 million increase? I guess what I'm asking is it's a pretty significant increase for this business to see such a quick uptick. I guess is there improved visibility or is it just flat out new customer wins or... Um, maybe less conservatism towards the macro outlook. Uh, just curious on your thoughts there.
spk06: Yeah, I'll go first. We really haven't changed our view of the macro outlook. We've been pretty consistent really since March 13th, when we started the lockdown that, uh, that there is still a lot of uncertainty in the market that really hasn't, we don't know today whether or not we're going to have a, a, a resolution to this or a vaccine. any more than we did in March. So that really hasn't changed. A couple of things have changed. Our confidence in our ability to attract and close business and engage with the competition and beat them. Also, there's a timing factor. The sales team is doing a better job of getting business pulled in earlier into the quarter, which certainly helps us from a revenue standpoint. I'll let Rob expand on anything else.
spk07: Yeah. And Lee, as you can imagine, kind of at the start of a quarter, we've got much better visibility into that quarter than we do even one quarter out, particularly given the macro environment and the pressures that our customers can be under. So as we look at Q4, it's really, you know, we've got great visibility and it's an outcome of the sales performance and the retention rate performance that we saw in the third quarter.
spk01: Got it. And then switching over to EBITDA guidance, you know, solid double digit result in Q3, but it looks like you have kind of a down tick into the high single digits for Q4. Are there any particular expense items to call out on that guidance outlook?
spk07: Yeah, we're really looking at making the investments for 2021 early. So as we look at what are the sales investments, what are the marketing investments that we're going to need to get a fast start into 2021? we're making those investments in the, in the fourth quarter.
spk01: Got it. And then last question for me, and I'll try to frame this in a way that makes sense, but you know, you guys are starting to kind of ramp the channel and I just kind of want to get a sense of where progress is. And so, you know, with this upside in Q3, could you maybe break down the function of it being direct sales versus channel sales in terms of the mix of upside and, I guess maybe just talk about the productivity of the channel sales right now and kind of how you expect that to ramp over the next couple quarters.
spk06: Sure. This is Jeff. We're still in the early days, obviously. We only got serious about launching channel at the beginning of this year. We're pleased with where we are in channel. The channel team is well ahead of plan. The pipeline is very, very healthy. And what I'm most encouraged about is the quality of of the kinds of deals that we're winning with channel partners. It just exceeds our expectations. So we feel very good about that. And we'll be accelerating some of our investments for that team. It's really premature. I'm going to kind of pull, I think, a little bit further than what you're asking. But, you know, what I hear you implying is about the future, you know, in terms of, you know, Where will direct be? Where will channel be? I think we're still some time away from where we're going to have any discussions about channel conflict or cannibalism. Right now there's very clear delineation, and there's zero conflict, and we feel very, very good about that.
spk01: Got it. Congrats on the results, and thank you for taking my questions.
spk05: Thank you. Thanks, Luke.
spk04: And our next question is from Steven Frankel from Guard. Please proceed with your question.
spk02: Congratulations. You talked about the success in the live event business. Can you give us some insight into your ability to take some of those one-off events, especially the ones that come through partners, and convert those customers into a recurring revenue relationship around maybe some of your other products?
spk06: Sure. I'll start. This is Jeff. And Rob will then jump in kind of on how we construct the deal, which gives us better confidence on the recurring revenue element. Typically, live events is triggered, obviously, by some kind of an issue where an entity has to replace what was going to be an attended event to a virtual event. That's typically what triggers the discussion at first. As we jump into it with them, most customers really don't even know what questions to ask because this is so new. And our team is very, very good at helping them understand, look, here's the pitfalls, here's the challenges, here's the kind of things you need to avoid to make sure that you have an exceptional event. And we can do one in as little as two weeks on a pretty large scale. I'm talking about 10,000-plus attendees. Then the discussion typically goes beyond, you know, these customers go on a journey and they say, okay, well, that's pretty good, but maybe I should be doing more live events. Maybe there's a reason for me to have a better relationship with customers, prospects, any, you know, whoever the stakeholders are, you know, maybe it's a supply chain. And so that gives us an opportunity to start talking about, upgrading the quality of their engagement, either for just digital marketing or for OTT and the use of Beacon to establish their own TV channel, if you will. So even though live events is certainly we're seeing a good pop, we spend a lot of time studying this. We feel that this has a very, very long tail. And then I'll turn it over to Rob on any commentary on kind of the deal constructs.
spk07: Yeah, so as you think about the deal construct, it's twofold. There's obviously a piece of services that's done right around the event. But to Jeff's point, the team is really selling that longer-term engagement with the customers, prospects, and employees, depending on the type of event. So you end up with a license over a period of time, which is more in line with our typical model. And that's to drive that engagement. We talked about it a little bit, but we've seen some of these event customers buy into our beacon product in order to drive that kind of engagement. And then the sales team is taking that entry point into these customers and starting to sell our other products across the broader customer.
spk02: Okay, great. And is it the same kind of process if these leads are coming in through Cvent or some of these other event partners as well?
spk07: Yeah, so each one of our partnerships is a little bit different, and some are referral partner one-off engagements, and some are more of an OEM-type engagement.
spk02: Okay, and then on the retention rate, which obviously was great progress this quarter, but you talked about how under the covers or maybe when you pull out some of the big upsells, you still have work to do. Jeff, could you give us a couple of specifics? Because you've been working on this for multiple quarters. What have you learned through the process that you weren't doing correctly, and what are the big things you still have to do to get this right where you want it to be?
spk06: As we shared in the last quarterly call, we were going to get serious about attacking this, just as we had all the other aspects of the business, product, marketing, sales, engineering. And this is, for us, it's the last domino that needs to fall. And so we have kicked off an internal project. We started it back in August with an outside firm. We benchmarked ourselves against the market and the best of breed. We identified where our strengths were and where our gaps are. We prioritized those in terms of the impact on the business and the difficulty of fixing, resolving, deploying things. And that plan is now in place. We've shared it with the board. They've blessed it. And now it's time for us to start executing. So for us, I wouldn't expect to see any kind of near-term results. This takes a while to deploy. It takes a while to move the needle. But there's really nothing in this that we have to do that is groundbreaking that no other company has ever done before. There's very, very little risk in this, and we're venturing off into uncharted waters. It's just things that we need to do, and we're going to get it done.
spk02: And in general, are your upsell and renewal rate materially higher on the enterprise side versus the media side?
spk06: I don't know if I would call it materially. It really depends on where the customer is in the journey and the level of sophistication.
spk02: meaning if the customer is too sophisticated, you can get engineered out, and if they're not getting enough value out of your product, you get dropped out as well, so the sweet spot's in the middle?
spk06: I think just the opposite. We're now engaging more and more with them and helping them understand how they're using video and how they can do even more with video. That's the power of the consulting team. It's the power of a really talented professional sales and pre-sales organization. They could sit down with customers and say, there's a lot more that you can be doing that you can see benefit from. And that's true for media as well as for enterprise. We just had not consistently historically engaged at that level. You know, you certainly saw it with the upsell activity in the third quarter.
spk02: Okay, great. Thank you.
spk05: Thank you. Thanks, Steve.
spk04: And our next question is from Mike Lattimore with Northland Capital Markets. Please proceed with your question.
spk05: Mike, you there? Are you on mute?
spk09: Sorry about that. It was a wonderful question. So the subscription gross margin, did you say that that was relatively sustainable going forward?
spk07: Yeah, I think similar to our retention rates, there's going to be a little bit of volatility there on a quarter-to-quarter basis. But in the long term, we think we can continue to work on that.
spk09: Okay. And then in terms of sales force productivity, My guess is it's kind of where you want it, but just wanted to clarify, you know, any color around Salesforce productivity.
spk08: Yeah, I think from a productivity standpoint, we've got them where we want them.
spk07: I think as we go into next year, we're going to continue to invest in the channel in an effort to drive down that cost of acquisition.
spk09: And then just last, what was overage in the quarter?
spk07: Overages were about 1.5 million. Okay, great.
spk09: All right. Thank you.
spk04: Thank you. And we have reached the end of the question and answer session, and I'll now turn the call over to CEO Jeff Ray for closing remarks.
spk06: Thank you, Shamali, and thank you for your help. To everyone, it was an exciting third quarter. I hope you could tell in the tone in my voice. That being said, we're very excited about the fourth quarter also. We know what our challenges are. We're sharing those with you, but we also see great opportunities. Just please continue to stay safe and healthy and go vote. Thanks, everybody. Bye.
spk04: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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