Brightcove (BCOV) Q4 2021 Earnings Call Transcript

Brightcove (BCOV 1.18%)
Q4 2021 Earnings Call
Feb 16, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Brightcove fourth quarter and fiscal year 2021 earnings call. [Operator instructions] Please note that this conference is being recorded. I would now like to turn the conference over to Brian Denyeaue from ICR.

Thank you. You may begin. 

Brian Denyeaue -- Investor Relations

Good afternoon, and welcome to Brightcove's fourth quarter 2021 earnings call. Today, we will discuss the results announced in our press release issued after the market closed. With me on the call are Jeff Ray, Brightcove's chief executive officer and Rob Noreck, Brightcove'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 first fiscal quarter of 2022 and the full year 2022, expected profitability and positive free cash flow, our position to execute on our go-to-market and growth strategy, our ability to expand our leadership position, our ability to maintain and up-sell existing customers as well as our ability to acquire new customers.

Forward-looking statements may often be identified with the 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 could 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 a 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 close today, which can be found on our website at www.brightcove.com. In terms of the agenda for today's call, Jeff will provide a summary review of our financial results and update on our operations and a review of our strategy. Rob will finish with additional details regarding our fourth quarter 2021 results as well as our outlook for the first quarter and full year of 2022.

With that, let me turn the call over to Jeff.

Jeff Ray -- Chief Executive Officer

Thanks, Brian, and thank you, everyone, for joining today. I hope you and your families continue to be well. As you know, I announced that I would be retiring this year and that we had launched the search for my replacement. Last week, we announced the appointment of Marc DeBevoise as CEO and board Director effective March 28.

Marc is an accomplished media and technology executive with exceptional leadership experience at Viacom CBS, CBS Interactive, Starz and NBCUniversal. He has spent his career in our domain. He's led large diverse teams and delivered outsized growth. As a previous Brightcove customer, Marc has created, monetized and distributed content.

And as a result, he brings a unique understanding of what our customers are trying to achieve. So we can now say that a customer is running Brightcove. I'm delighted that Marc will be leading the company, and I know Marc is excited to join this talented team. For me, it has been a privilege to lead this exceptional team in this challenging time, and I'm happy for Marc and for the future of this company.

Today, I will share our fourth quarter and full year achievements. I'm proud of what we've accomplished as a team last year. Despite the ongoing pandemic and in-person restrictions, our team sourced and developed some impressive new opportunities using the power of video and our own platform to connect with customers, partners and team members globally. I will summarize our financial results in a moment.

But before I do, I want to provide more insight into our recent activities and why we feel they will have a positive impact on the long-term growth prospects for our business. We are the leading SaaS video platform. As you know, video is the most powerful medium for capturing hearts and minds and connecting with audiences, but it's not just connecting with them, it's inspiring them to take action. Those actions in the collection and interpretation of the user data holds the power to change business outcomes, and that is our focus for our customers.

All our recent actions have been concentrated on helping customers realize that value and grow their business. We are specifically focused on advancing our strategic initiatives in the areas of innovation, retention and go-to-market execution. Last week, we executed on our commitment to enhancing our artificial intelligence and machine learning capabilities with the acquisition of Wicket Labs. This acquisition provides customers with deeper insights to stay competitive and grow their business.

We were particularly proud to be announced a leader in the Aragon Research Globe for Enterprise Video 2022. The report, the only such ranking for the online video industry evaluated 15 video vendors deemed to improve customer and employee experiences and is the only annual ranking in the enterprise video industry. This ranking builds upon our leadership position in 2021 with our strategy score increasing to the highest ranking while retaining the top ranking in product performance. This report is key to helping us drive greater brand awareness and for our sales team to have third-party validation of our position against competitors.

So these developments, coupled with our aggressive rollout of new products this summer, reinforce our leadership while setting the stage for future success. I'll cover more details of our achievements last year during this call. Let me first provide a summary of our financial results. For the fourth quarter, revenue was $52.6 million, down 2% year over year, but above the high end of our guidance of $52 million.

Adjusted EBITDA was $5.9 million, down $900,000 year over year, but ahead of the high end of our guidance. And for the full year 2021, we delivered revenue of $211.1 million, up 7% year over year, and adjusted EBITDA was $24.2 million or an 11.5% EBITDA margin for the year, our best adjusted EBITDA performance on both a dollar and margin basis in our history, and free cash flow was $10.7 million. While we beat financial guidance for the quarter, we continued to experience some challenges with sales execution. As we noted in the third quarter call, we have challenges with performance in our Asia Pacific and the Japan regions.

We've hired a strong sales leader in Japan, and our search is ongoing for an Asia Pacific leader. We're taking this opportunity to bring in a much more experienced sales leader. We continue to see significantly lower-than-expected results in both these regions in the fourth quarter. We also experienced some challenges in the timely conversion of new business in North America.

Other focused initiatives to address these execution challenges include investment in additional resources for sales enablement, including an extensive multi-day virtual sales kickoff event that took place early January and a more thorough ongoing sales certification program, investing heavily in building our ideal customer profile, researching our potential markets, customers' purchasing habits and future needs. By doing this work prior to the launch of several major product initiatives, our sales teams can now focus on the ideal accounts with content that is relevant to their specific industry needs. Because of this new work, our people know precisely where to target our marketing and sales efforts, and this has enabled a quick start to 2022 demand generation and improved our chances for success. While our fourth quarter results will bring down the revenue growth for 2022, we're seeing progress in improving our sales execution, and we feel confident that the steps we're taking will deliver accelerated revenue growth in the second half of 2022.

In addition to our go-to-market initiatives, we continue to focus heavily on innovating to bring our customers greater business value through the platform. Our innovation enhancements span all segments of our business for customers monetizing their content, selling their products or engaging with internal stakeholders. In October, we announced two new solutions. The first was Brightcove Marketing Studio, a new video communication solution to enable marketers to drive stronger results from digital campaigns.

Multiple marketing roles across the company can use Brightcove Marketing Studio to better find and utilize video assets right from within the marketing technology systems they use every day. integrations with major marketing technology vendors such as Eloqua, Marketo, HubSpot, Sitecore and Hootsuite will bring unmatched value to marketing studio customers. We're working with several customers who are early adopters, and we're encouraged by their confidence in this new solution. Brightcove Marketing Studio will be offered as limited availability in the second quarter with the general availability launch in Q3.

The second new solution we announced was Brightcove CorpTV. For enterprises, getting audience attention in this overcrowded digital landscape is extremely difficult. Brightcove CorpTV allows enterprises to create their own always-on Netflix-like channels to more effectively distribute content to customers, partners and employees. Last quarter, we discussed NetApp launching NetApp TV using Brightcove CorpTV, and we're also excited to see longtime customer, Barrow Neurological expand its offering with Brightcove CorpTV.

Barrow Neurological was under pressure to launch a more user-friendly experience while undergoing an initiative to make its content more accessible and available to physicians and patients in growing regions, specifically in parts of East Africa. Barrow will now deliver an unparalleled video experience in a mobile app and a fresh new web experience to its audience globally. In addition to those two new product launches, we're making significant progress on our work with video intelligence to help customers gain deep insight into how they are connecting with viewers. Today, Brightcove's intelligent video platform enables customers to deliver broadcast quality video to viewers and measure its effectiveness with comprehensive real-time analytics, including video and viewer insights.

These analytics help customers understand video performance, viewer engagement and return on investment. On February 2, Brightcove announced the acquisition of Wicket Labs, an Audience Insights company. This acquisition is another step in offering the most powerful analytics solution. Let me give you one example of the kind of value this acquisition allows us to offer.

By using analytics and machine learning, customers will now be able to see insights across a harmonized data store. Disparate data pulled from a variety of sources, billing data, CMSs and Access Systems, 50-plus data integrations in all presented in a daily dashboard that provides trend data and benchmarks for performance. Customers will have deep, actionable insight into content and subscriber analytics. They will make business decisions to improve subscriber acquisition, conversions, engagement and retention.

They'll pick the right prospects to close, grow those customers and retain them all through the power of the scorecard. These insights will provide our customers greater understanding of audience dynamics, sources of new subscribers, the subscriber journey and how to increase subscription revenue through data visualizations and dashboards. Brightcove acquired Wicket Labs technology, customers and experienced engineering talent, and I'm very excited that the entire engineering and founding team members have joined Brightcove, bringing some of the industry's best media analytics talent into our company. With this deal, we will accelerate getting products to market this year as this gives us an opportunity to sell into existing accounts, acquire new customers and strengthen our retention efforts.

We're proud to serve customers worldwide and thank them for their partnership. Here are some examples of fourth quarter customer activity. For us, by us network, popularly known as Fubo has joined Brightcove as a new Brightcove Beacon customer. In a joint venture with UrbanflixTV, Fubo Network will launch its new OTT strategy, building on its already existing audience and vision to develop quality content around topics, people and trends related to hip-hop culture and lifestyle.

Fubo chose Brightcove for our superior technology, strength in AVOD and our exceptional support service. Blue Buffalo, a $2.3 billion pet food manufacturer migrated from YouTube to become a Brightcove customer because Brightcove technology enables them to have more control over their brand and experience. Blue Buffalo will use Brightcove to power the next phase of its digital transformation, in particular, its website performance to engage with more customers. Verasity, a blockchain platform for eSports and digital content will now be using Brightcove to deliver its high-profile eSports events in 2022.

Verasity turned to Brightcove because it needed a reliable and scalable platform to deliver its high-profile events to audiences in 100 countries. And Ford Motor Company, a longtime Brightcove customer, renewed its relationship with us to continue to delivering an exceptional viewing experience to internal and external stakeholders. Ford has deployed Brightcove technology on its websites in over 60 countries and uses Brightcove video internally for global customer service training and dealer communications. No other solution brings the scalability and security Ford needs to be able to connect with its audiences, both internally and externally.

We continue to add channel partners to strengthen our ability to deliver reliable, scalable and secure video technologies. We added 18 partners in the fourth quarter and saw 23% of our business come through our partner team. As we move into 2022, our partner program remains a strategic focus area as we build momentum. I told you a year ago that we were committed to fixing our challenges in renewals and have made significant progress in that area.

We took the necessary steps to create a strong customer success team to improve our renewal business and overall customer experience. While we're not out of the woods yet, the results we are seeing are evidence of our focused strategy and execution. Over the past 12 months, we have successfully built a global customer success organization with representatives and regional offices. Customers now have local contacts to better support their needs and growth.

We've implemented cross-team processes for best practices and sharing data. This resulted in consistent internal conversations, so anyone across the globe can help a customer at any time. We deployed a new on-boarding process focused on getting new customers up and running as quickly as possible to reach their business goals. On-boarding is now customized as needed to fit each customer resulting in a faster and easier ramp-up time for a new customer and a great first impression.

We initiated monthly and quarterly business reviews with our customers, giving them a place to voice their needs, direction and definition of success. We're focusing on our customer strategy and how we can best support their path to growth. As a result of our efforts over the past 12 months, we have increased our Net Promoter Score by over 14%. This is a significant increase for an enterprise software business.

To conclude, we made significant progress in key areas, and we're working to improve our go-to-market execution. We're continuously investing in our product and engineering organization and have a robust road map for the year to bring real value to our customers and drive even greater competitive differentiation. With that, let me turn the call over to Rob to walk you through the numbers. Rob?

Rob Noreck -- Chief Financial Officer

Thank you, Jeff, and good afternoon, everyone. Before I start, I'd like to add my warm welcome to Marc as the new CEO of Brightcove. I'd also like to wish Jeff all the best for his retirement. I've thoroughly enjoyed working together for the past four years.

I will begin with a detailed review of our fourth quarter, and then I will finish with our outlook for the first quarter and the full year 2022. Total revenue was $52.6 million, which was above our guidance range. Breaking revenue down further, subscription and support revenue was $50.3 million, and professional services revenue was $2.4 million. Twelve-month backlog, which we define as the aggregate amount of committed subscription revenue related to future performance obligations in the next 12 months, was $121.2 million.

This represents a 6% year-over-year increase. On a geographic basis, we generated 57% of our revenue in North America during the quarter and 43% internationally. Breaking down international revenue a little more, Europe generated 19% of our revenue, and Japan and Asia Pacific generated 24% of revenue. Let me now turn to the supplemental metrics we share on a quarterly basis.

recurring dollar retention rate was 94.4%, which is within our target range of low to mid-90s. Net revenue retention was 93%, which compares to 95% in the third quarter of 2021 and 100% in the fourth quarter of 2020. Since the beginning of 2019, net revenue retention has ranged from 92% to 100%. As a reminder, we introduced net revenue retention to better align our reporting with most leading SaaS companies.

We calculate net revenue retention by comparing the current annualized recurring revenue to the annualized recurring revenue from 12 months prior for those premium customers that existed 12 months prior. We are pleased with the improvements we have made to strengthen our renewals business in recent quarters. While there is still more to do, we are beginning to see the benefits of these efforts in our renewals. It is important to keep in mind that since net revenue retention is calculated on a trailing 12-month basis, there will be a natural lag before the improvements we are making will be reflected in this metric.

We expect this metric will consistently be over 100% over time. Our customer count at the end of the fourth quarter was 3,135, of which 2,227 were classified as premium customers. Looking at our ARPU within our premium customer base, our annualized revenue per premium customer was $95,000 and excludes our entry-level pricing for starter customers, which averaged $4,100 in annualized revenue. Our ARPU was down year over year from $97,000 to $95,000 due to the impact of one-time events in Japan last fourth quarter.

Excluding these events, our fourth quarter 2020 ARPU was $92,300 and we are up 3% year over year. Looking at our results on a GAAP basis, our gross profit was $34.7 million. Operating income was $1.1 million, and net income per share was $0.01 for the quarter. Turning to our non-GAAP results.

Our non-GAAP gross profit was $35.3 million compared to $34.8 million in the year ago period and represented a gross margin of 67%, which is up from 65% in the fourth quarter of 2020. Subscription and support revenue represented approximately 95% of our total revenue and generated a 69% gross margin compared to a 68% gross margin in the fourth quarter of 2020. The improvement in gross margin throughout this year has been an area of strength for the business. This benefits us in two ways.

It provides additional capital to invest in the product initiatives Jeff referenced earlier, and it sets the foundation for meaningful improvement in overall profitability when revenue growth improves in the future. Non-GAAP income from operations was $4.7 million compared to $5.4 million in the fourth quarter of 2020. Adjusted EBITDA was $5.9 million compared to $6.8 million in the year ago period and above the high end of our guidance range. Adjusted EBITDA margin was 11%.

Non-GAAP diluted net income per share was $0.10 based on 41.7 million weighted average shares outstanding. This compares to net income per share of $0.14 on 41.7 million weighted average shares outstanding in the year-ago period. Looking at our full year 2021 results. Total revenue was $211.1 million, up 7% year over year.

On a GAAP basis, gross profit was $138.1 million. Operating income was $7.6 million and net income per share was $0.13 based on 42.2 million weighted average shares outstanding. On a non-GAAP basis, gross profit was $140.5 million. Income from operations was $18.9 million.

Adjusted EBITDA was $24.2 million and net income per share was $0.40 based on 42.2 million weighted average shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with cash and cash equivalents of $45.7 million. We generated $4.8 million in cash flow from operations and free cash flow was $2.3 million after taking into account $2.6 million in capital expenditures and capitalized internal use software.

I would like to finish by providing our guidance for the first quarter and the full year 2022. For the first quarter, we are targeting revenue of $50.5 million to $51.5 million, including $2 million of overages and approximately $2 million of professional services revenue. From a profitability perspective, we expect non-GAAP operating income to be $1 million to $2 million and adjusted EBITDA to be between $2.3 million and $3.3 million. Non-GAAP net income per share is expected to be in the range of $0.02 to $0.04 based on 42 million weighted average shares outstanding.

For the full year, we are targeting revenue of $207 million to $215 million, including $8 million of overages and approximately $9.3 million of professional services revenue. From a profitability perspective, we expect non-GAAP operating income of $7 million to $11 million and adjusted EBITDA to be between $15 million and $19 million. Non-GAAP net income per share is expected to be in the range of $0.14 to $0.23 based on 42.6 million weighted average shares outstanding. For the full year, we are now targeting free cash flow of $5 million to $10 million.

There are a few things I would keep in mind with regards to our guidance. Our outlook for the year, and in particular, the first quarter reflects the impact of the new business challenges Jeff described earlier as well as the cumulative impact of the retention challenges we have discussed over the past year. As we move through the year and the full impact of the changes we have made take hold, we expect to return to consistent positive revenue growth in the middle of the year. We believe our outlook for the year appropriately balances our continued commitment to profitable growth.

We are making targeted investments in high ROI areas of the business, particularly product development that we believe will set the stage for improved top and bottom-line growth over time. Finally, our fundamental belief in the long-term potential of this business has not changed. We are confident that over time, we can deliver a consistent blend of attractive revenue growth and meaningful margin expansion that can generate substantial value for shareholders. I'm looking forward to partnering with Marc and the entire team here at Brightcove on this next evolution as a business.

We have much work to do to get the company performing at the level we believe it is capable of. We look forward to introducing Marc to the investment community once he joins us at the end of March, so he can provide you with his perspective and strategy for the future of Brightcove. With that, we will now take your questions. Operator, we are ready to begin Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Steven Frankel with Colliers. You may proceed with your question.

Steven Frankel -- Colliers International -- Analyst

Good afternoon. I just dig into guidance a little bit and maybe get some insight into the headwinds from customer losses and maybe some insight into how the media versus the enterprise performed in 2021 and how that outlook looks like for 2022. So let's start there.

Rob Noreck -- Chief Financial Officer

Sorry, Steve. I had myself on mute. This is Rob. So in terms of the first part of your question around customer losses, customer losses were really in line with what we've seen for the last four quarters.

As we talked about on the call, we had some challenges on the new bookings side. And that's really what you saw in the customer count quarter over quarter. And then from an enterprise and media standpoint, both segments of the business performed well over the course of the year. And right now, as we've discussed, we're sitting at about 50/50 in terms of the revenue split between the two.

Steven Frankel -- Colliers International -- Analyst

OK. And how about some insight into what these problems in Japan and Asia-Pac are costing you in terms of revenue? How material is that to the forecast that you laid out?

Jeff Ray -- Chief Executive Officer

Hey, Steve. It's Jeff. Yes, certainly, it's significant enough to where we wanted it to report it to you. That's why we flagged it and highlighted it.

We started to see those indicators in Asia-Pac in the third quarter. We stepped in, we started making leadership changes. Japan. We've got a fantastic new sales leader on board, comes from Salesforce.com, brings a strong Rolodex, gets it on enterprise and media.

And in my early discussions with him, he's only been on the ground for a few weeks, but he is very, very fired up about the opportunities that he sees there. Korea healthy, Australia fantastic new sales manager there who had reported to me in the past and I know he'll do great things there. The gap at this moment is getting the regional VP landed into Singapore. We have interviewed lots and lots of people, and we're not going to rush this.

We're going to take our time and find the right person for the opportunities there.

Steven Frankel -- Colliers International -- Analyst

OK. We spent a lot of the last year talking about growth and investing for growth, and obviously, it hasn't come through in the numbers on a consolidated basis. Can you give us any examples of where things have maybe worked domestically. And so it proves out the theory that this is a good growth business because the numbers so far don't bear that out.

Jeff Ray -- Chief Executive Officer

Sure. I'll start. Rob can certainly jump in. We had some good wins in both media and enterprise.

You had asked about North America. Our big challenge in North America was also headcount. We promoted the individual who was running enterprise because it was extremely successful to run all of Americas when we promoted Brian up to run sales for the worldwide job. And it took a while for her to find her backfill to run enterprise, and we've also been a little bit challenged with getting really high-quality enterprise salespeople on board.

We're just not going to compromise just to fill a seat. We're going to continue to focus on getting the best possible talent. We have a lot of very, very cool new products coming out this summer. They are absolutely in line with what we see enterprises as well as media looking for.

And we know that we're doing the right steps now to make sure that we've got the right number of salespeople and leaders and equally as important that they are well trained. And you heard me talk about the fact that we focused on the ICP, the ideal customer profile, because we know precisely what these solutions will do. We know the kinds of decision makers that we will be calling on. And so we focused our training and enablement and certification program along those lines to make sure that they speak the language that those decision makers are facing.

Enterprises are seeing the power of video in communicating and connecting just as media has done for years just as we've done very well for Big Media. We're taking those skills and those credentials and helping enterprise do that. And on the media side, we're investing heavily in analytics, machine learning, and AI to help our media customers see the reveal the data and get everything that they can out of the content that they're putting up there.

Rob Noreck -- Chief Financial Officer

Just Steve, real quick to add on to that. Jeff mentioned some of the headcount challenges we're having in North America. And what we've seen, though, where we have had stability in leadership and stability in the team, particularly in Europe, we're seeing real success and growth in the double digits. So we know that once we get those teams in place, those leaders in place and get some stability, we can drive that kind of growth.

Steven Frankel -- Colliers International -- Analyst

OK. And then when you look at the renewals business, have you made any success around up-sells or are you still facing headwinds where up-sells are not as high as you had hoped?

Rob Noreck -- Chief Financial Officer

Yes. We saw a little bit of a recovery in the fourth quarter with those up-sells growing off of the third quarter. So we're pretty comfortable with the direction that's moving in.

Steven Frankel -- Colliers International -- Analyst

OK. And then what were overages in Q4?

Rob Noreck -- Chief Financial Officer

Overages were just over $2 million, at $2.2 million.

Steven Frankel -- Colliers International -- Analyst

Thank you. I'll jump back in the queue.

Rob Noreck -- Chief Financial Officer

Thanks, Steve. Thanks, Steve.

Operator

[Operator instructions] Our next question comes from the line of Eric Martinuzzi with Lake Street Capital. You may proceed with your question.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Yes. A question regarding Wicket Labs. Curious to know what revenue comes along with Wicket Labs and then also what expenses come with the acquisition?

Rob Noreck -- Chief Financial Officer

Yeah. Eric, it's not really material revenue at this point. We're not going to be breaking it out. But our expectation is that for the first year, it's not going to be dilutive at all.

We about breakeven.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. And then as I look at the guidance for 2022, for me, I guess, and I'm talking about the midpoint here for the revenue and the adjusted EBITDA. But it looks like we're talking about roughly flat at the midpoint on the revenue and then about a $7 million delta to the downside on the adjusted EBITDA. I'm assuming gross margins aren't going to change too much.

So on flat revs and flat gross margin, where is that $7 million of incremental expense being pointed out in 2022?

Rob Noreck -- Chief Financial Officer

Yes. So it's a combination of where we can see ROI on the R&D side. As you know, we've got new products being launched in the back half of the year. And then those point high ROI sales heads? And Eric, it's not -- as you look at it, it's not a material growth over our opex based on our Q4 run rates.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. So look at it versus Q4 as opposed to 2021?

Rob Noreck -- Chief Financial Officer

Yeah. Yeah, that's right.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

And then I did kind of assume it, but the gross margins that we -- I think we're 67% non-GAAP in Q4. What's -- is that an appropriate number for the full year in 2022?

Rob Noreck -- Chief Financial Officer

Yeah, that's about right.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. And then the I'm trying to understand the -- we had a step-up in the capitalized software. And I'm wondering if in Q4, because we've been running about $1.5 million, $1.6 million for the first nine months, and then we're up about $2 million of capitalized software in Q4. Is this kind of a onetime, the project got complete and that's going to go back down or is this kind of a new run rate?

Rob Noreck -- Chief Financial Officer

Yeah, it will be a little bit higher, closer to that level for the first part of the year and then it will step back down as we launch the new products.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. Thanks for taking my question.

Rob Noreck -- Chief Financial Officer

Thanks, Eric.

Operator

At this time, we have reached the end of the question-and-answer session. And I would now like to turn the call back over to Jeff Ray for any closing remarks.

Jeff Ray -- Chief Executive Officer

Thank you, John. Thanks, everyone, for joining us. I also want to take a note and thank this amazing leadership team for the journey we've been on. I'm very, very excited about the positioning of this business for Marc and the skills that he brings in.

It's a great time to write the next chapter. As disappointed as I am in the fourth quarter results. I am equally as excited about the foundation for growth. And I know that Marc will do great things for us.

And I thank all of you for your engagement over the last four years. Thank you, everyone. Goodbye.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

Brian Denyeaue -- Investor Relations

Jeff Ray -- Chief Executive Officer

Rob Noreck -- Chief Financial Officer

Steven Frankel -- Colliers International -- Analyst

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

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