United States Securities
and Exchange Commission
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
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1.
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Name of Registrant:
BRIGHTCOVE,
Inc.
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|
2.
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Name of person relying on exemption:
TENZING
GLOBAL Management, LLC
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|
3.
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Address of person relying on exemption:
388 Market Street
Suite 860
San Francisco, CA 94111
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|
4.
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Written materials:
The attached written materials are submitted pursuant
to a voluntary application of Rule 14a-6(g)(1) promulgated under the Securities Exchange Act of 1934.
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TENZING GLOBAL URGES BRIGHTCOVE STOCKHOLDERS TO HOLD CEO AND BOARD ACCOUNTABLE FOR SIGNIFICANT UNDERPERFORMANCE BY VOTING AGAINST
DAVID MENDELS AND DEREK HARRAR AT UPCOMING ANNUAL MEETING
The 2017
Annual Meeting Is Just 2 Days Away;
Vote to
“WITHOLD ALL” on Proposal 1 on the Company’s Proxy Card
Calls
for the Resignation of CEO David Mendels and Immediate Reconstitution of the Board
San Francisco
– May 8, 2017 – Tenzing
Global Management, LLC (“Tenzing Global”), a significant, long-term stockholder of Brightcove, Inc. (Nasdaq: BCOV)
(“Brightcove” or the “Company) with an ownership stake of 4.2% of the shares outstanding, issued a statement
today criticizing the Board for its failure to hold CEO David Mendels accountable for the substantial destruction of value that
stockholders have suffered for over five years. Tenzing Global calls on fellow stockholders to reject the re-election of two directors
to the Brightcove Board of Directors at the upcoming 2017 Annual Meeting of Stockholders by voting to “WITHHOLD ALL”
on Proposal 1 (election of directors) on the Company’s Proxy Card.
Tenzing Global reminds stockholders that the 2017 Annual
Meeting is just 2 days away. Stockholders must express their disappointment in the CEO and Board by a withhold vote against directors
Mendels and Harrar. As recently as March, Tenzing Global’s stockholder director had been informed by the CEO that Q1 financial
performance was tracking to plan, and had not been informed of any weakness in guidance. Based partially on that assurance, Tenzing
Global withdrew its nominated alternative slate of directors. Less than 5 days before the Annual Meeting, stockholders learned
the magnitude of the continued poor operating performance of the Company under this CEO.
Even though Brightcove has
an archaic, democracy-unfriendly plurality voting standard in place for director elections, where just one vote in favor is enough
to elect a director, Tenzing Global believes voter turnout against the 2 incumbent directors at this Wednesday’s 2017 Annual
Meeting will send a clear message to the Board that immediate changes are required and that stockholders will not tolerate the
status quo.
Tenzing Global urges stockholders
to reject the following directors by voting to “WITHHOLD ALL” on Proposal 1 on the Company’s Proxy Card:
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☐
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David Mendels, Chief Executive Officer of Brightcove
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☐
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Derek Harrar, a director since January 2014
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“Tenzing Global has met hundreds of great management
teams and boards, with whom we have formed long-standing collaborative relationships that have enabled us to compound our investors’
capital at over 13% net of fees since 2013.
Brightcove possesses all the components of a
successful company: industry-leading products and technologies, a highly recognizable brand, and dedicated employees.
At
Brightcove, we have been working constructively as long-term stockholders since April 2013, first as an outside stockholder and
then as a stockholder director for the last two years,” said Chet Kapoor, Portfolio Manager and Managing Partner of Tenzing
Global. “Our ideas were met with resistance from a Board that was unwilling to hold the CEO accountable for poor corporate
performance. Last week, I was surprised to learn of the sudden weakness at Brightcove subsequent to my resignation from the Board.
David Mendels’ recent confidence was yet again clearly misplaced.
We strongly believe
Brightcove can achieve its full potential under a new CEO and a reconstituted Board.
”
Consistent Poor Execution
under David Mendels’ Stewardship
The Company delivered extremely
disappointing results for its fiscal year 2017 first quarter on May 4, 2017. The Company significantly revised downward its full
year guidance at the mid-point for total revenue from $165 million to $153 million, and alarmingly, non-GAAP operating margin from
+3% to -5%, and its Non-GAAP earnings per share from +$0.11 to -$0.24.
To put those results into a 5-year perspective, the Company
presented a target of long-term operating margins of +20% in its 2013 Analyst Day
.
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Fiscal Year 2017 Guidance ($ in millions, except per share data)
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Downward
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As given February 16, 2017
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As given May 4, 2017
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Revision %
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Implied
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Implied
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from
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Metrics
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Low
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High
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Mid-point
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Low
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High
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Mid-point
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2/16/17 to 5/4/17
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Revenue
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$
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163.0
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$
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167.0
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$
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165.0
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|
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$
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151.0
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|
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$
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155.0
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$
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153.0
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-7.3
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%
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Non-GAAP operating income
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$
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3.5
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|
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$
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6.0
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|
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$
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4.8
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|
|
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$
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(9.0
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)
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|
$
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(6.0
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)
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$
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(7.5
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)
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|
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-257.9
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%
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Non-GAAP operating margin (implied)
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2.1
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%
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3.7
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%
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|
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2.9
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%
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|
|
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-5.8
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%
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|
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-4.0
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%
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|
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-4.9
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%
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|
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Non-GAAP earnings per share
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$
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0.07
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$
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0.14
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$
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0.11
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|
|
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$
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(0.28
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)
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$
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(0.19
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)
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$
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(0.24
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)
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|
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-323.8
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%
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During David Mendels’ tenure
as CEO, the Company has repeatedly lowered expectations. and reset Wall Street expectations. In addition to the mis-execution this
quarter, other serious missteps by the CEO include the overpriced and margin-dilutive acquisition of Unicorn Media in early 2014,
the loss of its largest customer Rovio in mid-2014, and the expectation of a greater than 90% reduction of revenue from its largest
customer in early 2017. Notably, the CEO has clung to a dual business unit structure that suppresses corporate profitability.
We are not alone in our lack of
confidence in the leadership:
Sameet Sinha (B. Riley,
5/5/17)
“With such a
downdraft, the stock trades at 1.0x 2018 revenue, but
we choose to downgrade after the fact as we call into question management
credibility
…The sudden reduction of contract values resets prior expectations laid out in Q1 of Q/Q improvement throughout
the year.
Management spoke about resumption of double digit revenue growth in FY18 after a four quarter digestion period, but
we have very little confidence in this
.”
We are also not alone in seeing
opportunities for the Company with a different strategy than that set by leadership:
Tom Roderick (Stifel,
5/4/17)
“We see Brightcove
as still the best player in a crowded market, and we further see the potential for external shareholder pressures
to push Brightcove
into the arms of a strategic or financial buyer
, or
to push the company toward a more profitable model
.”
Underperformance of
Brightcove’s Stock Price
Over the last five years, the Company’s
stock price return of -65% has significantly underperformed the S&P 500 and the Russell 2000. In addition, since its Initial
Public Offering, Brightcove’s stock has returned -45% to stockholders.
5-Year Stock Price Performance as
of May 5, 2017 (post-fiscal year 2017 first quarter earnings):
CEO Pay NOT Aligned
with Stockholders
Equally troubling, the Board has failed to align CEO
compensation with that of the Company’s stockholders. The Company’s CEO has received nearly $3 million in cash compensation
since 2012. The Company’s CEO annual total cash compensation and bonus compensation have increased 112% and 226%, respectively,
over a 5-year period versus Brightcove’s 5-year stock price returns of -65%. Inconsistent with the Company’s 5-year
stock price performance of -65%, the Board has determined that in four of the last five years, the Company’s CEO has achieved
over 100% of his annual target. This disconnect raises a red-flag regarding not only pay for performance, but also the absence
of true economic alignment with the stockholders and a Board unwilling to hold the CEO accountable.
|
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Cash
Compensation (as given by proxy)
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Equity
Compensation
(as given by proxy)
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Bonus
Compensation
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Achievement
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|
Year
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|
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Base
Salary
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|
|
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Bonus
Target
% of Base
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|
|
(As
Determined
by Board)
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|
|
|
Total
Bonus
Compensation
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|
|
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Total
Cash
Compensation
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|
|
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Option
Awards
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|
|
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Stock
Awards
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|
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Total
Equity
Awards
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Total
Compensation
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|
|
2012
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|
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$
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250,000
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|
|
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35
|
%
|
|
|
131.0
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%
|
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$
|
114,669
|
|
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$
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364,669
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|
|
|
|
|
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$
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903,500
|
|
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$
|
903,500
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|
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$
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1,268,169
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|
|
2013
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|
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$
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325,000
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|
|
|
50
|
%
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|
|
150.0
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%
|
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$
|
243,750
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|
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$
|
568,750
|
|
|
|
|
|
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$
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846,029
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|
|
$
|
846,029
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$
|
1,414,779
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|
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2014
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$
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325,000
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|
|
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58
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%
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|
|
110.4
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%
|
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$
|
206,290
|
|
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$
|
531,290
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|
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$
|
579,125
|
|
|
$
|
385,200
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|
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$
|
964,325
|
|
|
$
|
1,495,615
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|
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2015
|
|
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$
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400,000
|
|
|
|
70
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%
|
|
|
90.1
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%
|
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$
|
252,406
|
|
|
$
|
652,406
|
|
|
$
|
132,170
|
|
|
$
|
95,250
|
|
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$
|
227,420
|
|
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$
|
879,826
|
|
|
2016
|
|
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$
|
400,000
|
|
|
|
70
|
%
|
|
|
133.3
|
%
|
|
$
|
373,180
|
|
|
$
|
773,180
|
|
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$
|
149,524
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|
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|
|
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$
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149,524
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$
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922,704
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Cumulative
|
|
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$
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1,700,000
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|
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$
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1,190,295
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|
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$
|
2,890,295
|
|
|
$
|
860,819
|
|
|
$
|
2,229,979
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|
|
$
|
3,090,798
|
|
|
$
|
5,981,093
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We recommend the following courses
of action for Brightcove:
|
·
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Call for the immediate resignation of David Mendels
and begin a search for a new external candidate for CEO. Tenzing Global already has a few qualified candidates in mind.
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|
·
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Immediately reconstitute the Board to remove legacy
directors, restore independence and restore stockholder representation. Time is of the essence and we believe this business cannot
survive yet another year of mismanagement.
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|
·
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Put into place cost rationalization measures to rapidly achieve the
long-term profitability targets that were presented at the 2013 Analyst Day. We also propose immediately engaging the premier cost
consultants we proposed to the Board to rightsize the cost structure, evaluate the dual business unit structure, the significant
annual spend on travel, and the overall bloated cost structure of the organization. Significantly reducing the Company’s
cost structure will generate much needed profit and ease the burden of required bookings growth.
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|
·
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With the continued and significant decline in the share price, we
recognize that now is not a good time to sell the Company. However, without implementation of the immediate actions we suggest,
we believe stockholder value will continue to decline under the failing stewardship of this Board and its protected CEO. The technology
M&A environment is robust, and interest rates remain close to historic lows, with capital readily available. From the Company’s
historical proxy statements, 14 of the company’s reported Software-as-a-Service industry peers have been acquired by strategic
or financial buyers.
|
Given Tenzing Global’s lack
of confidence in the Company’s CEO and the Board’s ability to represent the interest of stockholders, it plans on voting
against directors Mendels and Harrar at the 2017 Annual Meeting.
Even if you have previously executed
a proxy card in support of directors Mendels and Harrar, you can still change your vote by voting again on the Company’s
Proxy Card to “WITHHOLD ALL” and reject the re-election of directors Mendels and Harrar. Only your latest dated proxy
will be counted.
Tenzing Global looks forward to
continuing discussions with our fellow stockholders and we encourage you to contact Chet Kapoor or Asher Qureshi at (415) 645-2400.
About Tenzing Global Management
Tenzing Global Management, LLC is
an independent investment firm founded in 2011 based in San Francisco.
Contact Details
Chet Kapoor & Asher Qureshi
|
|
Tenzing Global Management, LLC
|
|
(415) 645-2400
|
|
PLEASE NOTE: Tenzing Global is not
asking for your proxy card and cannot accept your proxy card. Please DO NOT send us your proxy card.
Written materials are
submitted voluntarily pursuant to Rule 14a-6(g)(1) promulgated under the Securities Exchange Act of 1934. This is not a solicitation
of authority to vote your proxy. Tenzing Global Management, LLC (“Tenzing Global”) is not asking for your proxy card
and will not accept proxy cards if sent. The cost of this filing is being borne entirely by Tenzing Global.
PLEASE NOTE: Tenzing Global
is not asking for your proxy card and cannot accept your proxy card. Please DO NOT send us your proxy card.
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