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Edited Transcript of QUMU earnings conference call or presentation 31-Oct-19 8:30pm GMT

Q3 2019 Qumu Corp Earnings Call

Minneapolis Nov 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Qumu Corp earnings conference call or presentation Thursday, October 31, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Gallagher Ristow

Qumu Corporation - CFO

* Vernon J. Hanzlik

Qumu Corporation - President, CEO & Director

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Conference Call Participants

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* Jeffrey Lee Van Rhee

Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst

* Steven Bruce Frankel

Dougherty & Company LLC, Research Division - Senior VP & Director of Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Qumu Third Quarter 2019 Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Dave Ristow, Chief Financial Officer. Please go ahead, sir.

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David Gallagher Ristow, Qumu Corporation - CFO [2]

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Good afternoon, everyone, and thank you for joining us for our third quarter 2019 earnings conference call. After the market closed, we issued a press release announcing our results for the third quarter ended September 30, 2019, a copy of which is available on the Investor Relations section of our website at qumu.com.

We will be making certain statements today with respect to our expected financial results, go-to-market strategy and efforts designed to increase our traction and penetration with customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.

Please note, these forward-looking statements reflect our opinions only as to the date of this call, and we are -- and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Please refer to our SEC filings, specifically our Form 10-K and Form 10-Q, and our financial results press release for a more detailed description of risk factors that may affect our results.

During our call today, we will discuss adjusted EBITDA, a non-GAAP financial measure. In our press release and our filings with the SEC, each of which is posted to our website, you will find additional disclosures regarding this non-GAAP measure, including a reconciliation of the measure with its comparable GAAP measure. Non-GAAP financial measures are not intended to be considered in isolation from or a substitute for or superior to GAAP results. We encourage you to consider all measures when analyzing the company's performance.

Now with that, I will turn the call over to Vern Hanzlik, President and CEO of Qumu.

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [3]

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Thank you, Dave, and welcome, everybody. I'd like to open up with a few comments and hand the call back to Dave for more detail on the numbers. When Dave has finished, I'll review the progress against our strategic plan.

Q3 was a solid quarter for Qumu, during which we regained much of the momentum we generated at the start of 2019. Looking at some financial highlights. Revenue for the quarter was up 18% to $6.7 million from $5.7 million in Q3 of last year driven by significant expansions from large enterprise clients like USAA, American Express, KPMG, Raytheon and Vodafone. For the first 9 months of 2019, revenue increased 6% to $19.1 million compared to the same period last year.

Gross margins was strong at 70% for the quarter and 73% for the first 9 months of 2019. It is important to note, 73% is at the high end of our annual guidance, and also marks significant improvement from the 63% reported in comparable period last year.

Adjusted EBITDA loss for the quarter was $535,000, a 33% improvement over Q3 last year, driven by a combination of higher revenue, gross margins, combined with lower operating expenses. For the first 9 months of 2019, adjusted EBITDA loss was $1.8 million, cutting last year's loss in half. We ended the quarter with $7.5 million in cash, up from $7.3 million in Q2.

With these strong results, we are reiterating our revenue and adjusted EBITDA guidance for 2019. Our confidence in the future support by several key factors. First, we have already closed several deals this quarter, valued at $790,000. Second, our sales pipeline remains robust, fueled by steady number of proof of concepts or pilot projects, currently running with multiple prospects. Third, early in the current quarter, we conducted our first live event on the Qumu platform for one of BT's customers, an important milestone for our BT partnership. And fourth, customer retention has reached an all-time high at 94.2% within our base of 196 customers.

And while this number is significant, it means much more when you actually hear our customers and partners discuss what keeps them committed to Qumu. So a few months ago, at our 2019 Customer Summit, we asked companies like AT&T, Boeing, AmeriHealth, GSK, Express Scripts and others to tell you exactly what their partnership with Qumu means to them and their organizations. I encourage you to take a few minutes and watch the video resulting from these conversation, which can be found on the About page of the Qumu website.

With that overview, I'll now hand the call back over to Dave for a few future financial details for the quarter.

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David Gallagher Ristow, Qumu Corporation - CFO [4]

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Thank you, Vern. I'll begin with a brief commentary on some of our financial highlights. Compared to the first 9 months of 2018, year-to-date 2019 revenue increased $1 million or 6%. Gross margin increased 10% to 73%, and adjusted EBITDA, a non-GAAP measure, improved $1.8 million or 51%. Combined with our current pipeline coverage, which stands at 3x revenue plus our record customer retention of 94.2%, we are confidently positioned for a strong finish to 2019.

Now getting into the rest of our financial results. Total revenues were $6.7 million for the third quarter of 2019, an improvement from $5.7 million in the third quarter of 2018. Year-to-date, total revenues were $19.1 million for the 9 months ended September 30, 2019, an improvement from $18.1 million in the comparable period of 2018.

Software license and appliance revenue was $2.0 million and $1.0 million for the 3 months ended September 30, 2019 and 2018, respectively, and $3.7 million and $4.3 million for the 9 months ended September 30, 2019 and 2018, respectively. Subscription, maintenance and support revenue was $4.2 million and $4.1 million for the 3 months ended September 30, 2019 and 2018, respectively. And $13.9 million and $12.3 million for the 9 months ended September 30, 2019 and 2018, respectively. For the first 9 months of 2019, subscription, maintenance and support revenue was comprised of 43.7% SaaS revenue and 56.3% annualized support and maintenance revenue.

As Vern mentioned in his opening remarks, we secured a number of major customer expansions in Q3, including a large insurance company that signed a new 7-figure contract with Qumu. The deal represents more than $1 million in both annual contract value or ACV and total contract value, TCV. We also closed another 7-figure deal with an existing financial services customer. This expansion represents a 3-year deal with a $550,000 ACV and $1.2 million TCV. In a $650,000 expansion, another financial services customer is upgrading to Qumu's intelligent video platform and deploying our latest Pathfinder delivery software. And finally, a large telecom customer is renewing and expanding their on-premise network, with an investment of more than $600,000 in upgrades, including advanced analytics and AI-driven captioning.

Transitioning from revenue, gross margin for the third quarter 2019, 70% compared to 63% for the third quarter of 2018. For the first 9 months of 2019, gross margin was 73% compared to 63% for the 9 months ended September 30, 2018. The change in gross margin compared to the prior years was favorably impacted by increased term license revenue in the first quarter of 2019. Cash and cash equivalents totaled $7.5 million as of September 30, 2019, compared to $7.3 million at June 30, 2019.

Adjusted EBITDA loss was $535,000 for the third quarter of 2019, an improvement compared to $801,000 loss in the third quarter of 2018. Adjusted EBITDA loss for the first 9 months of 2019 was $1.8 million versus $3.6 million in the same period of 2018, a $1.8 million or 51% improvement due to the higher revenue and margins, combined with lower operating expenses.

While net loss of $221,000, and loss per basic share of $0.02 were favorably impacted by the -- a $973,000 decrease in the fair value of our warrant liability during the 3 months ended September 30, 2019, generally accepted accounting principles require that we exclude from income -- that we exclude the income resulting from the decrease in the warrant liability when computing diluted loss per share. As a result, loss per diluted share of $0.11 represented a $0.09 difference from the loss per basic share. Changes in the fair value of our warrant liability are preliminary driven by fluctuations in our stock price, which decreased from $4.15 per share on June 30, 2019, to $3.26 per share on September 30, 2019, also resulting in a noncash impact to be included in other income and expense. In computing adjusted EBITDA, we exclude the impact of income or expense related to this warrant's liability.

Also, during 2019, we experienced material gains from the sale of our investment in BriefCam, which had a positive impact on our balance sheet last year. It's important to note that this onetime windfall inherently skews year-over-year comparisons of both our net loss and basic EPS.

With that, I'll move on to guidance. Each quarter, we evaluate our annual guidance. We monitor the size and timing of perpetual license opportunities as well as growth in our subscription business. As Vern previously noted, we are reiterating our revenue and adjusted EBITDA guidance for 2019. Specifically, we intend to deliver revenue of approximately $27 million. Gross margin percentage in the high 60s to low 70s. Net loss for 2019 is expected to be approximately $5.5 million, which differs from previous net loss -- previous guidance net loss of $5.1 million due to management's expectation of an increase in the fair value of the company's warrant liability during the balance of this year. Adjusted EBITDA loss for 2019 is expected to be approximately $1.5 million, the same as the previously issued guidance. Please refer to our earnings release for a reconciliation of forecasted net loss to forecasted adjusted EBITDA.

Qumu had previously provided guidance for 2019 annual contract value bookings growth. As our business has transitioned, beginning in 2018 and more significantly in 2019 to a deal-specific, customer-driven mix of on-premise and software as a service or SaaS solution, ACV bookings has become an increasingly less predictable and less relevant metric by which to judge the performance of the company during any given period. Although ACV bookings are expected to grow in 2019 in the range of 6% to 10% as compared to 2018, management believes that ACV bookings is no longer relevant as a measure of customer adoption of Qumu's technology or as a measure of our financial performance, particularly as compared to revenue and adjusted EBITDA. Accordingly, we will no longer be providing ACV bookings guidance on a go-forward basis in 2019, we will continue to be focused on revenue growth, and adjusted EBITDA improvements in 2019, as these are the key indicators and drivers of our financial performance.

In summary, we remain confident in this 2019 annual guidance, and we will be working hard for our shareholders to deliver continued successful results throughout the balance of this year.

With that, I'll turn it over to Vern.

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [5]

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Thanks, Dave. I want to take a minute and talk about an exciting self-service video movement underway in the enterprise and how it aligns with the Qumu overall strategy. I recently met with many of our new and existing customers and in every case, a significant piece of the discussion was about self-service broadcasting and how Qumu's solution could enable more users of video.

As an example, one of our telecom customers conducts about 200 live streaming events every month. The issue is they actually have user demand twice that amount every month. By using the Qumu platform and its self-service streaming capability, this customer now enables employees to quickly and easily set up delivery, their own live streaming events right from within the company's existing videoconferencing application, including Zoom.

With the Qumu platform, this customer and its employees now can pick up their mobile phones, sit down at their desk or walk to any conference room and launch a live streaming webcast and record a video for on-demand distribution. This movement is happening across our customer base and it's where Qumu fits. First, we make it easy for users to create more video with our unified communications gateway, turning Zoom, Webex, Teams and other video collaboration systems into video-recording and broadcast tools. Now any organization can use the same tools, which they already use daily for video meetings to launch large-scale webcasts without support from IT or internal video teams.

Second, self-service video means more individuals were generating more content, which puts more pressure on corporate networks. In these cases, Qumu's platform is being used intelligent -- for its intelligent management of content, deliver video streaming, upgrade both video security and access control.

To summarize, Qumu is taking over right where the customers need us. We are benefiting from the explosion of next generation of video conferencing and our ability to extend its capability even further into self-service video streaming.

Moving on, I'd like to report our progress against our 4 pillars of our strategic plan before we open the call up for questions. Our first pillar is sales execution and new customer growth. Our marketing efforts are keeping our sales pipeline strong and steadily at more than 3x revenue coverage for 2019. One of the ways marketing is keeping the pipeline strong is in improving valuable educational assets to help potential customers with their decision-making process, including analyst reports, industry papers, live instructional webcasts and on-demand learning-focused videos. The marketing team's immediate focus is to seize our leadership role in self-service broadcasting and streaming, helping customers and prospects understand how Qumu can enable extremely powerful concept within their organization.

As an example, just last week, we conducted a live webcast with our partner, BT titled Zoom as a streaming engine. This event was both an instructional broadcast and a live demonstration of our self-service streaming and broadcast capabilities in action. BT's Head of Product Management joined me live from Denver, and we discussed how firms are turning next-generation video conferencing applications into self-service live streaming engines. The entire event was conducted live from Zoom using Qumu's platform and we successfully transformed the Zoom event into a live streaming broadcast that was viewed across the globe.

Another educational example. We have recently partnered with Wainhouse Research for exclusive distribution rights to a newly published report titled 7 critical considerations for investing in corporate video technology in 2020. The report includes comprehensive survey data on decision-making attitudes and topics like intelligent video platforms, integration of videoconferencing and video streaming and deploying hybrid networks. These marketing efforts are critical for expanding Qumu's visibility in chosen markets and supporting both our direct and indirect sales channels.

We continue to build on our channel partnership to grow our indirect sales pipe. For the most recent quarter, 82% of our sales were direct, 18% were delivered through our indirect or partner channels. However, on a year-to-date basis, the revenue mix is 72% direct and 28% indirect. As I mentioned, our new partnership with BT is producing encouraging results -- early results as we compete -- complete our first live event from one of their customers. I look forward to increasing momentum for that relationship as BT's sales and marketing teams introduce Qumu to their customers.

The second pillar of our strategy is customer success and retention. As I mentioned earlier, our customer retention continues to steadily build, reaching new records during the third quarter. But equally as important as maintaining our existing relationships, we are also being successful growing and expanding our existing accounts, including notable customer expansion Dave covered earlier. Each of those deals include Qumu's newer technology and offering, which is taking hold in our customer base at a very significant pace.

The third pillar of our strategy is market post product innovation. In mid-September, we released Qumu's Video Control Center, or VCC version 10. The VCC is a customer hosted on-premise deployment of our platform. Qumu's VCC version 10 is built on the Qumu intelligent video platform we announced earlier this year, in addition to the system performance upgrades, the new version includes scalability and integration enhancements as well as a hybrid external delivery capability. Due to our intelligent delivery platform, Qumu's on-premise customers continue to upgrade and -- at a renewed record pace, primarily because the new platform lays the foundation for them to transitioning existing on-premise environments to hybrid or cloud in the future.

Our fourth pillar and final pillar is strengthening our financial conditions. As Qumu's plan gained momentum, we have moved beyond the cost-cutting and containment measures of the past and now focus our efforts on increasing product and service capabilities and helping us drive revenue in a cost-effective manner.

To wrap up, our large video first customers are responding well to the Qumu's strategy and interested in implementing our intelligent video platform are strong. With the momentum as a backdrop, we remain highly confident in our expectations for growth in 2019. Going forward, our focus is as follows: to capitalize on the tremendous opportunity of self-service video streaming to provide Qumu with a much larger total addressable market by extending what companies can do with our existing video -- with their existing video conference investment; stay laser-focused on solving tough problems of video in the enterprise and maintaining customer retention above 90%; to grow and monetize our channel efforts; build upon our new partnership with BT and others; to execute our direct-sales strategies; grow our footprint within our existing customers' base while bringing net new customers within our defined markets; and finally, to maintain the momentum on our financial results.

Now let's open the call up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Steven Frankel with Dougherty.

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [2]

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Dave, and Vern, I want to dig into this decision to not focus on ACV any longer going forward. Maybe help me understand, are you seeing more customers sticking to a traditional license model, and that's why ACV is less important? Or how should we think about recurring revenue going forward?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [3]

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Well, I think the recurring revenue piece, Steve. We -- the ARR number is something that we're laser-focused on as far as the retention in that. But I think that there are some of -- the mix of our revenue, it's more challenging as we're transitioning from on-prem to SaaS. But we will continue to communicate our ARR number as we move into 2020. But I think the decision of the ACV was -- it was a barometer of where we want to be from a growth and profitability. And -- so why it's important to get net new customers and report it. I don't think it's a beacon for the success of the business but our ARR growth would be and also revenue on the top line and then getting the business to breakeven profitability as we move into 2020.

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David Gallagher Ristow, Qumu Corporation - CFO [4]

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Steve, I mean, the other component -- I think we had previously communicated a place whereby we had an existing customer who is going through an entire proof of concept focused on on-premise. And once it got to essentially the technology decision-makers, they evaluated the SaaS-based platform. They swung into the hybrid solution set. We have other proofs of concept that are included in those that Vern mentioned earlier that are actually looking at both at this time. Still haven't made the decision but intend to be Q4 decisions. And so as a result, our ability as -- the beauty of the Qumu platform is that we got -- we have the flexibility to go ahead and offer up or serve up an offering that meets the customers' needs and/or requirements.

But oftentimes, as we're going through this and trying to predict ACV we've got customers that will swing one way or the other, and they tend to be our larger deals, which makes ACV prediction very difficult. And then additionally, the movement to ASC 606, the accounting treatment, it also changes essentially how term licenses are treated, which also, therefore, impacts how our bookings are calculated. And so what we're really focused on, Steve, is making sure that we're reporting those metrics that really matter most. And I think, so it's really going to come down to three things: we'll focus on revenue; we will focus on adjusted EBITDA, both of those from a guidance perspective; and we're going to start working to -- within these scripts and these calls, give greater visibility and transparency through ARR as to what's happening within that existing base and how we're seeing that grow with particular emphasis on kind of conversions as we're moving folks off of on-premise and into hybrid, depending upon essentially where they meet the marketplace. So that -- those are the elements behind. Does that help?

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [5]

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That does. And maybe you could give us some insights into -- in the quarter, how many new wins did you have? How did those break out between cloud, hybrid and on-prem for an opener?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [6]

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So a majority -- I would say, we had about 6 new wins in the quarter. The majority of those were either new cloud or hybrid. We've mentioned AmEx was one of them. That was probably our largest hybrid win in the quarter. That was a TCV above $1.2 million. But that was the largest one. And the other ones were smaller, sort of, first-generation cloud ones that are both here and Japan and in Europe. But most of our revenue of net new was expansion in our base, which we had mentioned some of those, which were USAA, Raytheon expanded their footprint, Lockheed Martin, those people that are expanding, have been long time customers that are just growing because of the demand in the delivery networks and the pressure on that.

And there -- as I mentioned in my piece of the script, Steve, is that people are building out their delivery networks because they know that they can -- be able to transition to hybrid in the future if they want. But you mentioned that they are staying on-prem. So that licensing model stays with more of an on-prem model. We get maintenance out of that. It adds to the ARR stack for us, but we get the revenue within the quarter. So -- but we continue to kind of transition, really working hard on our account-based marketing of our customers and then grabbing those marquee customers, which are longer sales cycles with proof of concepts that we have, they're more complex, and that's -- we're seeing our biggest opportunities inside the firewall even though our cloud stuff is starting to get traction in the hybrid fashion, whether that's what we talk a lot about with the self-service use and the gateway product and using these new generation videoconferencing, and that's kind of what BT is doing. That's what the -- early customers have signed on to that. So...

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [7]

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And Vern, could you update us on the proof of concepts you talked about last quarter, if any of those converted? Have you grown the overall number of POCs?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [8]

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The number is about the same as a totality, I think we said 8 or 9 last quarter or 10. I can't remember the exact number, but we converted a couple of those. One of them was a significant win in the quarter. It was a competitive win. And we feel good about those. Some of them are just tests that we're -- people want to test it before they buy, and we've converted a couple of those. We -- a lot of them that we mentioned last quarter are still going on. Two of those are still in Germany, they're still going on, now they go through the next phase of acquisition after we've done the test. We've got another one that just kicked off in the Middle East, a show that we'll be at next week. But those are very significant for us. We qualify those pretty hard so that we can kind of make sure that we win them but I think that the hit rates high, if we qualify them right so we might...

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [9]

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And you mentioned BT in the script that you got the first customer win. Could you maybe give us any more detail on that? And how quickly do you think that you can snowball and ramp-up that effect?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [10]

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So I think that from a BT perspective, we'll see more deals in Q4, obviously, we've operationalized everything. They can run these. So these are the ones that we won, where -- event that they ran. These are events, 2 or 3 events, but the commitment is somewhere between 40 and 50 events that this -- their customer will run over a period of anywhere from 9 to 12 months. And we think that, that will start to snowball. We've got a pretty healthy pipeline for Q4. We're working with BT to qualify what's going to close within that quarter. They initiate an order and a PO to us on a quarterly basis. And those are for the service side of the -- our relationship, and then we have other ones that are in the, what we call, the resell side of the formula, which are longer sales cycle like normal, and they work with our direct team in order to push those over line. But the service side, they're running those themselves and our cloud operations team helps them if they need to. But we think that we're going to start to see -- we'll actually see more momentum in Q4. We haven't sized it yet, Steve, we'll continue to see a lot more momentum as we plan our 2020. We've always kind of thought that, but I mean, as that ramps up, these 800 strategic accounts that they're focused on, they've got about -- there's a lot of reps in the world, about 500, they've got about 10 to 15 people that are experts that focus on supporting us in these sales cycles. So we think that it's going to ramp significantly to our business in 2020. We see revenue coming in, in Q4, but we see the ramp in 2020.

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Steven Bruce Frankel, Dougherty & Company LLC, Research Division - Senior VP & Director of Research [11]

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Okay. And maybe some insight into your decision to add a couple of new directors. And were those net new seats? Or are they replacing somebody?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [12]

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They were replacing seats that we had open.

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David Gallagher Ristow, Qumu Corporation - CFO [13]

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Yes. From our point of view, this is an extremely positive event for the business. If you look at the resumes of both Ed and Mary, Ed has very strong technology background, well focused in the space that we're targeting from a marketplace perspective and will be a significant, valuable strategic contributor. Mary, too, will be a strong strategic contributor to the business. She also brings financial expertise and has been the CFO of several $300-million-plus businesses. And as a result, will add an additional enhance as we think about business model, go-to market and kind of how we go ahead and get run rate ramp going here, will also be a good addition. We're very excited to have them on board, and we're looking forward to working with them.

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Operator [14]

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(Operator Instructions) Our next question comes from the line of Jeff Van Rhee with Craig-Hallum.

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Jeffrey Lee Van Rhee, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [15]

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A few for me. Maybe, Vern, just start with competitive differentiation. You talked about this proof-of-concept pipeline being the biggest in your duration at the company. And you've talked a lot about Zoom and other collaboration solutions, sort of exploding video in the enterprise. But clearly, you're not the only guys who show up for those deals. Talk a little bit more about what that looks like. And 2 specific questions there. Win rates and how have they changed? And two, how do you differentiate?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [16]

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So I think for us, Jeff, I -- on just the proof-of-concept question. I mean we really focus on where the customer is looking for live and on-demand in the delivery piece of our network, whether that's a hybrid or it's just behind the firewall. So one of the ones that we won last quarter was against a competitor that didn't really -- they had a disjointed service, so they had -- they're very good on the cloud, but they weren't very good on the delivery and the customer wanted both. And we won that because we had a holistic solution. So our stack, our video stack worked better than the competitive landscape. And then some of the other vendors just got disqualified because they couldn't meet the requirements.

But one of the things that is a differentiator for us is the unified communications gateway piece of software that we have that connects us either to Webex or Zoom. We kind of highlight Zoom because it seems to be very topical in a lot of our big accounts. And we differentiate our competitors because they don't have that piece, and they can't federate those, what their advertising is. I can manage a Zoom meeting and then have it as a video-on-demand asset, but they can't actually stream it. And so we can bring it in live, stream it to our constituents, on our network that we own and create a great user experience. And when they -- when our customers and these proof of concepts start to see that, that's a huge differentiator for us. So having a holistic, there's not a lot. There's not any integration with Zoom, we can do it out of the box with them. That's what -- we demonstrated it with the British Telecom product people. You got to show people how it works, standard.

And then we're doing some things with the integration to make sort of this easy button environment with Zoom to leverage both management and delivery of those platforms. And -- so that's what we focus on when we get to the use cases with these customers and go, "Look, what are you trying to do first? Is it corporate education? Is it executive communications? Is it -- are you going to enable your video conferencing?" And then we focus how the platform should be sold and integrated as the proof of concept so that we can win. Some people focus on user experience, some focus on different types of things. We make sure that we kind of -- when we're going to invest in a proof of concept that we usually can win those because we've got the right constituents that are thinking about it right, or we're making them think about it right.

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Jeffrey Lee Van Rhee, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [17]

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Fair enough. And then the -- just very briefly, the retention rates, I remember a little over a year or so ago, you were really going to lean into that. It looks like 4 good quarters of progress there. Just very briefly, in a nutshell, what's the core of that? Why is the retention jumping here?

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [18]

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Well, we have 2 -- I mean we have world-class support in our customer success group that people continue to talk about. Secondarily, we focus on it as an energy, it's one of our core pillars. We did -- we started that at the beginning of 2018. It's paying dividends. As you can see in the numbers, we still got more work to do, I think that we can do better, it's just creating adoption and, as I like to call, pouring concrete with our solution inside, these people use this platform day in and day out. So it's just quality of service, quality of support and making sure that we're talking to people. That's why we're getting big expansion out of our base because we're talking to them. We're getting renewals. And all of those things come into play, I mean, of our customers that we have that are expanding is because we're telling them more. We're not in just one group. And I think that creates renewals, it creates expansion, and it creates things like I talked about on the website of customers talking about our support group. Boeing has a quote in there. It's the best support they've ever had and he's been in the software industry for 20 years. So we like to hear those things, but I think it's good when our customers say that.

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David Gallagher Ristow, Qumu Corporation - CFO [19]

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And, Jeff, what I -- what we hear. I mean my group touches them from a renewals perspective. But we continue to innovate, and our marketing group works very closely with not only support but also outbound marketing to the existing customer base to help them to understand what we're creating, a unified coms gateway, for example, how we touch Zoom, how we enable them with new use cases and then bringing customers together at things like our summits. That enable them to go ahead and connect with other best-of-class users and understand use cases, all of that, I think, are just components of why renewal rates continue to increase.

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Jeffrey Lee Van Rhee, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [20]

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Got it. Great. And then last one for me, just the minus 11% in '18 revenues, this year, you're tracking to somewhere around 8%. I think the consensus is looking for 12% in the out-year '20. Without the bookings number, obviously, we try to use that to make some sense of trajectory going forward. You reiterated '19, I know you don't probably want to give a formal 2020 guide, but can you give us any semblance of, sort of, either your comfort level with the consensus, which is sitting around 11% or 12% top line growth? Might you be able to comment on at least acceleration versus the 8% growth this year? Just give us as a sense, because you see the pipe and you're seeing deal flow, what's the conviction without that bookings number, how do we get a sense of what '20 looks like? Any help there would be great.

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David Gallagher Ristow, Qumu Corporation - CFO [21]

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Yes. I think, Jeff, it's -- we're not going to obviously quote numbers. We wanted to put out guidance when we put out the K. But net-net, I think if you take a step back and you put yourself into our shoes, running this business, we've been going through this difficult transition of on-premise into hybrid, okay? We are very confident in terms of where the solution sets today. We're doubling down with new Board members to help drive this business forward. We continue to innovate and grow. And I think relatively speaking, within the competitive landscape, we feel very good about where we're at. And I think The Street's going to feel good about essentially what we guide to next year.

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [22]

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Yes. I think, Jeff, I think it's the reoccurring revenue, we -- the ARR number where -- what we can see within the partners and what we have to execute to kind of get to those as we look at it. I mean we're getting very comfortable with kind of where that consensus is. We're still evaluating. But I think that we're starting to see the foundation of the business, not just from the financial numbers, but I mean, the renewals in the energy of the inflection point in this market a little bit. People are investing more. They know they need video, they have to do different things than they're doing with just some of the things we're mentioning. We fit well into that stack, and we're starting to see it in our communication with these larger clients that are sort of our focus. And then these channels start to pick up, things change. So we're feeling good as we look out to 2020.

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Operator [23]

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This concludes today's question-and-answer session. I would now like to turn the call back over to Vern Hanzlik for closing remarks.

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Vernon J. Hanzlik, Qumu Corporation - President, CEO & Director [24]

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Thank you again for joining us today and have a great rest of your day.

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Operator [25]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.