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Qumu Reports Third Quarter and Nine Month 2020 Financial Results

·18 min read

Company’s Strategic Roadmap Designed to Drive 20%+ Full Year Revenue Growth in 2021, Supported by 18% Year-over-Year Increase in Q3 2020 Subscription Annual Recurring Revenue (ARR) and Robust Pipeline

Qumu Corporation (Nasdaq: QUMU), the leading provider of best-in-class Enterprise Video technology for organizations of all sizes, today reported financial results for the third quarter and nine months ended September 30, 2020.

Q3 2020 Operational Highlights

  • Launched new Qumu app for Zoom, enabling self-service streaming of Zoom events to audiences of 100,000+ while adding comprehensive video content management and enterprise-grade security

  • Released the Qumu Cloud Build and Price Tool, which allows users to customize their own annual cloud video subscription based on parameters such as storage and bandwidth needs, user counts, live streams, distribution preferences and so on

  • Launched Qumu Cloud for Audio Streaming, a large-scale audio streaming service that provides enterprises with secure, high-quality audio-only call delivery and management at a significantly lower cost than standard audio-conferencing services

  • Hosted 30 million viewers on Qumu Cloud during the quarter, up 28% from Q2 2020 and up 911% from Q3 2019

  • Strengthened leadership team with appointment of veteran technology executive TJ Kennedy as President and CEO

  • Introduced Qumu Video Control Center (VCC) version 10.5, the customer-hosted deployment of Qumu’s intelligent Enterprise Video platform, adding key features such as the Qumu Analytics Engine (QAE), which provides comprehensive, real-time and historical usage reporting of both live and on demand video content

Q3 2020 Financial Highlights

  • Subscription, maintenance and support revenue for Q3 2020 increased 28%, or $1.1 million, to $5.3 million, compared to $4.2 million in Q3 2019

  • Revenue was $6.6 million in Q3 2020, compared to $6.7 million in Q3 2019

  • Gross margin was 75.1% in Q3 2020, up from 69.8% in Q3 2019

  • Cash and cash equivalents totaled $11.4 million at September 30, 2020 compared to $10.6 million at December 31, 2019

  • Company reaffirms 2020 revenue outlook of approximately $29.0 million, representing 14% year-over-year growth

Q3 2020 Key Performance Indicators (KPIs) (compared to the same year-ago period)

  • Subscription Annual Recurring Revenue (ARR) increased 18% to $10.9 million from $9.2 million.

  • Software-as-a-Service (SaaS) customer retention:

    • Gross Renewal Rate (GRR): 90.5% at end of Q3 2020 compared to 88.6% at end of Q3 2019

    • Net Renewal Rate (NRR): 119.2% at end of Q3 2020 compared to 107.5% at end of Q3 2019

    • Dollar Value Retention: 94.0% at end of Q3 2020 compared to 93.3% at end of Q3 2019

Management Commentary

"In the third quarter we began the initial implementation phase of our long-term strategic roadmap, which is designed to position Qumu as a more focused, cloud-first organization driving improved, high-margin recurring revenues," said Qumu President and CEO TJ Kennedy. "Financially, our success along this path was highlighted by strong year-over-year growth in several metrics, including a 28% increase in subscription, maintenance and support revenue along with a 18% increase in subscription ARR, generating robust gross margins of 75% for the quarter. From an operational standpoint, since I joined the company in late July, we have made meaningful progress in cementing our long-term growth strategy, refining our product roadmap, and accelerating the evolution of our SaaS-based business model.

"The global pandemic forced organizations worldwide to rapidly adopt and expand the use of video, both internally and externally. While standard video conferencing and collaboration apps were able to meet the initial need for employees, we are now seeing a second wave of larger more sophisticated needs, where enterprises are exceeding the upper limits of what standard video conferencing and internal collaboration tools can deliver and manage. And this is where Qumu shines. In direct response to this second wave, we built and deployed a new app that enables Zoom to be used as the front end for any large-scale video broadcast, while Qumu handles all delivery, management and video security—changing the game for organizations looking to not only scale Zoom events over 10,000 attendees, but record and manage all Zoom meetings across the organization as secure, searchable, on demand assets. Video content management is the future for all enterprises to get the most out of their organizations and Qumu’s market leading content management capabilities allow video to be securely stored and managed to make businesses more effective and efficient.

"Beyond launching new innovative products for the current market, we’re also hard at work implementing longer-term strategic initiatives to effectively and profitably scale Qumu to the next level. One of these initiatives is expanding and diversifying our go-to-market strategy, which will provide more predictable revenues and long-term, sustainable growth. Consistent with our cloud-first approach, we have now launched an e-Commerce self-service solution that enables a highly automated and low-touch sale of Qumu’s cloud-based solution to small and medium-sized organizations, or SMBs. Now the SMB space can easily access and benefit from Qumu’s best-in-class platform for creating, managing and delivering live and on demand video at scale.

"Today, Qumu is at the forefront of a massive transformation in the way organizations drive communication. Our strategic roadmap is designed to capture the opportunities presented by this transformation. Our successful execution against this plan, which has already begun and will accelerate in the balance of 2020, is expected to drive revenue growth in excess of 20% in 2021 as compared to our current 2020 revenue estimate. Our sales pipeline, strong deferred revenue and our growing annual recurring revenue also give us confidence about our prospects for revenue growth in 2021. Looking ahead, we believe our building momentum and the successful execution of our strategic initiatives will translate to sustainable adjusted EBITDA profitability and, ultimately, net income profitability in the years ahead."

Third Quarter 2020 Financial Results

Revenue for the third quarter of 2020 was $6.6 million compared to $6.7 million for the third quarter of 2019. The slight decrease in revenue was primarily due to lower software license and appliance revenue, offset by higher subscription, maintenance and support revenue as well as higher subscription bookings.

Subscription, maintenance and support revenue for the third quarter of 2020 increased 28% to $5.3 million from $4.2 million in the same year-ago period, which was driven by new cloud and term deals signed in 2020 as well as an increase in cloud usage overages. Cloud usage continues to grow with significant increases being driven by new use cases and enterprises driving their daily operations through the efficient use of video.

Gross margin in the third quarter of 2020 was 75.1% compared to 69.8% for the third quarter of 2019. The gross margin percentage increase was primarily due to a favorable sales mix and an increase in higher-margin cloud Software-as-a-Service (SaaS) revenue.

Net loss in the third quarter of 2020 was $(1.9) million, or $(0.14) loss per basic and diluted share, compared to $(221,000), or $(0.02) loss per basic share and $(0.11) loss per diluted share, for the third quarter of 2019. The greater net loss for the third quarter of 2020 was primarily due to a combined $1.3 million unfavorable impact from changes in the warrant liability fair value during the 2020 and 2019 third quarters, respectively, a one-time severance charge of $0.4 million related to the CEO transition in July 2020, as well as $0.1 million of transaction expenses related to the previously announced terminated merger with Synacor, Inc.

Adjusted EBITDA loss, a non-GAAP measure, in the third quarter of 2020 was $(839,000), compared to an adjusted EBITDA loss of $(535,000) for the third quarter of 2019.

Cash and cash equivalents totaled $11.4 million as of September 30, 2020, compared to $10.6 million as of December 31, 2019.

Nine Month 2020 Financial Results

Revenue for the nine months ended September 30, 2020 increased 16% to $22.2 million from $19.1 million in the same year-ago period. The increase in revenue was primarily due to a large customer order received at the end of the first quarter of 2020.

Subscription, maintenance and support revenue for the nine months ended September 30, 2020 increased 2% to $14.2 million from $13.9 million in the same year-ago period. The increase in subscription, maintenance and support revenue was due to a large order from a single customer as well as a large order received at the end of the first quarter of 2020, partially offset by the recognition of large term license renewals in 2019 that were absent in the comparable period of 2020.

Gross margin for the nine months ended September 30, 2020 was 69.9% compared to 73.3% in the same year-ago period. The gross margin decrease was primarily due to a higher mix of appliance revenue in the nine months of 2020, which generally carries lower margins compared to term license revenue, and lower term license revenue in the 2020 period.

Net loss for the nine months ended September 30, 2020 was $(5.2) million, or $(0.39) loss per basic share and $(0.41) loss per diluted share, compared to $(4.8) million, or $(0.49) loss per basic and diluted share, for the nine months ended September 30, 2019. The higher net loss for the nine months of 2020 was primarily due to $1.6 million of transaction expenses related to the previously announced terminated merger with Synacor, Inc. and a one-time severance charge of $0.4 million related to the CEO transition in July 2020.

Adjusted EBITDA loss, a non-GAAP measure, for the nine months ended September 30, 2020 was $(1.3) million, compared to an adjusted EBITDA loss of $(1.8) million for the comparable 2019 period.

Business Outlook

Qumu provides revenue guidance based on current market conditions and expectations, including the unknown financial impact that COVID-19 will have on economies and enterprises around the world. Based on the Company’s third quarter 2020 financial results and pipeline of business, management currently expects revenue for 2020 to be approximately $29.0 million compared to $25.4 million in 2019, representing year-over-year growth of 14%.

For 2021, management anticipates that the successful execution of its new strategic roadmap has the potential to generate revenue growth of at least 20% compared to the current 2020 estimates.

Conference Call

Qumu executive management will host a conference call today (October 27, 2020) at 4:30 p.m. Eastern time.

U.S. Dial-In Number: +1.833.644.0679
International Dial-In Number: +1.918.922.6755

Investors can also access a webcast of the live conference call by linking through the investor relations section of the Qumu website at https://ir.qumu.com. The webcast will be archived on Qumu’s website for one year.

Non-GAAP Information

To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company uses adjusted EBITDA, a non-GAAP measure, which excludes certain items from net loss, a GAAP measure. Adjusted EBITDA excludes items related to interest income and expense, the impact of income-based taxes, depreciation and amortization, stock-based compensation, change in fair value of warrant liabilities, foreign currency gains and losses, other non-operating income and expenses, and transaction-related expenses.

The Company uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the Company’s performance. The Company believes that adjusted EBITDA is useful to investors because it provides supplemental information that allows investors to review the Company's results of operations from the same perspective as management and the Company's board of directors. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

See the attached Supplemental Financial Information for a reconciliation of net loss, a GAAP measure, to adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2020 and 2019.

About Qumu

Qumu Corporation (Nasdaq: QUMU) is the leading provider of best-in-class tools to create, manage, secure, distribute and measure the success of live, on-demand and video content management solutions for enterprises. Backed by the most trusted and experienced team in the industry, the Qumu platform enables global organizations to drive employee engagement, increase access to video, and modernize the workplace by providing a more efficient and effective way to share knowledge.

Forward-Looking Statements

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," or "estimate" or comparable terminology are intended to identify forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements.

Such forward-looking statements include, for example, statements about: the expected use and adoption of video in the enterprise, the impact of COVID-19 on the use and adoption of video in the enterprise, the Company’s future revenue and operating performance, cash balances, future product mix or the timing of recognition of revenue, the demand for the Company’s products or software, or the success of go-to-market strategies or the other initiatives in the Company’s strategic roadmap. The risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include the risk factors described in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, any subsequently filed Form 10-Q and Current Reports on Form 8-K and other filings with the Securities and Exchange Commission.

The forward-looking statements in this press release speak only as of the date of this press release. Except as required by law, Qumu assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by law.

QUMU CORPORATION

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues:

Software licenses and appliances

$

548

$

1,962

$

6,149

$

3,656

Service

6,082

4,709

16,042

15,478

Total revenues

6,630

6,671

22,191

19,134

Cost of revenues:

Software licenses and appliances

219

719

2,344

1,366

Service

1,435

1,294

4,337

3,747

Total cost of revenues

1,654

2,013

6,681

5,113

Gross profit

4,976

4,658

15,510

14,021

Operating expenses:

Research and development

2,105

1,849

5,973

5,361

Sales and marketing

2,044

2,083

6,443

6,647

General and administrative

2,142

1,673

7,055

4,998

Amortization of purchased intangibles

165

168

492

587

Total operating expenses

6,456

5,773

19,963

17,593

Operating loss

(1,480

)

(1,115

)

(4,453

)

(3,572

)

Other income (expense):

Interest expense, net

(33

)

(235

)

(38

)

(654

)

Decrease (increase) in fair value of derivative liability

(1

)

104

Decrease (increase) in fair value of warrant liability

(332

)

973

(730

)

(752

)

Gain on sale of BriefCam, Ltd.

41

41

Other, net

(55

)

(3

)

(252

)

32

Total other income (expense), net

(421

)

776

(916

)

(1,333

)

Loss before income taxes

(1,901

)

(339

)

(5,369

)

(4,905

)

Income tax benefit

(43

)

(118

)

(147

)

(133

)

Net loss

$

(1,858

)

$

(221

)

$

(5,222

)

$

(4,772

)

Net loss per share – basic:

Net loss per share – basic

$

(0.14

)

$

(0.02

)

$

(0.39

)

$

(0.49

)

Weighted average shares outstanding – basic

13,579

9,913

13,555

9,822

Net loss per share – diluted:

Loss attributable to common shareholders

$

(1,858

)

$

(1,194

)

$

(5,516

)

$

(4,772

)

Net loss per share – diluted

$

(0.14

)

$

(0.11

)

$

(0.41

)

$

(0.49

)

Weighted average shares outstanding – diluted

13,579

10,413

13,575

9,822

QUMU CORPORATION

Condensed Consolidated Balance Sheets

(unaudited - in thousands)

Assets

September 30,
2020

December 31,
2019

Current assets:

Cash and cash equivalents

$

11,352

$

10,639

Receivables, net

5,699

4,586

Contract assets

802

1,089

Income taxes receivable

289

338

Prepaid expenses and other current assets

1,882

1,981

Total current assets

20,024

18,633

Property and equipment, net

431

596

Right of use assets – operating leases

1,425

1,746

Intangible assets, net

2,341

3,075

Goodwill

7,036

7,203

Deferred income taxes, non-current

12

21

Other assets, non-current

458

442

Total assets

$

31,727

$

31,716

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and other accrued liabilities

$

2,104

$

2,816

Accrued compensation

1,777

1,165

Deferred revenue

12,280

10,140

Operating lease liabilities

627

587

Financing obligations

123

157

Note payable

1,767

Derivative liability

36

Warrant liability

1,814

2,939

Total current liabilities

20,528

17,804

Long-term liabilities:

Deferred revenue, non-current

3,612

1,449

Income taxes payable, non-current

602

585

Operating lease liabilities, non-current

1,137

1,587

Financing obligations, non-current

18

83

Other liabilities, non-current

264

Total long-term liabilities

5,633

3,704

Total liabilities

26,161

21,508

Stockholders’ equity:

Common stock

137

136

Additional paid-in capital

78,758

78,061

Accumulated deficit

(70,350

)

(65,128

)

Accumulated other comprehensive loss

(2,979

)

(2,861

)

Total stockholders’ equity

5,566

10,208

Total liabilities and stockholders’ equity

$

31,727

$

31,716

QUMU CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

Nine Months Ended
September 30,

2020

2019

Operating activities:

Net loss

$

(5,222

)

$

(4,772

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

935

1,170

Stock-based compensation

620

644

Accretion of debt discount and issuance costs

52

403

Gain on sale of BriefCam, Ltd.

(41

)

Gain on lease modification

(21

)

Decrease in fair value of derivative liability

(104

)

Increase in fair value of warrant liability

730

752

Deferred income taxes

9

8

Changes in operating assets and liabilities:

Receivables

(1,107

)

2,038

Contract assets

296

(845

)

Income taxes receivable / payable

70

62

Prepaid expenses and other assets

268

573

Accounts payable and other accrued liabilities

(629

)

546

Accrued compensation

617

(732

)

Deferred revenue

4,338

(431

)

Other non-current liabilities

264

(24

)

Net cash provided by (used in) operating activities

1,137

(670

)

Investing activities:

Proceeds from sale of BriefCam, Ltd.

41

Purchases of property and equipment

(68

)

(137

)

Net cash used in investing activities

(68

)

(96

)

Financing activities:

Proceeds from issuance of common stock under employee stock plans

238

46

Principal payments on financing obligations

(286

)

(242

)

Common stock repurchases to settle employee withholding liability

(160

)

(54

)

Net cash used in financing activities

(208

)

(250

)

Effect of exchange rate changes on cash

(148

)

(95

)

Net increase (decrease) in cash and cash equivalents

713

(1,111

)

Cash and cash equivalents, beginning of period

10,639

8,636

Cash and cash equivalents, end of period

$

11,352

$

7,525

QUMU CORPORATION

Supplemental Financial Information

(unaudited - in thousands)

A summary of revenue is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Software licenses and appliances

$

548

$

1,962

$

6,149

$

3,656

Service

Subscription, maintenance and support

5,349

4,166

14,182

13,883

Professional services and other

733

543

1,860

1,595

Total service

6,082

4,709

16,042

15,478

Total revenue

$

6,630

$

6,671

$

22,191

$

19,134

A reconciliation from GAAP results to adjusted EBITDA is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net loss

$

(1,858

)

$

(221

)

$

(5,222

)

$

(4,772

)

Interest expense, net

33

235

38

654

Income tax benefit

(43

)

(118

)

(147

)

(133

)

Depreciation and amortization expense:

Depreciation and amortization in operating expenses

80

84

231

243

Total depreciation and amortization expense

80

84

231

243

Amortization of intangibles included in cost of revenues

72

109

212

340

Amortization of intangibles included in operating expenses

165

168

492

587

Total amortization of intangibles expense

237

277

704

927

Total depreciation and amortization expense

317

361

935

1,170

EBITDA

(1,551

)

257

(4,396

)

(3,081

)

Gain on sale of BriefCam, Ltd.

(41

)

(41

)

Increase (decrease) in fair value of derivative liability

1

(104

)

Increase (decrease) in fair value of warrant liability

332

(973

)

730

752

Other expense (income), net

55

3

252

(32

)

Stock-based compensation expense:

Stock-based compensation included in cost of revenues

12

6

22

20

Stock-based compensation included in operating expenses

199

213

598

624

Total stock-based compensation expense

211

219

620

644

Transaction-related expenses

113

1,623

Adjusted EBITDA

$

(839

)

$

(535

)

$

(1,275

)

$

(1,758

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006163/en/

Contacts

Company Contact:
Dave Ristow
Chief Financial Officer
Qumu Corporation
Dave.Ristow@qumu.com
+1.612.638.9045

Investor Contact:
Matt Glover or Tom Colton
Gateway Investor Relations
QUMU@gatewayir.com
+1.949.574.3860