QUMU - Qumu Reports Third Quarter 2022 Financial Results

October, 27 2022 04:01 PM Qumu Corporation

Traction with Partner-Led Sales Strategy Contributes to Continued Growth in Quarterly SaaS Revenue and SaaS Annual Recurring Revenue for Third Quarter 2022

Cost Management Yields 30% Year-Over-Year Operating Expense Reduction

Qumu Corporation (Nasdaq: QUMU) , a leading provider of cloud-based enterprise video technology, today reported financial results for the third quarter ended September 30, 2022.

Q3 2022 and Recent Operational Highlights

Expanded partnership with AT&T to support the branding and launch of AT&T’s Qumu-powered enterprise video-as-a service product offering

Lau nched Qumu Video Engagement Platform on Google Cloud Marketplace

Renewed several of our marquee customers, including international banking group Uni Credit , Birmingham County Football Club and pediatric oncology center Prinses Máxima Centrum

Q3 2022 Financial Highlights

Software as a Service (SaaS) revenue increased 6% to $2.8 million, compared to $2.6 million in Q3 2021

SaaS Annual Recurring Revenue (SaaS ARR) grew to $13.5 million, up 7% year-over-year

SaaS revenue accounted for 51% of total revenue, compared to 54% in Q2 2022 and 41% in Q3 2021

Gross margin improved to 77.5%, compared to 75.4% for Q2 2022 and 76.0% for Q3 2021

Operating expenses decreased 12% sequentially and 30% year-over-year

Net cash used in operating activities decreased to $1.4 million, an improvement compared to $3.7 million in Q2 2022 and $3.3 million in Q3 2021

Solid balance sheet with $6.0 million of cash and cash equivalents, inclusive of line of credit borrowings of $1.2 million

Company reiterated its expectation that SaaS recurring revenue will comprise approximately 65% of its overall recurring revenue mix by the end of 2022, with targeted growth to approximately 75% of recurring revenue mix by the end of 2023

Q3 2022 Key Performance Indicators

SaaS revenue accounted for 63% of recurring revenue, up from 61% in Q2 2022 and 52% in Q3 2021

SaaS revenue accounted for 51% of total revenue, compared to 54% in Q2 2022 and 41% in Q3 2021

SaaS ARR increased to $13.5 million from $13.3 million in Q2 2022 and $12.6 million in Q3 2021

SaaS customer retention metrics:
- Gross Retention Rate (GRR): 92% at end of Q3 2022 compared to 84% at end of Q3 2021
- Net Retention Rate (NRR): 100% at end of Q3 2022 compared to 123% at end of Q3 2021

Management Commentary

“Our improving financial results and strong SaaS KPIs in Q3 reflect the increasing success and momentum of our partner-led sales strategy as well as our customers growing their investment with Qumu as their trusted provider of live and asynchronous video content,” said CEO of Qumu, Rose Bentley. “In particular, our partner strategy has been validated by the volume of opportunities we are seeing as well as by the rate we are closing new business. In fact, our new logo count for the first nine months of the year exceeds all new logos we secured in 2021 and we continue to see over 80% of our new bookings being sourced by our partners.”

Qumu CFO Tom Krueger commented: “During Q3 we built on the financial momentum we established in the first half of 2022 by delivering solid growth across our key SaaS metrics. Highlighting our success is the 6% increase in SaaS revenue and 7% increase in SaaS ARR. Renewals and retention rates were especially strong in the quarter, with gross retention rate of 92% and net retention rate of 100%. Importantly, we were able to achieve these results while reducing our operating expenses by 12% sequentially and 30% year-over-year, which enabled us to improve cash used in operations by $2.3 million compared to Q2 2022. We have made great strides improving our cash usage, and we will continually look for ways to further optimize our cost profile without sacrificing our ability to scale.”

Bentley continued: “Looking ahead, our pipeline for renewals and new customers is incredibly strong. Many of the renewals include expansion of our customer relationships as they look to increase usage of the Qumu platform resulting in a broader network of technology partners and new enterprise use cases going forward. A growing number of renewals secured in Q3 were for multi-year contracts, and we expect future renewals to follow suit. In fact, three-to-five-year contracts accounted for nearly 20% of our renewals year-to-date, reflecting the confidence our customers have in our cloud-based solution and unmatched level of customer service.

“Longer term, our three-year vision for Qumu is to achieve $50 million in revenue as a profitable and predictable company by the end of 2025. The strategic investments that we have made into the business over the past several years position us to now focus on scaling outwardly and promoting our platform through our network of partners and collaborators. The benefits of our transformation will become increasingly evident in growth in recurring revenues later this year and in 2023.”

Third Quarter 2022 Financial Results

Revenue for Q3 2022 was $5.5 million, compared to $5.1 million in Q2 2022 and $6.4 million in Q3 2021. The year-over-year decrease was due to the company’s strategic shift away from perpetual license sales, and the related maintenance revenue, and toward SaaS sales.

Service revenue was $4.9 million in both Q3 2022 and Q2 2022 and $5.7 million in Q3 2021. The year-over-year decrease resulted from customer contracts sunsetting, which impacted maintenance revenue associated with the company’s on-premise solution. Subscription and support revenue, which is included in service revenue and comprises the company's SaaS revenue, was $2.8 million in both Q3 2022 and Q2 2022 and $2.6 million in Q3 2021. The company expects subscription revenue will continue to grow as Qumu executes on its cloud transformation strategy.

Gross margin in Q3 2022 was 77.5%, compared to gross margin of 75.4% for Q2 2022 and 76.0% for Q3 2021. The gross margin percentage improved due primarily to better margins on SaaS revenue recognized compared to Q2 2022, a higher percentage of SaaS revenue contributing to the overall sales mix compared to Q3 2021, and improved utilization of professional services personnel.

Net loss in Q3 2022 totaled $(1.4) million, or $(0.08) loss per basic and diluted share. This compares to net loss of $(2.6) million, or $(0.15) loss per basic and diluted share, for Q2 2022 and net loss of $(3.7) million, or $(0.21) loss per basic and diluted share, in Q3 2021.

Adjusted EBITDA loss, a non-GAAP measure, in Q3 2022 was $(1.6) million, compared to $(3.1) million in Q2 2022 and $(3.5) million in Q2 2021.

As of September 30, 2022, the company had cash and cash equivalents of $6.0 million and borrowings on its line of credit of $1.2 million.

Business Outlook

Qumu provides guidance based on current market conditions and expectations. The company emphasizes that its guidance is subject to various important cautionary factors referenced in the section entitled “Forward-Looking Statements” below, including risks and uncertainties associated with the company’s strategic plan, transition to SaaS recurring revenue through channel partners, and the COVID-19 pandemic, such as trends in distributed remote and hybrid work impacting enterprise technology adoption and procurement.

To give insight into the progress of Qumu’s SaaS business transformation, the company provides a business outlook based on the percentage of recurring revenue comprised of SaaS revenue. Qumu’s management reiterated its expectation that SaaS recurring revenue will comprise approximately 65% of its overall recurring revenue mix by the end of 2022, with targeted growth to approximately 75% of recurring revenue mix by the end of 2023.

Conference Call

Qumu executive management will host a conference call today (October 27, 2022) at 4:30 p.m. Eastern time. Register here to join the conference call: https://register.vevent.com/register/BI807fbf299aa44f1192b19c2c4a86ad99 .

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 derivative and warrant liabilities, foreign currency gains and losses, Employee Retention Credit income, gain on sale of BriefCam, Ltd. and other non-operating income and 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, 2022 and 2021.

About Qumu

Qumu (Nasdaq: QUMU) is a leading provider of best-in-class tools to create, manage, secure, distribute and measure the success of live and on-demand video for the enterprise. The Qumu Cloud platform enables global organizations to drive human engagement, increase access to and insights from video use, 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 success of go-to-market strategies or the other initiatives in the company’s strategic plan, the company's ability to continue as a going concern, the expected use and adoption of video in the enterprise, the ability to obtain additional capital as needed, the ability to attract and retain necessary personnel, 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, or the demand for the company’s products or software. 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 Annual Report on Form 10-K for the year ended December 31, 2021, and other factors set forth in the company’s 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,

2022

2021

2022

2021
Revenues:







Software licenses and appliances
$
606


$
742


$
995


$
1,091

Service

4,865



5,683



14,547



17,021

Total revenues

5,471



6,425



15,542



18,112

Cost of revenues:







Software licenses and appliances

58



63



137



190

Service

1,173



1,481



3,764



4,470

Total cost of revenues

1,231



1,544



3,901



4,660

Gross profit

4,240



4,881



11,641



13,452

Operating expenses:







Research and development

1,628



2,305



5,383



6,519

Sales and marketing

2,436



4,490



8,931



14,139

General and administrative

1,990



1,881



6,684



6,550

Amortization of purchased intangibles

150



163



459



488

Total operating expenses

6,204



8,839



21,457



27,696

Operating loss

(1,964
)


(3,958
)


(9,816
)


(14,244
)
Other income (expense):







Employee Retention Credit income

623



—



1,272



—

Interest expense, net

(26
)


(12
)


(135
)


(81
)
Decrease in fair value of derivative liability

—



—



—



37

Decrease in fair value of warrant liability

26



94



143



1,469

Gain on sale of BriefCam, Ltd.

—



50



—



50

Other, net

(150
)


4



(334
)


(23
)
Total other income (expense), net

473



136



946



1,452

Loss before income taxes

(1,491
)


(3,822
)


(8,870
)


(12,792
)
Income tax benefit

(124
)


(77
)


(241
)


(276
)
Net loss
$
(1,367
)

$
(3,745
)

$
(8,629
)

$
(12,516
)








Net loss per share – basic:







Net loss per share – basic
$
(0.08
)

$
(0.21
)

$
(0.48
)

$
(0.72
)
Weighted average shares outstanding – basic

18,143



17,872



18,077



17,358

Net loss per share – diluted:







Loss attributable to common shareholders
$
(1,367
)

$
(3,788
)

$
(8,629
)

$
(13,985
)
Net loss per share – diluted
$
(0.08
)

$
(0.21
)

$
(0.48
)

$
(0.80
)
Weighted average shares outstanding – diluted

18,143



17,881



18,077



17,525

QUMU CORPORATION Condensed Consolidated Balance Sheets (unaudited - in thousands)








September 30,

December 31,
Assets
2022

2021
Current assets:



Cash and cash equivalents
$
6,032


$
20,563

Receivables, net

4,088



3,709

Contract assets

223



446

Income taxes receivable

750



556

Other receivable

1,272



—

Prepaid expenses and other current assets

1,790



2,184

Total current assets

14,155



27,458

Property and equipment, net

167



337

Right of use assets – operating leases

—



146

Intangible assets, net

882



1,388

Goodwill

6,066



7,388

Deferred income taxes, non-current

17



17

Other assets, non-current

308



362

Total assets
$
21,595


$
37,096

Liabilities and Stockholders’ Equity



Current liabilities:



Accounts payable and other accrued liabilities
$
3,206


$
2,742

Accrued compensation

1,415



1,725

Deferred revenue

9,757



10,862

Operating lease liabilities

82



597

Financing obligations

1,252



5,502

Warrant liability

658



801

Total current liabilities

16,370



22,229

Long-term liabilities:



Deferred revenue, non-current

1,169



1,507

Income taxes payable, non-current

647



630

Operating lease liabilities, non-current

—



21

Financing obligations, non-current

74



113

Total long-term liabilities

1,890



2,271

Total liabilities

18,260



24,500

Stockholders’ equity:



Common stock

179



178

Additional paid-in capital

105,912



105,655

Accumulated deficit

(99,322
)


(90,693
)
Accumulated other comprehensive loss

(3,434
)


(2,544
)
Total stockholders’ equity

3,335



12,596

Total liabilities and stockholders’ equity
$
21,595


$
37,096

QUMU CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited - in thousands)




Nine Months Ended September 30,

2022

2021
Operating activities:



Net loss
$
(8,629
)

$
(12,516
)
Adjustments to reconcile net loss to net cash used in operating activities:



Depreciation and amortization

634



738

Loss on disposal of property and equipment

(1
)


3

Stock-based compensation

293



1,403

Accretion of debt discount and issuance costs

38



35

Decrease in fair value of derivative liability

—



(37
)
Decrease in fair value of warrant liability

(143
)


(1,469
)
Gain on sale of BriefCam, Ltd.

—



(50
)
Changes in operating assets and liabilities:



Receivables

(559
)


913

Contract assets

223



37

Income taxes receivable / payable

(294
)


107

Other receivable

(1,272
)


—

Prepaid expenses and other assets

421



264

Accounts payable and other accrued liabilities

472



(607
)
Accrued compensation

(269
)


(915
)
Deferred revenue

(882
)


(2,800
)
Net cash used in operating activities

(9,968
)


(14,894
)
Investing activities:



Proceeds from sale of BriefCam, Ltd.

—



50

Purchases of property and equipment

(10
)


(216
)
Net cash used in investing activities

(10
)


(166
)
Financing activities:



Principal payments on lines of credit

(7,000
)


(1,840
)
Proceeds from lines of credit

3,200



1,840

Principal payments on term loan

—



(1,833
)
Payment for line of credit issuance costs

(86
)


(25
)
Principal payments on financing obligations

(489
)


(342
)
Net proceeds from common stock issuance

—



23,085

Proceeds from issuance of common stock under employee stock plans

—



545

Common stock repurchases to settle employee withholding liability

(35
)


(47
)
Net cash provided by (used in) financing activities

(4,410
)


21,383

Effect of exchange rate changes on cash

(143
)


(2
)
Net increase (decrease) in cash and cash equivalents

(14,531
)


6,321

Cash and cash equivalents, beginning of period

20,563



11,878

Cash and cash equivalents, end of period
$
6,032


$
18,199

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,

2022

2021

2022

2021
Software licenses and appliances
$
606


$
742


$
995


$
1,091

Service







Subscription and support

2,786



2,636



8,205



7,360

Maintenance and support

1,605



2,444



5,167



7,678

Subscription, maintenance and support

4,391



5,080



13,372



15,038

Professional services and other

474



603



1,175



1,983

Total service

4,865



5,683



14,547



17,021

Total revenue
$
5,471


$
6,425


$
15,542


$
18,112

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








Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021
Net loss
$
(1,367
)

$
(3,745
)

$
(8,629
)

$
(12,516
)
Interest expense, net

26



12



135



81

Income tax benefit

(124
)


(77
)


(241
)


(276
)
Depreciation and amortization expense:







Depreciation and amortization in operating expenses

57



57



175



170

Total depreciation and amortization expense

57



57



175



170

Amortization of intangibles included in cost of revenues

—



26



—



80

Amortization of intangibles included in operating expenses

150



163



459



488

Total amortization of intangibles expense

150



189



459



568

Total depreciation and amortization expense

207



246



634



738

EBITDA

(1,258
)


(3,564
)


(8,101
)


(11,973
)
Gain on sale of BriefCam, Ltd.

—



(50
)


—



(50
)
Employee Retention Credit income

(623
)


—



(1,272
)


—

Decrease in fair value of derivative liability

—



—



—



(37
)
Decrease in fair value of warrant liability

(26
)


(94
)


(143
)


(1,469
)
Other expense (income), net

150



(4
)


334



23

Stock-based compensation expense:







Stock-based compensation included in cost of revenues

22



12



58



44

Stock-based compensation included in operating expenses

121



236



235



1,359

Total stock-based compensation expense

143



248



293



1,403

Adjusted EBITDA
$
(1,614
)

$
(3,464
)

$
(8,889
)

$
(12,103
)

View source version on businesswire.com: https://www.businesswire.com/news/home/20221027005852/en/

Company Contact:
Tom Krueger
Chief Financial Officer
Qumu Corporation
Tom.Krueger@qumu.com
+1.612.638.9100

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

Company Name:	Qumu Corporation
Stock Symbol:	QUMU
Market:	NASDAQ
Website:	qumu.com

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