Qumu Reports Third Quarter 2019 Results

Qumu Reports Third Quarter 2019 Results

6% Year-to-Date Revenue Increase and 51% Adjusted EBITDA Improvement Underpin Return to Growth

Reiterates Revenue and Adjusted EBITDA Financial Guidance for 2019

Conference Call Today, October 31, 2019 at 4:30 p.m. ET
MINNEAPOLIS–(BUSINESS WIRE)–Qumu Corporation (NASDAQ: QUMU) today reported financial results for the third quarter and nine months ended September 30, 2019. The Company reported third quarter revenue of $6.7 million, net loss of $(221,000), adjusted EBITDA, a non-GAAP measure, of $(535,000), and ended the quarter with cash of $7.5 million. Compared to the corresponding first nine months of 2018, year-to-date 2019 gross profit improved $2.5 million as revenue grew $1.0 million, or 6%, and gross margin percentage increased 10%. Further, adjusted EBITDA, a non-GAAP measure, improved $1.8 million, or 51%. Qumu management also reiterated its revenue and adjusted EBITDA financial guidance for the year ending December 31, 2019.

Management Commentary
“Qumu’s growth in the third quarter was driven by large enterprise customers investing in major expansions,” said Vern Hanzlik, Qumu’s President and CEO. “Our customers are experiencing an explosion of video content and traffic across their global networks. This rapid expansion will only intensify with the ongoing migration toward Self-Service video streaming options, which Qumu enables by transforming a Zoom, WebEx, Teams or other video conferencing system into a video recording and broadcasting tool.”

“On the financial side, Q3 was a solid quarter for Qumu during which we regained much of the momentum we generated at the start of 2019,” added Hanzlik. “With these strong results, we are reiterating our revenue and adjusted EBITDA guidance for 2019. Our confidence is further supported by several key factors, including two major deals already secured in the fourth quarter as well as a robust sales pipeline and customer retention of 94%, an all-time high. In addition, our BT partnership is already producing encouraging early results as we received our first two purchase orders through that new channel at the start of the current quarter.”

Third Quarter 2019 Financial Highlights
Third quarter 2019 revenue was $6.7 million, compared to $5.7 million for the third quarter 2018, and net loss was $(221,000), or $(0.02) loss per basic share or $(0.11) loss per diluted share, compared to net income of $2.4 million, or $0.25 income per basic and diluted share, for the third quarter 2018. Third quarter 2019 adjusted EBITDA was $(535,000), compared to adjusted EBITDA of $(801,000) for the third quarter 2018. The revenue growth of $1.0 million and improved gross margin for the third quarter 2019 resulted in a $1.1 million increase in gross profit compared to the third quarter 2018.

Significantly impacting the $(0.36) decrease in diluted earnings per share compared to the 2018 third quarter was the inclusion of a large gain on the sale of BriefCam, Ltd. and loss on extinguishment of debt in the 2018 third quarter and the dilutive effect of the Company’s warrants on 2019 third quarter loss per diluted share. Net income in the 2018 third quarter was favorably impacted by the inclusion of $5.3 million of other income (pre-tax), or approximately $0.56 (pre-tax) per diluted share, relating to the $6.5 million gain on the sale of BriefCam, Ltd., partially offset by a loss on extinguishment of debt of $1.2 million incurred with the paydown of the Company’s term debt by $6.0 million in principal and $463,000 in accrued interest from the proceeds of the BriefCam sale. In accordance with generally accepted accounting principles, loss per diluted share for the third quarter 2019 was impacted by the exclusion of $973,000 of income, resulting in the exclusion of $0.09 of income per diluted share, related to the change in the fair value of the Company’s warrant liability during the quarter.

Nine Month 2019 Financial Highlights
For the nine months ended September 30, 2019, revenue was $19.1 million, compared to $18.1 million for the corresponding 2018 period, and net loss was $(4.8) million, or $(0.49) loss per basic and diluted share, compared to $(3.7) million, or $(0.39) loss per basic and diluted share, for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, adjusted EBITDA was $(1.8) million, an improvement from adjusted EBITDA of $(3.6) million for the nine months ended September 30, 2018. The revenue growth of $1.0 million and improved gross margin for the nine months ended September 30, 2019 resulted in a $2.5 million increase in gross profit compared to the nine months ended September 30, 2018.

Significantly impacting the $(0.10) increase in diluted loss per share compared to the nine months ended September 30, 2018 was the inclusion in the 2018 period of $5.3 million of other income (pre-tax), or approximately $0.56 (pre-tax) per diluted share, relating to the $6.5 million gain on the sale of BriefCam, Ltd., partially offset by a loss on extinguishment of debt of $1.2 million incurred with the paydown of the Company’s term debt by $6.0 million in principal and $463,000 in accrued interest from the proceeds of the BriefCam sale.

Other Financial Highlights

Software license and appliance revenue was $2.0 million and $1.0 million for the three months ended September 30, 2019 and 2018, respectively, and $3.7 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Subscription, maintenance and support revenue was $4.2 million and $4.1 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $12.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Gross margin was 70% for the third quarter 2019, compared to 63% for third quarter 2018, and 73% for the nine months ended September 30, 2019, compared to 63% for the nine months ended September 30, 2018.

Cash and cash equivalents totaled $7.5 million as of September 30, 2019, compared to $7.3 million as of June 30, 2019 and $8.6 million as of December 31, 2018.

Customer retention continued to build steadily, reaching a new record of 94% during the three months ended September 30, 2019.

Business Outlook
The Company is reiterating its previously issued revenue and adjusted EBITDA financial guidance for 2019:

Revenue for 2019 is expected to be approximately $27 million. Gross margin percentage is expected to be in the high 60s to low 70s.

Net loss for 2019 is expected to be approximately $(5.5) million, which differs from previous guidance 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 the year. Adjusted EBITDA for 2019 is expected to be approximately $(1.5) million, the same as previously issued guidance. Forecasted adjusted EBITDA for 2019 excludes forecasted interest expense of approximately $1.0 million, income tax benefit of approximately $(0.2) million, depreciation expense of approximately $0.3 million, amortization of acquired intangible assets of approximately $1.2 million, stock-based compensation of approximately $0.8 million, other income of approximately $(0.1) million and increase in warrant liability of approximately $1.0 million.

The Company had previously provided guidance for 2019 annual contract value (ACV) bookings growth. As the Company’s 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 (SaaS) solutions, ACV bookings has become an increasingly less predictable and relevant metric by which to judge the performance of the Company during a 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 the Company’s technology or as a measure of the Company’s financial performance, particularly as compared to revenue and adjusted EBITDA. Accordingly, the Company will no longer be providing ACV bookings guidance for 2019. Management will continue to be focused on revenue growth and adjusted EBITDA improvement in 2019 as these are the key indicators and drivers of the Company’s financial performance.

Conference Call
Qumu President and CEO Vern Hanzlik and CFO Dave Ristow will host a conference call today (October 31, 2019) at 4:30 p.m. Eastern time, followed by a question and answer period.

U.S. Dial-In Number: 877-456-6914
International Dial-In Number: 929-387-3794

Investors can also access a webcast of the live conference call by linking through the Investor Relations section of the Qumu website at https://qumu.com/en/investor-relations/. 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 income (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, 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 income (loss), a GAAP measure, to adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2019 and 2018.

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. Such forward-looking statements include, for example, statements about: the Company’s future revenue and operating performance, cash balances, future product mix or the timing of recognition of revenue and the demand for the Company’s products or software. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and other factors set forth in the Company’s filings with the Securities and Exchange Commission.

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 and on-demand video for the enterprise. 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.

QUMU CORPORATION

Condensed Consolidated Statements of Operations

(unaudited – in thousands, except per share data)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Software licenses and appliances

$

1,962

 

 

$

985

 

 

$

3,656

 

 

$

4,303

 

Service

 

4,709

 

 

 

4,668

 

 

 

15,478

 

 

 

13,807

 

Total revenues

 

6,671

 

 

 

5,653

 

 

 

19,134

 

 

 

18,110

 

Cost of revenues:

 

 

 

 

 

 

 

Software licenses and appliances

 

719

 

 

 

504

 

 

 

1,366

 

 

 

1,643

 

Service

 

1,294

 

 

 

1,611

 

 

 

3,747

 

 

 

4,990

 

Total cost of revenues

 

2,013

 

 

 

2,115

 

 

 

5,113

 

 

 

6,633

 

Gross profit

 

4,658

 

 

 

3,538

 

 

 

14,021

 

 

 

11,477

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

1,849

 

 

 

1,617

 

 

 

5,361

 

 

 

5,159

 

Sales and marketing

 

2,083

 

 

 

1,796

 

 

 

6,647

 

 

 

6,388

 

General and administrative

 

1,673

 

 

 

1,608

 

 

 

4,998

 

 

 

5,536

 

Amortization of purchased intangibles

 

168

 

 

 

224

 

 

 

587

 

 

 

680

 

Total operating expenses

 

5,773

 

 

 

5,245

 

 

 

17,593

 

 

 

17,763

 

Operating loss

 

(1,115

)

 

 

(1,707

)

 

 

(3,572

)

 

 

(6,286

)

Other income (expense):

 

 

 

 

 

 

 

Gain on sale of BriefCam, Ltd.

 

41

 

 

 

6,502

 

 

 

41

 

 

 

6,502

 

Loss on extinguishment of debt

 

 

(1,189

)

 

 

 

(1,189

)

Interest expense, net

 

(235

)

 

 

(262

)

 

 

(654

)

 

 

(1,616

)

Decrease (increase) in fair value of warrant liability

 

973

 

 

 

(401

)

 

 

(752

)

 

 

(292

)

Other, net

 

(3

)

 

 

(78

)

 

 

32

 

 

 

(481

)

Total other income (expense), net

 

776

 

 

 

4,572

 

 

 

(1,333

)

 

 

2,924

 

Income (loss) before income taxes

 

(339

)

 

 

2,865

 

 

 

(4,905

)

 

 

(3,362

)

Income tax expense (benefit)

 

(118

)

 

 

469

 

 

 

(133

)

 

 

303

 

Net income (loss)

$

(221

)

 

$

2,396

 

 

$

(4,772

)

 

$

(3,665

)

 

 

 

 

 

 

 

 

Net income (loss) per share – basic:

 

 

 

 

 

 

 

Net income (loss) per share – basic

$

(0.02

)

 

$

0.25

 

 

$

(0.49

)

 

$

(0.39

)

Weighted average shares outstanding – basic

 

9,913

 

 

 

9,559

 

 

 

9,822

 

 

 

9,472

 

Net income (loss) per share – diluted:

 

 

 

 

 

 

 

Income (loss) attributable to common shareholders

$

(1,194

)

 

$

2,396

 

 

$

(4,772

)

 

$

(3,665

)

Net income (loss) per share – diluted

$

(0.11

)

 

$

0.25

 

 

$

(0.49

)

 

$

(0.39

)

Weighted average shares outstanding – diluted

 

10,413

 

 

 

9,709

 

 

 

9,822

 

 

 

9,472

 

QUMU CORPORATION

Condensed Consolidated Balance Sheets

(unaudited – in thousands)

 

Assets

September 30,
2019

 

December 31,
2018

Current assets:

 

 

 

Cash and cash equivalents

$

7,525

 

 

$

8,636

 

Receivables, net

 

4,202

 

 

 

6,278

 

Contract assets

 

1,330

 

 

 

485

 

Income taxes receivable

 

274

 

 

 

327

 

Prepaid expenses and other current assets

 

1,752

 

 

 

2,192

 

Total current assets

 

15,083

 

 

 

17,918

 

Property and equipment, net

 

633

 

 

 

545

 

Right of use assets – operating leases

 

1,783

 

 

 

Intangible assets, net

 

3,279

 

 

 

4,247

 

Goodwill

 

6,748

 

 

 

6,971

 

Deferred income taxes, non-current

 

45

 

 

 

55

 

Other assets, non-current

 

602

 

 

 

544

 

Total assets

$

28,173

 

 

$

30,280

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and other accrued liabilities

$

3,286

 

 

$

2,838

 

Accrued compensation

 

817

 

 

 

1,548

 

Deferred revenue

 

9,050

 

 

 

9,672

 

Operating lease liabilities

 

465

 

 

 

Deferred rent

 

 

 

45

 

Financing obligations

 

214

 

 

 

152

 

Term loan

 

3,834

 

 

 

Warrant liability

 

3,550

 

 

 

2,798

 

Total current liabilities

 

21,216

 

 

 

17,053

 

Long-term liabilities:

 

 

 

Deferred revenue, non-current

 

1,768

 

 

 

1,672

 

Income taxes payable, non-current

 

580

 

 

 

563

 

Deferred tax liability, non-current

 

 

 

2

 

Operating lease liabilities, non-current

 

1,735

 

 

 

Deferred rent, non-current

 

 

 

302

 

Financing obligations, non-current

 

104

 

 

 

57

 

Term loan, non-current

 

 

 

3,431

 

Other liabilities, non-current

 

 

 

195

 

Total long-term liabilities

 

4,187

 

 

 

6,222

 

Total liabilities

 

25,403

 

 

 

23,275

 

Stockholders’ equity:

 

 

 

Common stock

 

99

 

 

 

96

 

Additional paid-in capital

 

69,705

 

 

 

69,072

 

Accumulated deficit

 

(63,457

)

 

 

(58,875

)

Accumulated other comprehensive loss

 

(3,577

)

 

 

(3,288

)

Total stockholders’ equity

 

2,770

 

 

 

7,005

 

Total liabilities and stockholders’ equity

$

28,173

 

 

$

30,280

 

QUMU CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands)

 

 

Nine Months Ended
September 30,

 

2019

 

2018

Operating activities:

 

 

 

Net loss

$

(4,772

)

 

$

(3,665

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

1,170

 

 

 

1,924

 

Stock-based compensation

 

644

 

 

 

767

 

Accretion of debt discount and issuance costs

 

403

 

 

 

1,194

 

Gain on sale of BriefCam, Ltd.

 

(41

)

 

 

(6,502

)

Loss on debt extinguishment

 

 

 

1,189

 

Gain on lease modification

 

(21

)

 

 

Loss on lease contract termination

 

 

 

177

 

Increase in fair value of warrant liability

 

752

 

 

 

292

 

Deferred income taxes

 

8

 

 

 

(99

)

Changes in operating assets and liabilities:

 

 

 

Receivables

 

2,038

 

 

 

1,363

 

Contract assets

 

(845

)

 

 

394

 

Income taxes receivable / payable

 

62

 

 

 

357

 

Prepaid expenses and other assets

 

573

 

 

 

291

 

Accounts payable and other accrued liabilities

 

546

 

 

 

(2,082

)

Accrued compensation

 

(732

)

 

 

(857

)

Deferred revenue

 

(431

)

 

 

2,283

 

Deferred rent

 

 

 

(121

)

Other non-current liabilities

 

(24

)

 

 

98

 

Net cash used in operating activities

 

(670

)

 

 

(2,997

)

Investing activities:

 

 

 

Proceeds from sale of BriefCam, Ltd.

 

41

 

 

 

9,678

 

Purchases of property and equipment

 

(137

)

 

 

(116

)

Net cash provided by (used in) investing activities

 

(96

)

 

 

9,562

 

Financing activities:

 

 

 

Proceeds from term loan and warrant issuance

 

 

 

10,000

 

Principal payments on term loans

 

 

 

(14,000

)

Payments for term loan issuance costs

 

 

 

(1,308

)

Principal payments on financing obligations

 

(242

)

 

 

(329

)

Proceeds from employee stock plans

 

46

 

 

 

Common stock repurchases to settle employee withholding liability

 

(54

)

 

 

(28

)

Net cash used in financing activities

 

(250

)

 

 

(5,665

)

Effect of exchange rate changes on cash

 

(95

)

 

 

(91

)

Net increase (decrease) in cash and cash equivalents

 

(1,111

)

 

 

809

 

Cash and cash equivalents, beginning of period

 

8,636

 

 

 

7,690

Cash and cash equivalents, end of period

$

7,525

$

8,499

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,

 

2019

 

2018

 

2019

 

2018

Software licenses and appliances

$

1,962

 

 

$

 

985

 

 

$

3,656

 

 

$

4,303

 

Service

 

 

 

 

 

 

 

Subscription, maintenance and support

 

4,166

 

 

 

4,091

 

 

 

13,883

 

 

 

12,251

 

Professional services and other

 

543

 

 

 

577

 

 

 

1,595

 

 

 

1,556

 

Total service

 

4,709

 

 

 

4,668

 

 

 

15,478

 

 

 

13,807

 

Total revenue

$

6,671

 

 

$

 

5,653

 

 

$

19,134

 

 

$

18,110

 

 

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

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net income (loss)

$

(221

)

 

$

 

2,396

 

 

$

(4,772

)

 

$

(3,665

)

Interest expense, net

 

235

 

 

 

262

 

 

 

654

 

 

 

1,616

 

Income tax expense (benefit)

 

(118

)

 

 

469

 

 

 

(133

)

 

 

303

 

Depreciation and amortization expense:

 

 

 

 

 

 

 

Depreciation and amortization in cost of revenues

 

 

 

2

 

 

 

 

 

7

 

Depreciation and amortization in operating expenses

 

84

 

 

 

63

 

 

 

243

 

 

 

358

 

Total depreciation and amortization expense

 

84

 

 

 

65

 

 

 

243

 

 

 

365

 

Amortization of intangibles included in cost of revenues

 

109

 

 

 

288

 

 

 

340

 

 

 

879

 

Amortization of intangibles included in operating expenses

 

168

 

 

 

224

 

 

 

587

 

 

 

680

 

Total amortization of intangibles expense

 

277

 

 

 

512

 

 

 

927

 

 

 

1,559

 

Total depreciation and amortization expense

 

361

 

 

 

577

 

 

 

1,170

 

 

 

1,924

 

EBITDA

 

257

 

 

 

3,704

 

 

 

(3,081

)

 

 

178

 

Gain on sale of BriefCam, Ltd.

 

(41

)

 

 

(6,502

)

 

 

(41

)

 

 

(6,502

)

Loss on extinguishment of debt

 

 

 

1,189

 

 

 

 

 

1,189

 

Increase (decrease) in fair value of warrant liability

 

(973

)

 

 

401

 

 

 

752

 

 

 

292

 

Other (income) expense, net

 

3

 

 

 

78

 

 

 

(32

)

 

 

481

 

Stock-based compensation expense:

 

 

 

 

 

 

 

Stock-based compensation included in cost of revenues

 

6

 

 

 

8

 

 

 

20

 

 

 

26

 

Stock-based compensation included in operating expenses

 

213

 

 

 

321

 

 

 

624

 

 

 

741

 

Total stock-based compensation expense

 

219

 

 

 

329

 

 

 

644

 

 

 

767

 

Adjusted EBITDA

$

(535

)

 

$

 

(801

)

 

$

(1,758

)

 

$

(3,595

)

 
Contacts
Company Contact:Dave Ristow
Chief Financial Officer
Qumu Corporation
[email protected]+1.612.638.9045

Investor Contact:Matt Glover or Tom Colton
Gateway Investor Relations
[email protected]+1.949.574.3860

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