Qumu Reports Second Quarter 2019 Results, Reiterates Annual Financial Guidance

Strong Sales Pipeline, Expanding Gross Margin and Record Customer Retention Will Drive Anticipated Growth in Second Half of Year

Conference Call Today, July 30, 2019 at 4:30 p.m. ET

MINNEAPOLIS--()--Qumu Corporation (NASDAQ: QUMU) today reported financial results for the second quarter and six months ended June 30, 2019. The Company reported second quarter revenue of $5.4 million, net loss of $(3.6) million and adjusted EBITDA, a non-GAAP measure, of $(1.4) million, and ended the quarter with cash of $7.3 million. Management also reiterated its financial guidance for the fiscal year ending December 31, 2019.

Management Commentary
"In the second quarter we generated consistent improvements in a number of key operating metrics, including improved customer retention, year-over-year expansion of our gross margins and incremental reductions to our operating expenses,” said Vern Hanzlik, Qumu’s President and CEO. “We did encounter minor delays in certain new contract signings that impacted our topline results for the period. However, several of the deals that we had expected to close in Q2 have subsequently closed or are tracking to close in Q3. Overall, we’re still tracking well against our long-term growth plan, and we remain highly confident in our ability to meet our financial guidance for 2019.”

“Looking ahead, our robust sales pipeline gives us additional confirmation in the effectiveness of our sales and marketing program, which has us well-positioned to close additional deals throughout the remainder of the year. Better yet, we are regularly unseating direct competitors in large enterprise deals, including deployments for our newest technologies, such as Unified Communications Gateway and Hybrid Cloud, which also speaks to the quality of our offerings relative to the rest of the market,” noted Hanzlik.

“As of today, we are currently running the highest number of proof-of-concepts I’ve seen in my four years as President and CEO. At the same time, customer retention remains at an all-time high of 93.2%, and gross margin is steadily growing on a year-over-year basis, reaching 71% in the quarter, showing the leverage and scalability of our operations. On the channel partner side, Qumu recently passed British Telecom’s stringent onboarding requirements, officially making Qumu an approved vendor within BT’s video solution portfolio, which should provide additional growth. With a solid foundation and building operational momentum, we remain increasingly well-positioned to benefit from the transition to video as a mission-critical component for large enterprises."

Second Quarter 2019 Financial Details
For the three months ended June 30, 2019, revenue was $5.4 million, compared to $7.6 million for last year's second quarter, and net loss was $(3.6) million, or $(0.37) per diluted share, compared to $(1.5) million, or $(0.16) per diluted share, for the second quarter 2018. Net loss was negatively impacted by a significant increase in the fair value of the Company’s warrant liability due primarily to the Company's stock price increasing 69% during the second quarter 2019, which resulted in a non-cash expense of $1.4 million, or $(0.15) per diluted share. For the three months ended June 30, 2019, adjusted EBITDA was $(1.4) million, compared to adjusted EBITDA of $71,000 for the second quarter 2018.

Six Month 2019 Financial Details
For the six months ended June 30, 2019, revenue was $12.5 million, compared to $12.5 million for the corresponding 2018 period, and net loss was $(4.6) million, or $(0.47) per diluted share, compared to $(6.1) million, or $(0.64) per diluted share, for the corresponding 2018 period. Net loss was negatively impacted by a material increase in the fair value of the Company’s warrant liability due primarily to the Company’s stock price increasing 118% during the first half of 2019, which resulted in a non-cash expense of $1.7 million, or $(0.18) per diluted share. For the six months ended June 30, 2019, adjusted EBITDA was $(1.2) million, an improvement from adjusted EBITDA of $(2.8) million for the six months ended June 30, 2018.

Other Financial Highlights

  • Gross margin was 70.9% for the second quarter 2019, compared to 68.5% for second quarter 2018, and 75.1% for the six months ended June 30, 2019, compared to 63.7% for the six months ended June 30, 2018.
  • Cash and cash equivalents totaled $7.3 million as of June 30, 2019, compared to $8.6 million as of both March 31, 2019 and December 31, 2018.
  • Subscription, maintenance and support revenue was $4.2 million and $4.1 million for the three months ended June 30, 2019 and 2018, respectively, and $9.7 million and $8.2 million for the six months ended June 30, 2019 and 2018, respectively.
  • Software license and appliance revenue was $689,000 and $2.9 million for the three months ended June 30, 2019 and 2018, respectively, and $1.7 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively.
  • Operating expenses decreased $195,000 and $698,000 during the three and six months ended June 30, 2019, respectively, compared to the corresponding 2018 periods, reflecting the impact of the Company's improved operating efficiencies.

Business Outlook
The Company is reiterating its previously issued financial guidance for 2019:

  • Annual contract value bookings growth is expected to be 20% to 25% in 2019 compared to 2018.
  • 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 $(5.1) million. Adjusted EBITDA for 2019 is expected to be approximately $(1.5) million. 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 $0.9 million, and increase in warrant liability of approximately $0.4 million.

Conference Call
Qumu President and CEO Vern Hanzlik and CFO Dave Ristow will host a conference call today (July 30, 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 loss, a GAAP measure, to adjusted EBITDA, a non-GAAP measure, for the three and six months ended June 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

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Software licenses and appliances

$

689

 

 

$

2,867

 

 

$

1,694

 

 

$

3,318

 

Service

4,676

 

 

4,759

 

 

10,769

 

 

9,139

 

Total revenues

5,365

 

 

7,626

 

 

12,463

 

 

12,457

 

Cost of revenues:

 

 

 

 

 

 

 

Software licenses and appliances

336

 

 

804

 

 

647

 

 

1,139

 

Service

1,227

 

 

1,602

 

 

2,453

 

 

3,379

 

Total cost of revenues

1,563

 

 

2,406

 

 

3,100

 

 

4,518

 

Gross profit

3,802

 

 

5,220

 

 

9,363

 

 

7,939

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

1,838

 

 

1,639

 

 

3,512

 

 

3,542

 

Sales and marketing

2,212

 

 

2,412

 

 

4,564

 

 

4,592

 

General and administrative

1,579

 

 

1,747

 

 

3,325

 

 

3,928

 

Amortization of purchased intangibles

201

 

 

227

 

 

419

 

 

456

 

Total operating expenses

5,830

 

 

6,025

 

 

11,820

 

 

12,518

 

Operating loss

(2,028

)

 

(805

)

 

(2,457

)

 

(4,579

)

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net

(214

)

 

(510

)

 

(419

)

 

(1,354

)

Decrease (increase) in value of warrant liability

(1,436

)

 

(278

)

 

(1,725

)

 

109

 

Other, net

66

 

 

(16

)

 

35

 

 

(403

)

Total other expense, net

(1,584

)

 

(804

)

 

(2,109

)

 

(1,648

)

Loss before income taxes

(3,612

)

 

(1,609

)

 

(4,566

)

 

(6,227

)

Income tax benefit

(11

)

 

(78

)

 

(15

)

 

(166

)

Net loss

$

(3,601

)

 

$

(1,531

)

 

$

(4,551

)

 

$

(6,061

)

 

 

 

 

 

 

 

 

Net loss per share – basic and diluted:

 

 

 

 

 

 

 

Net loss per share

$

(0.37

)

 

$

(0.16

)

 

$

(0.47

)

 

$

(0.64

)

Weighted average shares outstanding

9,861

 

 

9,484

 

 

9,775

 

 

9,427

 

QUMU CORPORATION

Condensed Consolidated Balance Sheets

(unaudited - in thousands)

 

Assets

June 30,

2019

 

December 31,

2018

Current assets:

 

 

 

Cash and cash equivalents

$

7,349

 

 

$

8,636

 

Receivables, net

2,969

 

 

6,278

 

Contract assets

1,495

 

 

485

 

Income taxes receivable

352

 

 

327

 

Prepaid expenses and other current assets

1,909

 

 

2,192

 

Total current assets

14,074

 

 

17,918

 

Property and equipment, net

623

 

 

545

 

Right of use assets – operating leases

1,060

 

 

 

Intangible assets, net

3,599

 

 

4,247

 

Goodwill

6,949

 

 

6,971

 

Deferred income taxes, non-current

46

 

 

55

 

Other assets, non-current

442

 

 

544

 

Total assets

$

26,793

 

 

$

30,280

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and other accrued liabilities

$

2,375

 

 

$

2,838

 

Accrued compensation

842

 

 

1,548

 

Deferred revenue

8,592

 

 

9,672

 

Operating lease liabilities

435

 

 

 

Deferred rent

 

 

45

 

Financing obligations

277

 

 

152

 

Term loan

3,693

 

 

 

Warrant liability

4,523

 

 

2,798

 

Total current liabilities

20,737

 

 

17,053

 

Long-term liabilities:

 

 

 

Deferred revenue, non-current

1,295

 

 

1,672

 

Income taxes payable, non-current

574

 

 

563

 

Deferred tax liability, non-current

 

 

2

 

Operating lease liabilities, non-current

1,038

 

 

 

Deferred rent, non-current

 

 

302

 

Financing obligations, non-current

125

 

 

57

 

Term loan, non-current

 

 

3,431

 

Other liabilities, non-current

 

 

195

 

Total long-term liabilities

3,032

 

 

6,222

 

Total liabilities

23,769

 

 

23,275

 

Stockholders’ equity:

 

 

 

Common stock

99

 

 

96

 

Additional paid-in capital

69,484

 

 

69,072

 

Accumulated deficit

(63,236

)

 

(58,875

)

Accumulated other comprehensive loss

(3,323

)

 

(3,288

)

Total stockholders’ equity

3,024

 

 

7,005

 

Total liabilities and stockholders’ equity

$

26,793

 

 

$

30,280

 

QUMU CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

Six Months Ended

June 30,

 

2019

 

2018

Operating activities:

 

 

 

Net loss

$

(4,551

)

 

$

(6,061

)

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

 

 

 

Depreciation and amortization

809

 

 

1,347

 

Stock-based compensation

425

 

 

438

 

Accretion of debt discount and issuance costs

263

 

 

1,035

 

Gain on lease modification

(21

)

 

 

Loss on lease contract termination

 

 

177

 

Decrease in value of warrant liability

1,725

 

 

(109

)

Deferred income taxes

7

 

 

(72

)

Changes in operating assets and liabilities:

 

 

 

Receivables

3,290

 

 

588

 

Contract assets

(1,010

)

 

211

 

Income taxes receivable / payable

(15

)

 

(130

)

Prepaid expenses and other assets

586

 

 

197

 

Accounts payable and other accrued liabilities

(397

)

 

(1,019

)

Accrued compensation

(711

)

 

(604

)

Deferred revenue

(1,445

)

 

938

 

Deferred rent

 

 

(144

)

Other non-current liabilities

(24

)

 

436

 

Net cash used in operating activities

(1,069

)

 

(2,772

)

Investing activities:

 

 

 

Purchases of property and equipment

(43

)

 

(73

)

Net cash used in investing activities

(43

)

 

(73

)

Financing activities:

 

 

 

Proceeds from term loan and warrant issuance

 

 

10,000

 

Principal payments on term loans

 

 

(8,000

)

Payments for term loan issuance costs

 

 

(1,308

)

Principal payments on financing obligations

(158

)

 

(247

)

Proceeds from employee stock plans

42

 

 

 

Common stock repurchases to settle employee withholding liability

(53

)

 

(27

)

Net cash provided by (used in) financing activities

(169

)

 

418

 

Effect of exchange rate changes on cash

(6

)

 

(61

)

Net decrease in cash and cash equivalents

(1,287

)

 

(2,488

)

Cash and cash equivalents, beginning of period

8,636

 

 

7,690

 

Cash and cash equivalents, end of period

$

7,349

 

 

$

5,202

 

QUMU CORPORATION

Supplemental Financial Information

(unaudited - in thousands)

A summary of revenue is as follows:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

Software licenses and appliances

$

689

 

 

$

2,867

 

 

$

1,694

 

 

$

3,318

 

Service

 

 

 

 

 

 

 

Subscription, maintenance and support

4,154

 

 

4,122

 

 

9,717

 

 

8,160

 

Professional services and other

522

 

 

637

 

 

1,052

 

 

979

 

Total service

4,676

 

 

4,759

 

 

10,769

 

 

9,139

 

Total revenue

$

5,365

 

 

$

7,626

 

 

$

12,463

 

 

$

12,457

 

 

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

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

Net loss

$

(3,601

)

 

$

(1,531

)

 

$

(4,551

)

 

$

(6,061

)

Interest expense, net

214

 

 

510

 

 

419

 

 

1,354

 

Income tax benefit

(11

)

 

(78

)

 

(15

)

 

(166

)

Depreciation and amortization expense:

 

 

 

 

 

 

 

Depreciation and amortization in cost of revenues

 

 

2

 

 

 

 

5

 

Depreciation and amortization in operating expenses

86

 

 

126

 

 

159

 

 

295

 

Total depreciation and amortization expense

86

 

 

128

 

 

159

 

 

300

 

Amortization of intangibles included in cost of revenues

114

 

 

293

 

 

231

 

 

591

 

Amortization of intangibles included in operating expenses

201

 

 

227

 

 

419

 

 

456

 

Total amortization of intangibles expense

315

 

 

520

 

 

650

 

 

1,047

 

Total depreciation and amortization expense

401

 

 

648

 

 

809

 

 

1,347

 

EBITDA

(2,997

)

 

(451

)

 

(3,338

)

 

(3,526

)

Increase (decrease) in fair value of warrant liability

1,436

 

 

278

 

 

1,725

 

 

(109

)

Other (income) expense, net

(66

)

 

16

 

 

(35

)

 

403

 

Stock-based compensation expense:

 

 

 

 

 

 

 

Stock-based compensation included in cost of revenues

6

 

 

8

 

 

14

 

 

18

 

Stock-based compensation included in operating expenses

188

 

 

220

 

 

411

 

 

420

 

Total stock-based compensation expense

194

 

 

228

 

 

425

 

 

438

 

Adjusted EBITDA

$

(1,433

)

 

$

71

 

 

$

(1,223

)

 

$

(2,794

)

 

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

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