QUMU Qumu Corporation

Year-over-year improved gross margins and operating results

Conference Call Wednesday, May 3 at 10:00 a.m. ET

Qumu Corporation (NASDAQ: QUMU) today reported financial results for the first quarter 2017.

First quarter revenue was $6.7 million, compared to $8.7 million in the first quarter 2016, and net loss was $(3.6) million, or a loss of $(0.39) per share, compared to $(4.1) million, or a loss of $(0.45) per share, in the first quarter 2016. First quarter adjusted EBITDA (a non-GAAP measure) was a loss of $(1.9) million, compared to an adjusted EBITDA loss of $(3.0) million for the first quarter 2016.

“Qumu’s first quarter 2017 was a solid start to the year as we continue to take a long-term view of our dynamic industry. We are successfully transitioning Qumu to a software as a service (SaaS) provider, serving large organizations with both on-premise and cloud video solutions. We are investing in our future with exciting new developments to be announced later this month about our suite of solutions. And we have validated our strategy with our current customers and prospects, confirming that it is directly in line with the market’s direction toward highly collaborative video environments. The digital workforce thrives on video, and large enterprises need solutions to both encourage and manage that demand,” said Vern Hanzlik, Qumu’s president and CEO.

Other Financial Highlights

• Subscription, maintenance and support revenue for the first quarter 2017 was $4.8 million compared to $5.5 million for the first quarter 2016. The variance in subscription, maintenance and support revenue was primarily due to the inclusion of approximately $700,000 of revenue in the first quarter 2016 relating to customer acceptance and contract buyouts, as well as to the timing of customer renewals.
• Gross margin for the first quarter 2017 was 61.5% compared to 56.3% for the first quarter 2016.
• Total headcount was 145 as of March 31, 2017 compared to 150 as of December 31, 2016 and 182 as of March 31, 2016.
• Cash and marketable securities were $10.4 million as of March 31, 2017, compared to $10.4 million as of December 31, 2016, reflecting the first quarter operating loss and the impact on cash from changes in working capital.

GuidanceFor the second quarter 2017, revenue is expected to be in the range of $6.5 million to $7.5 million. Total gross margin percentage is expected to be in the low to mid 60s in the second quarter. Second quarter net loss is expected to be in the range of $(3.1) million to $(2.6) million, or $(0.33) to $(0.28) per diluted share, with weighted-average shares outstanding of approximately 9.3 million shares. Adjusted EBITDA for the second quarter 2017 is expected to be in the range of a loss of $(1.6) million to $(1.1) million, compared to an adjusted EBITDA loss of $(3.1) million in the second quarter 2016.

For the full year 2017, revenue is expected to be in the range of $31.0 million to $34.0 million as the Company continues to grow its recurring revenue base. Total gross margin percentage is expected to improve from the low 60s early in the year to the high 60s late in the year. Net loss is expected to be in the range of $(9.5) million to $(8.0) million, or $(1.02) to $(0.87) per diluted share, with weighted-average shares outstanding of approximately 9.3 million shares. Adjusted EBITDA for the full year 2017 is expected to be in the range of a loss of $(3.5) million to $(2.0) million compared to an adjusted EBITDA loss of $(6.6) million in fiscal 2016. The Company expects a tax benefit of $200,000 in fiscal 2017. Additionally, the Company expects that it will be cash flow breakeven for the second half of 2017.

Conference CallThe Company has scheduled a conference call and webcast to review its first quarter 2017 results tomorrow, May 3, 2017 at 10:00 a.m. Eastern Time. The dial-in number for the conference call is 877-456-6914 for domestic participants and 929-387-3794 for international participants. Investors can also access a webcast of the live conference call by linking through the investor relations section of the Qumu website, www.qumu.com. Webcasts will be archived on Qumu’s website.

Non-GAAP InformationTo 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 liability, 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 months ended March 31, 2017 and 2016.

Forward-Looking StatementsThis 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, 2016 and other factors set forth in the Company’s filings with the Securities and Exchange Commission.

About QumuVideo is today’s document. Qumu Corporation (NASDAQ: QUMU) provides the tools businesses need to create, manage, secure, deliver and measure the success of their videos. Qumu's innovative solutions release the power in video to engage and empower employees, partners and clients. Organizations around the world realize the greatest possible value from video they create and publish using Qumu. Whatever the audience size, viewer device or network configuration, Qumu solutions are how business does video. Additional information can be found at www.qumu.com.

 

QUMU CORPORATIONCondensed Consolidated Statements of Operations(unaudited - in thousands, except per share data)

 

Three Months Ended March 31,

2017   2016 Revenues: Software licenses and appliances $ 1,220 $ 1,962 Service   5,491     6,774   Total revenues   6,711     8,736   Cost of revenues: Software licenses and appliances 494 957 Service   2,090     2,861   Total cost of revenues   2,584     3,818   Gross profit   4,127     4,918   Operating expenses: Research and development 2,109 2,350 Sales and marketing 2,451 3,532 General and administrative 2,460 2,970 Amortization of purchased intangibles   223     226   Total operating expenses   7,243     9,078   Operating loss   (3,116 )   (4,160 ) Other income (expense):

Interest expense, net

(317 ) (12 ) Change in value of warrant liability (78 ) — Other, net   (55 )   36   Total other income (expense), net   (450 )   24   Loss before income taxes (3,566 ) (4,136 ) Income tax benefit   (4 )   (4 ) Net loss $ (3,562 ) $ (4,132 )   Net loss per share – basic and diluted: Net loss per share $ (0.39 ) $ (0.45 ) Weighted average shares outstanding 9,245 9,218      

QUMU CORPORATIONCondensed Consolidated Balance Sheets(in thousands)

  Assets

March 31, 2017

December 31, 2016

Current assets: (unaudited) Cash and cash equivalents $ 10,411 $ 10,364 Receivables, net 4,614 7,495 Income taxes receivable 168 317 Prepaid expenses and other current assets   2,681     2,470   Total current assets 17,874 20,646 Property and equipment, net 1,584 1,827 Intangible assets, net 7,623 8,110 Goodwill 6,808 6,749 Deferred income taxes, non-current 69 70 Other assets, non-current   4,643     4,827   Total assets $ 38,601   $ 42,229   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and other accrued liabilities $ 1,990 $ 2,394 Accrued compensation 2,122 2,361 Deferred revenue 8,982 8,992 Deferred rent 283 283 Financing obligations 473 508 Warrant liability   971     893   Total current liabilities   14,821     15,431   Long-term liabilities: Deferred revenue, non-current 632 423 Income taxes payable, non-current 3 6 Deferred tax liability, non-current 260 294 Deferred rent, non-current 638 712 Financing obligations, non-current 80 170 Term loan, non-current   6,603     6,617   Total long-term liabilities   8,216     8,222   Total liabilities   23,037     23,653   Stockholders’ equity: Common stock 93 92 Additional paid-in capital 67,276 66,864 Accumulated deficit (48,035 ) (44,473 ) Accumulated other comprehensive loss   (3,770 )   (3,907 ) Total stockholders’ equity   15,564     18,576   Total liabilities and stockholders’ equity $ 38,601   $ 42,229      

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

  Three Months Ended March 31, 2017   2016 Operating activities: Net loss $ (3,562 ) $ (4,132 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 774 852 Stock-based compensation 413 351 Accretion of debt discount and issuance costs 111 — Change in value of warrant liability 78 — Deferred income taxes (33 ) (1 ) Changes in operating assets and liabilities: Receivables 2,896 3,911 Income taxes receivable / payable 148 245 Prepaid expenses and other assets (23 ) (1,170 ) Accounts payable and other accrued liabilities (367 ) (101 ) Accrued compensation (245 ) (1,006 ) Deferred revenue 178 (756 ) Deferred rent (75 ) (48 ) Other non-current liabilities   —     (125 ) Net cash provided by (used in) operating activities   293     (1,980 ) Investing activities: Sales and maturities of marketable securities — 4,000 Purchases of property and equipment   (14 )   (12 ) Net cash provided by (used in) investing activities   (14 )   3,988   Financing activities: Payments for debt issuance costs (125 ) — Principal payments on financing obligations (125 ) (118 ) Common stock repurchases to settle employee withholding liability   —     (1 ) Net cash used in financing activities   (250 )   (119 ) Effect of exchange rate changes on cash   18     50   Net increase in cash and cash equivalents 47 1,939 Cash and cash equivalents, beginning of period   10,364     7,072   Cash and cash equivalents, end of period $ 10,411   $ 9,011    

QUMU CORPORATIONSupplemental Financial Information(unaudited - in thousands)

A summary of revenue is as follows:

 

Three Months Ended March 31,

2017   2016 Software licenses and appliances $ 1,220 $ 1,962 Service Subscription, maintenance and support 4,838 5,525 Professional services and other   653   1,249 Total service   5,491   6,774 Total revenue $ 6,711 $ 8,736  

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

  Three Months Ended March 31, 2017   2016 Net loss $ (3,562 ) $ (4,132 ) Interest expense, net 317 12 Income tax benefit (4 ) (4 ) Depreciation and amortization expense: Depreciation and amortization in cost of revenues 10 22 Depreciation and amortization in operating expenses   248     282   Total depreciation and amortization expense   258     304   Amortization of intangibles included in cost of revenues 293 322 Amortization of intangibles included in operating expenses   223     226   Total amortization of intangibles expense   516     548   Total depreciation and amortization expense   774     852   EBITDA (2,475 ) (3,272 ) Change in fair value of warrant liability 78 — Other expense, net 55 (36 ) Stock-based compensation expense: Stock-based compensation included in cost of revenues 14 (7 ) Stock-based compensation included in operating expenses   399     358   Total stock-based compensation expense   413     351   Adjusted EBITDA $ (1,929 ) $ (2,957 )  

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Investor Contact:Qumu CorporationPeter Goepfrich, CFO, 612-638-9096