Company reports solid first quarter results,
provides update on business and market for enterprise video amid
COVID-19 pandemic
Conference Call Today, May 5, 2020 at 4:30
p.m. ET
Qumu Corporation (Nasdaq: QUMU) today reported financial results
for the first quarter ended March 31, 2020, reflecting revenue of
$6.2 million, net loss of $(2.7) million, and adjusted EBITDA loss,
a non-GAAP measure, of $(1.2) million. The Company ended the first
quarter 2020 with cash of $8.4 million.
Management Commentary “Scalable, secure, self-service
video technology for enterprises is the key value proposition that
Qumu provides to its customers. Beginning in mid-March 2020,
enterprises around the world implemented work-from-home and travel
restrictions in response to COVID-19. Certainly, Qumu has done the
same for the health and safety of its global workforce and I want
to recognize the Qumu team for their dedication to serving our
customers around the world and around the clock," said Vern
Hanzlik, Qumu President and CEO.
"We believe the COVID-19 pandemic has become a change agent
within enterprises, driving organizations to expand the use of
video for business continuity and effectively resetting
communication in a new normal," continued Hanzlik. "Video adoption
has fueled an exponential increase in usage of our platform in the
last weeks of the quarter which continues into the current quarter.
We are also experiencing very strong demand from prospects and
existing customers as enterprises push to enable and upgrade their
video capabilities.”
“Amongst the COVID-19 related opportunities closed during the
last week of Q1 was one of significance," added Hanzlik. "An
existing customer signed an expansion agreement to harden their
video infrastructure in support of 325,000 employees and additional
external stakeholders. Although we were only able to recognize a
small portion of the multi-million dollar contract as revenue in
Q1, significant revenues will be delivered in Q2, as well as
additional revenue in the second half of 2020. Given our
COVID-19-driven customer deals in Q1, and our visibility to our
near-term pipeline, we have confidence in our prospects for revenue
growth in 2020.”
First Quarter 2020 Financial Highlights First quarter
2020 revenue was $6.2 million, compared to $7.1 million for the
first quarter 2019. Sales mix and the timing of revenue recognition
contributed to the decrease, as the first quarter 2019 included
revenue from large term software license renewals, resulting in a
year-over-year term software license revenue decrease of $1.5
million. Revenue from term software licenses is recognized upon
fulfillment—that is, up front—in accordance with ASC 606.
Net loss was $(2.7) million, or $(0.20) loss per basic share and
$(0.21) loss per diluted share, compared to $(950,000), or $(0.10)
loss per basic and diluted share, for the first quarter 2019. First
quarter 2020 adjusted EBITDA loss was $(1.2) million, compared to
adjusted EBITDA income of $210,000 for the comparative 2019 period.
Net loss and net loss per share for the first quarter 2020 were
unfavorably impacted by transaction-related expenses totaling
$811,000, included in general and administrative expenses, related
to Qumu's merger agreement with Synacor, Inc., which is anticipated
to close mid-2020. The transaction-related expenses represent an
adjustment in the determination of adjusted EBITDA (see
Supplemental Financial Information below).
Other Financial Highlights
- Subscription, maintenance and support revenue was $4.2 million
and $5.6 million for the first quarter 2020 and 2019, respectively,
as the first quarter 2019 included large term license renewals, for
which the revenue is recognized up front.
- Gross margin was 66.5% for the first quarter 2020, compared to
78.3% for the first quarter 2019, as the sales mix for the 2020
period included a higher mix of appliance revenue, which generally
has lower margins, and the mix for the 2019 period included a
higher mix of term license revenue, which generally has higher
margins. Additionally, the first quarter 2020 included outsourced
professional services expense for certain customer-specific
projects in the quarter, which negatively impacted services gross
margin.
- Cash and cash equivalents totaled $8.4 million as of March 31,
2020, compared to $10.6 million as of December 31, 2019.
- Customer retention was 90% for the first quarter 2020.
- Subsequent to March 31, 2020, Qumu entered into an agreement to
cancel its outstanding warrant to ESW Holdings, Inc. effective May
1, 2020, for a deferred purchase price of $1.83 million reflected
in a note maturing on April 1, 2021 and bearing no interest. The
warrant to ESW Holdings, Inc. was for the purchase of up to 925,000
shares of Qumu's common stock and was subject to a minimum cash
settlement provision in the event of a change of control
transaction referred to as a Fundamental Transaction, which
included Qumu’s proposed merger with Synacor, Inc. The payment
obligations of the note will be accelerated upon a Fundamental
Transaction, which includes Qumu’s proposed merger with Synacor,
Inc., and Qumu would be required to pay an additional $150,000 to
ESW Holdings, Inc. upon the closing of a Fundamental Transaction.
The fair value of the warrant instrument has historically been
reported as a liability in Qumu's consolidated financial
statements, and, for certain historical reporting periods since its
issuance—including the first quarter 2020—the warrant instrument
was dilutive in the calculation of earnings per share.
Business Outlook As Qumu considers its revenue outlook
for the balance of 2020, we are cautious due to the unknown
financial impact that COVID-19 will have on economies and
enterprises around the world. However, based on the strength of
first quarter 2020 and second quarter 2020 to date customer
contracts and Qumu’s pipeline, management expects 2020 revenue to
be approximately $28 million as compared to $25.4 million in 2019.
Qumu will continue to assess the revenue outlook for the second
half of the year as more information becomes available on customer
ordering trends and the economic disruption caused by COVID-19.
Conference Call Qumu President and CEO Vern Hanzlik and
CFO Dave Ristow will host a conference call today (May 5, 2020) at
4:30 p.m. Eastern time.
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 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 months ended March 31, 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 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.
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 and 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 most
recent Annual Report on Form 10-K, subsequent Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and other filings with the
Securities and Exchange Commission.
Other forward-looking statements relating to the merger between
Qumu and Synacor also are subject to risks and uncertainties that
include, but are not limited to: (i) Synacor or Qumu may be unable
to obtain shareholder approval as required for the merger; (ii)
other conditions to the closing of the merger may not be satisfied;
(iii) the merger may involve unexpected costs, liabilities or
delays; (iv) the effect of the announcement of the merger on the
ability of Synacor or Qumu to retain and hire key personnel and
maintain relationships with customers, suppliers and others with
whom Synacor or Qumu does business, or on Synacor’s or Qumu’s
operating results and business generally; (v) Synacor’s or Qumu’s
respective businesses may suffer as a result of uncertainty
surrounding the merger and disruption of management’s attention due
to the merger; (vi) the outcome of any legal proceedings related to
the merger; (vii) Synacor or Qumu may be adversely affected by
other economic, business, and/or competitive factors; (viii) the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement; (ix) the
financial results of each company for the first quarter 2020 may
not be representative of the combined company’s results for 2020 or
any future period; (x) risks that the merger disrupts current plans
and operations and the potential difficulties in employee retention
as a result of the merger; and (xi) other risks to consummation of
the merger, including the risk that the merger will not be
consummated within the expected time period or at all or that the
anticipated benefits of the merger will not be realized within the
expected time period or at all, including due to COVID-19.
Additional factors that may affect the future results of Synacor
are set forth in its filings with the Securities and Exchange
Commission, including Synacor’s most recent Annual Report on Form
10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and other filings with the Securities and Exchange
Commission, which are available on the SEC’s website at
www.sec.gov.
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.
No Offer or Solicitation This press release does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval with
respect to the proposed merger or otherwise. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Additional Information and Where to Find It In connection
with the proposed merger between Synacor and Qumu, Synacor intends
to file a registration statement on Form S-4 containing a joint
proxy statement/prospectus of Synacor and Qumu and other documents
concerning the proposed merger with the SEC. The definitive proxy
statement will be mailed to the stockholders of Synacor and Qumu in
advance of the meeting. BEFORE MAKING ANY VOTING DECISION,
SYNACOR’S AND QUMU’S RESPECTIVE STOCKHOLDERS ARE URGED TO READ THE
JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY WHEN IT BECOMES
AVAILABLE AND ANY OTHER DOCUMENTS FILED BY EACH OF SYNACOR AND QUMU
WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED
BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE
PROPOSED TRANSACTION. Investors and security holders will be able
to obtain a free copy of the joint proxy statement/prospectus and
other documents containing important information about Synacor and
Qumu, once such documents are filed with the SEC, through the
website maintained by the SEC at www.sec.gov. Synacor and Qumu make
available free of charge at www.synacor.com and www.qumu.com,
respectively (in the “Investor Relations” section), copies of
materials they file with, or furnish to, the SEC. The contents of
the websites referenced above are not deemed to be incorporated by
reference into the registration statement or the joint proxy
statement/prospectus.
Participants in the Solicitation This document does not
constitute a solicitation of proxy, an offer to purchase or a
solicitation of an offer to sell any securities. Synacor, Qumu and
their respective directors, executive officers and certain
employees may be deemed to be participants in the solicitation of
proxies from the stockholders of Synacor and Qumu in connection
with the proposed merger. Information regarding the special
interests of these directors and executive officers in the proposed
merger will be included in the joint proxy statement/prospectus
referred to above. Security holders may also obtain information
regarding the names, affiliations and interests of Synacor’s
directors and executive officers in Synacor’s Annual Report on Form
10-K for the fiscal year ended December 31, 2019, which was filed
with the SEC on March 6, 2020, and its definitive proxy statement
for the 2020 annual meeting of stockholders, which was filed with
the SEC on April 29, 2020. Security holders may obtain information
regarding the names, affiliations and interests of Qumu’s directors
and executive officers in Qumu’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, which was filed with the SEC
on March 6, 2020. To the extent the holdings of Synacor securities
by Synacor’s directors and executive officers or the holdings of
Qumu securities by Qumu’s directors and executive officers have
changed since the amounts set forth in Synacor’s proxy statement
for its 2020 annual meeting of stockholders or Qumu’s Form 10-K for
2019, such changes have been or will be reflected on Statements of
Change in Ownership on Form 4 filed with the SEC. Additional
information regarding the interests of such individuals in the
proposed merger will be included in the joint proxy
statement/prospectus relating to the proposed merger when it is
filed with the SEC. These documents (when available) may be
obtained free of charge from the SEC’s website at www.sec.gov,
Synacor’s website at www.synacor.com and Qumu’s website at
www.qumu.com. The contents of the websites referenced above are not
deemed to be incorporated by reference into the registration
statement or the joint proxy statement/prospectus.
QUMU CORPORATION
Condensed Consolidated Statements of
Operations
(unaudited - in thousands, except per
share data)
Three Months Ended
March 31,
2020
2019
Revenues:
Software licenses and appliances
$
1,540
$
1,005
Service
4,687
6,093
Total revenues
6,227
7,098
Cost of revenues:
Software licenses and appliances
648
311
Service
1,439
1,226
Total cost of revenues
2,087
1,537
Gross profit
4,140
5,561
Operating expenses:
Research and development
1,780
1,674
Sales and marketing
2,218
2,352
General and administrative
2,593
1,746
Amortization of purchased intangibles
164
218
Total operating expenses
6,755
5,990
Operating loss
(2,615
)
(429
)
Other income (expense):
Interest income (expense), net
17
(205
)
Decrease (increase) in fair value of
warrant liability
36
(289
)
Other, net
(160
)
(31
)
Total other income (expense), net
(107
)
(525
)
Loss before income taxes
(2,722
)
(954
)
Income tax benefit
(50
)
(4
)
Net loss
$
(2,672
)
$
(950
)
Net loss per share – basic:
Net loss per share – basic
$
(0.20
)
$
(0.10
)
Weighted average shares outstanding –
basic
13,552
9,688
Net loss per share – diluted:
Loss attributable to common
shareholders
$
(2,838
)
$
(950
)
Net loss per share – diluted
$
(0.21
)
$
(0.10
)
Weighted average shares outstanding –
diluted
13,589
9,688
QUMU CORPORATION
Condensed Consolidated Balance
Sheets
(unaudited - in thousands)
March 31,
December 31,
Assets
2020
2019
Current assets:
Cash and cash equivalents
$
8,365
$
10,639
Receivables, net
5,082
4,586
Contract assets
907
1,089
Income taxes receivable
441
338
Prepaid expenses and other current
assets
2,022
1,981
Total current assets
16,817
18,633
Property and equipment, net
536
596
Right of use assets – operating leases
1,590
1,746
Intangible assets, net
2,770
3,075
Goodwill
6,739
7,203
Deferred income taxes, non-current
13
21
Other assets, non-current
458
442
Total assets
$
28,923
$
31,716
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued
liabilities
$
2,755
$
2,816
Accrued compensation
1,906
1,165
Deferred revenue
10,304
10,140
Operating lease liabilities
527
587
Financing obligations
133
157
Warrant liability
2,903
2,939
Total current liabilities
18,528
17,804
Long-term liabilities:
Deferred revenue, non-current
1,096
1,449
Income taxes payable, non-current
591
585
Operating lease liabilities,
non-current
1,399
1,587
Financing obligations, non-current
61
83
Total long-term liabilities
3,147
3,704
Total liabilities
21,675
21,508
Stockholders’ equity:
Common stock
136
136
Additional paid-in capital
78,253
78,061
Accumulated deficit
(67,800
)
(65,128
)
Accumulated other comprehensive loss
(3,341
)
(2,861
)
Total stockholders’ equity
7,248
10,208
Total liabilities and stockholders’
equity
$
28,923
$
31,716
QUMU CORPORATION
Condensed Consolidated Statements of
Cash Flows
(unaudited - in thousands)
Three Months Ended
March 31,
2020
2019
Operating activities:
Net loss
$
(2,672
)
$
(950
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
314
408
Stock-based compensation
245
231
Accretion of debt discount and issuance
costs
—
128
Gain on lease modification
—
(21
)
Increase (decrease) in fair value of
warrant liability
(36
)
289
Deferred income taxes
8
—
Changes in operating assets and
liabilities:
Receivables
(542
)
1,914
Contract assets
182
(1,176
)
Income taxes receivable / payable
(113
)
(3
)
Prepaid expenses and other assets
(28
)
125
Accounts payable and other accrued
liabilities
17
(75
)
Accrued compensation
754
(405
)
Deferred revenue
(18
)
(424
)
Other non-current liabilities
—
(24
)
Net cash provided by (used in) operating
activities
(1,889
)
17
Investing activities:
Purchases of property and equipment
(27
)
(14
)
Net cash used in investing activities
(27
)
(14
)
Financing activities:
Principal payments on financing
obligations
(93
)
(80
)
Common stock repurchases to settle
employee withholding liability
(53
)
(36
)
Net cash used in financing activities
(146
)
(116
)
Effect of exchange rate changes on
cash
(212
)
48
Net decrease in cash and cash
equivalents
(2,274
)
(65
)
Cash and cash equivalents, beginning of
period
10,639
8,636
Cash and cash equivalents, end of
period
$
8,365
$
8,571
QUMU CORPORATION
Supplemental Financial
Information
(unaudited - in thousands)
A summary of revenue is as follows:
Three Months Ended
March 31,
2020
2019
Software licenses and appliances
$
1,540
$
1,005
Service
Subscription, maintenance and support
4,160
5,563
Professional services and other
527
530
Total service
4,687
6,093
Total revenue
$
6,227
$
7,098
A reconciliation from GAAP results to
adjusted EBITDA is as follows:
Three Months Ended
March 31,
2020
2019
Net loss
$
(2,672
)
$
(950
)
Interest expense (income), net
(17
)
205
Income tax benefit
(50
)
(4
)
Depreciation and amortization expense:
Depreciation and amortization in cost of
revenues
—
—
Depreciation and amortization in operating
expenses
78
73
Total depreciation and amortization
expense
78
73
Amortization of intangibles included in
cost of revenues
72
117
Amortization of intangibles included in
operating expenses
164
218
Total amortization of intangibles
expense
236
335
Total depreciation and amortization
expense
314
408
EBITDA
(2,425
)
(341
)
Increase (decrease) in fair value of
warrant liability
(36
)
289
Other expense, net
160
31
Stock-based compensation expense:
Stock-based compensation included in cost
of revenues
5
8
Stock-based compensation included in
operating expenses
240
223
Total stock-based compensation expense
245
231
Transaction-related expenses
811
—
Adjusted EBITDA
$
(1,245
)
$
210
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005841/en/
Dave Ristow Chief Financial Officer Qumu Corporation
Dave.Ristow@qumu.com +1.612.638.9045
Qumu (NASDAQ:QUMU)
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