Q1 2020 Earnings Call
[music].
Ladies and gentlemen, just the conference operator today's conference is scheduled to begin momentarily on that at times only just to be placed on Namisa cold Nike free patients.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the.
<unk> first quarter 20 point conference call, all watch and at least on mute to prevent the background noise.
As you need assistance during the call. Please press star zero in an operator, who come back on why to assist you. Please note that today's call is recorded. Thank you Mr., David It's though chief Financial Officer, you may begin.
Good afternoon, everyone and thank you for joining our first quarter 2020 earnings conference call. After the market closed we issued a press release announcing our results for the first quarter ended March 31st 2020, a copy of which is available on our Investor Relations section of our website <unk> Dot com.
We will make certain statements today with respect to our expected financial results go to market strategy in efforts designed to increase our traction in penetration with customers as well as our proposed merger with Synacor that was announced on February 11th of 2020.
These statements are forward looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward looking statements reflect our opinions only as of the data this call and we undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Please refer to our FCC filings, specifically, our form 10-K, and our financial results press release for more detailed description of risk factors that may affect our results. Our financial results Press release also includes a description of the risk factors that may affect the anticipated timing of the proposed merger completion of benefits of the proposed.
As a merger anticipated future combination combined operations and offerings and expected synergies to be achieved.
During our call today, we'll discuss adjusted EBITDA, a non-GAAP measure in our press release and our filings with the FCC each of which is posted on our website you will find additional disclosures regarding this non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure Nongaap financial measures are not intended to be.
He considered in isolation from we're a substitute for or superior to GAAP results. We encourage you to consider all measures when analyzing the company's performance. Please note that in connection with the anticipated merger with Synacor, We we which we announced on February 11.
Well not be hosting a question and answer session at the conclusion of our remarks, so without I will turn the call over to Vern Hanzlik, President and CEO of cool.
Thank you, Dave and welcome everyone to begin I would like to reflect on how the cold 19 pandemic is affecting our business.
But first I want to acknowledge the devastating impact a pandemic that haven't human health and on People's lives in livelihoods around the globe.
I speak on behalf of cool as an organization when I say, we hope everyone can return to normal work and personal activities.
With this in mind current an unprecedented health event has become a changing for enterprise.
Driving them to use video in an effort to maintain collaboration.
Engagement and overall business continuing.
And even when this particular crisis is over I believe the world reset a new normal for video will not only be expected.
But in many cases, the preferred way to communicate going forward organization, we more.
Critical aware when and how much they asked people to travel for business.
As a video first company Qumu is that very fortunate in being able to quickly and easily adapt work from home recommendations and mandates at all our locations globally.
Because of the nature of our business the use of our own technology, we were fully operational on a global scale.
Every team member working from home.
Of course, we're also portion being a position to support and lead our customers in the same transition ensuring that employees are safe productivity and shelter in place.
Our global 2000 customer bases mobilizing and building out their video infrastructures to support thousands and in many cases tens or even hundreds of thousands of concurrent video users as they operate under travel restrictions and mandatory work from home policies.
As you know video conferencing solutions like Zoom Webex teams are now everyday tools for small group meetings.
But organizations are learning quickly that the standard video conferencing ABS are not enough. These tools for not built and were never intended to be used for medium or large scale.
Live webcast and for managing massive video content libraries for streaming on demand videos and meeting and meetings that scale, but this is where kulu technology fills a gap our platform seamlessly extended video conferencing, providing not only critical.
Large scale webcasting, but also a robust video content management and enterprise Grade School security and the same level of security that dozens of global 2000 financial institutions Fortune 500 health care organizations and government agencies currently benefit from as a cool customer over the last several months the video marketplace. It should.
With that and feel confident had become the new front end for self service broadcast and for those who are interested we provide multiple examples.
These trends on our website.
These events combined with a robust capability. The coolest platform has set the stage for what we believe will be a very strong revenue performance in the balance of the year.
The increasing demand for video in the enterprise was evident in the last week with first quarter 2020, and has continued into the current quarter.
As we announced at the end of March. They use these are Qumu cloud platform is up 30 times from normal levels. During peak business hours Cobot 19 related challenges are not only fueling increased usage, but also driving new projects as customers upgrades or infrastructures.
For example.
An aircraft manufacturing customers now conducting large scale live webcast at the pace of 150 events per year.
A large health care system currently a cool client has reported nearly 3 million views of its on demand videos for keeping staff in patients currently on cold in 19 information.
Five qumu customers are actively converting to hybrid cloud deployments and finally.
Through our partnership with BP, We're seeing increased activity in both live video and audio streaming.
Additionally, in existing Kulu customers, expanding and hardening their video infrastructure to support 325000 corporate than retail employees.
As well as increasing the capacity for extra home video communications, although we were able to recognize only a small portion of that multimillion dollar deal as revenue in first quarter. This contract will provide significant revenue for the second quarter as well as the second half of 2020.
Given our coven 19, driven customer deals in Q1.
Our Q2 activity to date, our visibility in our near term pipeline, we have confidence in our revenue guidance for fiscal year 2020.
In addition to expanding our footprint with existing customers.
We will close seven new customers and two new cloud deployments during the quarter, including SAP customers like pay safe and T. T in a large Canadian bank.
This combined with pipeline growth puts come on track to meet its objective at 50, new logos to our customer base in 20 Twond.
Now if you talking points about increased sales and marketing activity.
We're seeing an increase in existing customers, who are investigating expanding their qumu platform or adding cloud or converting to our cloud hybrid solution.
Along with dynamically higher web traffic there has been an uptick in both free trial request and submissions of online inquiries ones, which hit an all time high several weeks ago and finally, we received the largest number abuse ever on March 31st Press release Global press release about a dynamic increasing.
Usage on our Qumu cloud platform.
With that overview I'll hand, the call back over to Dave to provide further financial details.
First quarter 2020.
Thank you burned.
<unk> 19 has served us both an unfortunate and unprecedented change agent, which has led to both increased bookings and sales related activity for kulu that gives us confidence for 2020 [noise].
We have also been working to improve our balance sheet with the purchase of yes w.'s warrant.
I'll begin with a brief commentary on some of our financial highlights.
First quarter 2020 revenue was 6.2 million compared to 7.1 million for the first quarter 2019.
Sales backs and timing of revenue recognition contributed to the decrease as the first quarter 2019 included revenue from large terms software license wrap and renewals, resulting in a year over year terms software revenue decrease of $1.5 million revenue from term software licenses as recognized upfront.
In accordance with AOCI six so six.
Gross margin was 66.5% for the first quarter 2020, compared to 78.3% for the first quarter 2019.
As the sales mix for Twoq 2020 period included a higher mix of appliance revenue, which generally has lower margins in 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.
Due to our cobot related contracts closing at the end of the quarter Q1 revenue backlog is $5.6 million a significant portion of which will be recognized in the second quarter.
Net loss for the quarter was $2.9 million compared to the net loss of $950000 for Q1 2019 net loss for the first quarter 2020 was unfavorably impacted by transaction related expenses totaling $811000 included in general and administrative expenses really.
Got it to come loose merger agreement with Synacor, which is anticipated to close mid 2020.
Adjusted EBITDA loss for the first quarter 2020 was $1.2 million compared to adjusted EBITDA income for 2019 of $210000. The $811000 of transaction related expenses are excluded in the determination of adjusted EBITDA. Please refer to our press release for a reconciliation of.
Adjusted EBITDA to net loss.
Cash and cash equivalents totaled $8.4 million as of March 30, Onest 2020, compared to $10.6 million as of December 30, Onest 2019 customer retention was 90% for the first quarter 2020, and subsequent to March 30, Onest 2020, Qumu entered into an agreement.
Cancels outstanding warrant with the Efw Holdings Inc. effective may Onest 2020 for a deferred purchase price of $1.83 million reflected in a note maturing on April 1st 2020 and bearing no interest.
The warranty Efw holdings, which for the purchase of up to 925000 shares to lose common stock and was subject to a minimum cash settlement provision in the event of a change in control transaction referred to as a fundamental transaction, which included Koumas proposed merger with Synacor, Inc.
The payment obligations of the note will accelerate upon a fundamental transaction, which includes combos proposed merger with Synacor income a would be required to pay an additional $150000 to efw holdings. Upon the closing of a fundamental transaction the fair value of the warrant instrument has historically been reported as a liability and come loose.
Consolidated financial statements and for certain historical reporting periods since its issuance, including the first quarter 2020, the worn instrument was dilutive in the calculation of earnings per share.
And for our business outlook as COO considers its revenue outlook for the balance of 2020, we're cautious due to the unknown financial impact. The coping 19 will have on economies and enterprises around the world. However, based on the strength of our first quarter 2020 and second quarter.
2020 today customer contracts and Coolidge pipeline management expects 2020 revenue to be approximately $28 million as compared to $25.4 million in 2019 in consideration of Qumu is anticipated merger was Synacor management is not providing guidance regarding.
Profitability or any other metric for the full year 2020.
We will continue to assess the revenue outlook for the second half of the year as more information becomes available on customer ordering trends and economic disruption caused by cobot 19.
For further detail on the anticipated transaction. We encourage you to review our recent SEC filings, which can be found on the Investor Relations section of our website.
That concludes my remarks, and I'll turn it back over to burn for some closing comments that Hubert.
Thanks, Dave.
Wrap up can lose business remains strong and given the current sales activity. We anticipate we will come through the current global crisis stronger than ever.
Interest in our platform is is high by multiple measures.
Sales pipeline has grown by more than 30%, we have significant revenue backlog and our customer retention remains.
Hi at 90% going forward, our focus will be as follows.
To further capitalize on the dramatic growth happening in video as our customers and prospects assume a new normal that will be.
We believe will extend far beyond the coven 19 pandemic.
To stay laser focused on solving tough problems related to video in the enterprise.
Maintain customer retention above 90% for the year.
The continue to innovate on our enterprise video platform and realize all to find opportunities.
To grow and monetize our existing channel.
Building upon established partnerships with BT and others.
Execute on our direct sales strategy and continue to expand our footprint within existing customer base.
While bringing net new customers within our defined markets and finally to improve our financial results building on our strong business fundamentals.
That concludes our comments.
Thank you again, everyone for joining us today and have a great day.
This concludes today's conference call May now disconnect.
Yeah.
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to the.
<unk> first quarter 20 point conference call all as it relates on mute to prevent any background noise can you just need assistance during the call. Please press star zero and an operating come back on why this is Jim. Please note today's call is being recorded. Thank you Mr., David So Chief Financial Officer, you may begin.
Good afternoon, everyone and thank you for joining our first quarter 2020 earnings conference call. After the market closed we issued a press release announcing our results for the first quarter ended March 30, Onest 2020, a copy of which is available on our Investor Relations section of our website. It can move dot com.
We will make certain statements today with respect to our expected financial results go to market strategy in the efforts designed to increase our traction in penetration with customers as well as our proposed merger with Synacor that was announced on February 11 2020.
These statements are forward looking and involve a number of risks and uncertainties that could cause actual results to differ materially.
Please note that these forward looking statements reflect our opinions only as of the data this call and we undertake no obligation to publicly update or revise any forward looking statements whether as a result of new information future events or otherwise please refer to our SEC filings, specifically, our form 10-K, and our financial results press release for more detail.
Ill description of risk factors that may affect our results. Our financial results Press release also includes a description of the risk factors that may affect the anticipated timing of the proposed merger completion of benefits or the proposed merger anticipated future combination combined operations and offerings and expected synergies.
To be achieved during our call today, we'll discuss adjusted EBITDA, a non-GAAP measure in our press release and our filings with the FCC each of which is posted on our website you will find additional disclosures regarding this non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure non-GAAP finance.
Actual measures are not intended to be considered in isolation from or a substitute for or superior to GAAP results. We encourage you to consider all measures when analyzing the company's performance.
Please note that in connection with the anticipated merger with Synacor, We we which we announced on February 11, we will not be hosting a question and answer session at the conclusion of our remarks, so with that I will turn the call over to Vern Hanzlik, President and CEO of cool.
Thanks, Dave and welcome everyone to begin I would like to reflect on how the Cowen 19 pandemic, that's affecting our business.
But first I want to acknowledge the devastating impact the pandemic has had a human health and on People's lives and livelihoods around the globe.
I speak on behalf of cool as an organization when I say, we hope everyone can return to normal work and personal activities.
With this in mine current an unprecedented health event has become a change agent for enterprise.
Having them to use video in an effort to maintain collaboration.
Engagement and overall business continuing.
And even when this particular crisis is over I believe the world reset a new normal for video will not only be the expected.
But in many cases, the preferred way to communicate going forward organization, we more.
Critical aware when and how much the asked people to travel for business.
As a video first company cooler than very fortunate in being able to quickly and easily adaptable work from home recommendations and mandates at all our locations globally.
Because of the nature of our business the use of our own technology, we are fully operational on a global scale.
With every team member working from home.
Of course, we're also for can be in a position to support and lead our customers in the same transition.
Ensuring that employees are safe productivity and shelter in place.
Our global 2000 customer bases mobilizing in building out their video infrastructures to support thousands in many cases tens or even hundreds of thousands of concurrent video users as they operate under travel restrictions in mandatory work from home policies.
As you know video conferencing solutions like Zoom Webex teams are now everyday tools for small group meetings.
But organizations are learning quickly that the standard video conferencing apps are not enough. These tools were not built and were never intended to be used for medium or large scale.
Live webcast in for managing massive video content libraries for streaming on demand videos and meeting and meetings at scale, but this is work with new technology skills gap our platform seamlessly extended video conferencing, providing not only critical.
Large scale webcasting, but also a robust video content management and enterprise Grade School security and the same level of security that dozens of global 2000 financial institutions Fortune 500, healthcare organizations and government agencies currently benefit from as a couple of customer over the last several months the video marketplaces.
And we feel confident had become the new front end for self service broadcast and for those who are interested we provide multiple examples.
These trends on our website.
These events combined with a robust capability. The coolest platform has set the stage for what we believe will be a very strong revenue performance in the balance of the year.
The increasing demand for video in the enterprise was evident in the last week with first quarter 2020 has continued into the current quarter.
As we announced at the end of March the usage of our Qumu cloud platform is up 30 times from normal levels. During peak business hours Golden 19 related challenges are not only fueling increased usage, but also driving new projects as customers upgrader infrastructures.
For example.
An aircraft manufacturing customers now conducting large scale live webcast and pays 150 events per year.
A large health care system currently a cool client has reported nearly 3 million views of an on demand videos for keeping staff in patients currently on cold in 19 information.
Five qumu customers are actively converting to hybrid cloud deployments and finally.
Through our partnership with BP, We're seeing increased activity in both live video and audio streaming.
Additionally, in existing Kulu customers, expanding and hardening their video infrastructure to support 325000, corporate and retail employees.
As well and increasing the capacity for extra home video communications, although we were able to recognize only a small portion of that multimillion dollar deal as revenue in first quarter. This contract will provide significant revenue for the second quarter as well as the second half in 2020.
Given our coven 19, driven customer deals in Q1.
Our Q2 activity to date, our visibility in our near term pipeline, we have confidence in our revenue guidance for fiscal year 2020.
In addition to expanding our footprint with existing customers.
We will close seven new customers and two new cloud deployments during the quarter, including SAP customers like Pcs NTT and a large Canadian bank.
This combined with pipeline growth has come on track to meet subjective adds 50, new logos to our customer base in 2012.
Now if you talking points about increased sales and marketing activity.
We're seeing an increase in existing customers, who are investigating expanding their can move platform or adding cloud or converting to our cloud hybrid solution.
Along with dynamically higher web traffic there has been an uptick in both free trial requests and submissions of online inquiries ones, which hit an all time high several weeks ago and finally, we received the largest number of use ever on March 31st Press release Global press release about a dynamic increasing.
Usage on our Qumu cloud platform.
With that overview I'll hand, the call back over to Dave to provide further financial details.
First quarter 2020.
Thank you very <unk>.
Tobin 19 has served us both an unfortunate and unprecedented change agent, which has led to both increased bookings and sales related activity for qumu that gives us confidence for 2020.
We have also been working to improve our balance sheet with the purchase of yes w.'s warrant.
I'll begin with a brief commentary on some of our financial highlights first quarter 2020 revenue was 6.2 million compared to 7.1 million for the first quarter 2019.
Sales mix and timing of revenue recognition contributed to the decrease as the first quarter 2019 included revenue from large term software license reference renewals, resulting in a year over year terms software revenue decrease of $1.5 million revenue from term software licenses as recognized upfront.
In accordance with FC six so six.
Gross margin was 66.5% for the first quarter 2020, compared to 78.3% for the first quarter 2019.
As the sales mix for 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 outsource professional services expense.
For certain customer specific projects in the quarter, which negatively impacted services gross margin.
Due to our cobot related contracts closing at the end of the quarter Q1 revenue backlog is $5.6 million a significant portion of which will be recognized in the second quarter.
Net loss for the quarter was $2.9 million compared to the net loss of $950000 for Q1 2019 net loss for the first quarter 2020 was unfavorably impacted by transaction related expenses totaling $811000 included in general and administrative expenses really.
It could lose merger agreement with Synacor, which is anticipated to close mid 2020.
Adjusted EBITDA loss for the first quarter 2020 was $1.2 million compared to adjusted EBITDA income for 2019 of $210000 the $811000 and transaction related expenses are excluded in the determination of adjusted EBITDA. Please refer to our press release for a reconciliation.
Adjusted EBITDA to net loss.
Cash and cash equivalents totaled $8.4 million as of March 30, Onest 2020, compared to $10.6 million as of December 30, Onest 2019 customer retention was 90% for the first quarter 2020, and subsequent to March 30, Onest 2020, Qumu entered into an agreement.
Cancels outstanding warrant with the Efw Holdings Inc. effective may Onest 2020 for a deferred purchase price of $1.83 million reflected in a note maturing on April 1st 2020 and bearing no interest.
The warranty Efw holdings was for the purchase of up to 925000 shares to lose common stock and was subject to a minimum cash settlement provision in the event of a change in control transaction referred to as a fundamental transaction, which included Koumas proposed merger with Synacor, Inc.
The payment obligations of the note will accelerate upon a fundamental transaction, which includes combos proposed merger with Synacor income would be required to pay an additional $150000 to SW holdings. Upon the closing of a fundamental transaction the fair value of the warrant instrument has historically been reported as a liability and commercial.
Consolidated financial statements and for certain historical reporting periods since its issuance, including the first quarter 2020 worn instrument was dilutive in the calculation of earnings per share.
And for our business outlook as COO considers its revenue outlook for the balance of 2020, we're cautious due to the unknown financial impact that coping 19 will have on economies and enterprises around the world. However, based on the strength of our first quarter 2020, and second quarter 22.
20 today customer contracts and Camillus pipeline management expects 2020 revenue to be approximately $28 million as compared to $25.4 million in 2019 in consideration of can was anticipated merger was synacor management is not providing guidance regarding future.
City or any other metric for the full year 2020.
We will continue to assess the revenue outlook for the second half of the year as more information becomes available on customer ordering trends and economic disruption caused by cobot 19.
For further detail on the anticipated transaction. We encourage you to review our recent SEC filings, which can be found on the Investor Relations section of our website.
That concludes my remarks, and I'll turn it back over to burn for some closing comments that Hubert.
Thanks, Dave.
To wrap up can lose business remains strong and given the current sales activity. We anticipate we will come through the current global crisis stronger than ever.
Interest in our platform is is high by multiple measures.
Sales pipeline has grown by more than 30%, we have significant revenue backlog and our customer retention remains.
Hi at 90%.
Going forward, our focus will be as follows.
To further capitalize on the dramatic growth happening in video as our customers and prospects assume a new normal that will be well, we believe will extend far beyond the Cowen 19 pandemic.
To stay laser focused on solving tough problems related to video in the enterprise to maintain customer retention above 90% for the year.
We continue to innovate on our enterprise video platform and realize all the find opportunities.
To grow and monetize our existing channel.
By building upon established partnerships with BT and others.
Execute on our direct sales strategy and continue to expand our footprint within existing customer base.
While bringing net new customers within our defined markets and finally to improve our financial results building on our strong business fundamentals.
That concludes our comments.
Thank you again, everyone for joining us today and have a great day.
This concludes today's conference call May now disconnect.