Q2 2020 Qumu Corp Earnings Call
Good afternoon, and welcome to the Q No second quarter 2020 Conference call. My name is Justin and now the operator for this call joining me for today's call is the company's chairman, Neil Cox, President and CEO, TJ Kennedy and CFO Dave.
Ristow.
After market close today at Cubo, It's issued a press release announcing its financial results for the second quarter ended June Thirtyth 2020.
Copy of which is available on the Investor Relations section of the company's website at <unk>.
During today's call management will make certain statements with respect to the company's expert expected financial results the impact of Cobot 19 on they use and the adoption of the video in the enterprise. The companies go to market strategy in effort designed to increase the company's traction and penetration with customers. These statements are forward.
Looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please note. These forward looking statements reflect management's opinions only as of the date of this call and the company undertakes no obligation to publicly update over revise any forward looking statements whether as a result of new information.
Future events or otherwise.
Please refer to cool knows SEC filing specifically form 10-K intend to land financial results press release for more detailed description of risk factors that may affect the company's result.
During the call today management will discuss adjusted EBITDA and non-GAAP financial measures in the company's press release and filings with the S. C feed both of which are posted on the company's website you will find additional disclosures regarding this non-GAAP measure, including a reconciliation I'll just measured with his company comparable GAAP measure.
Non-GAAP financial measures are not intended to be considered in isolation form a substitute for or superior to get results. The company encourage you to consider all measures when analyzing its performance.
I would now like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Q Most web site.
Now I would like to turn the call over to the company's Chairman Mr. Neal Cox Sir. Please proceed.
Thank you operator, and good afternoon, good afternoon, everyone.
It's a pleasure to have the opportunity to speak with you today.
After the market closed we issued our financial results for the second quarter ended June Thirtyth 2020.
As you can see from our earnings release second quarter marked an exceptionally strong period for kumon, both operationally and financially.
The 9.3 million in quarterly revenue is the highest qumu has achieved in several years.
It is a direct result of a swelling demand for our best in class software platform and they now largely remote work environment.
On the general level the co bad 19 pandemic has impacted the kloeppel economy collectively as well as all of us personally.
The ongoing digital transformation initiatives at the enterprise level, which many projected would take years to fully materialize have arrived nearly overnight.
At Kulu, we are experiencing one way and wishes expedited timeline has played out which is through a fundamental shift in enterprise video usage driving organizations across the globe to rapidly adopt and expand their use a video for both external business continuity.
An internal communications as the new normal.
Qumu has played a pivotal role in helping enterprise sustained their business during cold that 19 as they have implemented mass work at home programs Virtualized events and execute large scale internal and external broadcast using video.
On top of this we're also seeing an increase in self service broadcasting where could lose platform provides a secure video delivery and management infrastructure to enable anyone within an organization to easily launch a live broadcast from either zoom Microsoft.
James Webex or any other enterprise collaboration tool.
To summarize the Qumu platform has become a mission critical infrastructure component that enables global enterprises to securely create manage and deliver video at scale and for any use.
Cool most favorable competitive positioning within the enterprise video market and the accelerated ship within the industry are to the main reasons why our board of directors determined it was prudent and the best interests up our shareholders to agreed to terminate the proposed merger with Synacor at the end.
June.
And with our second quarter performance and recent operational changes the Qumu Board remains confident it was her right decision for our supportive shareholders are valued customers and especially our hard working employees.
The exhaustive internal review, we conducted as part of the merger process also allowed us to identify opportunities to strengthen the organization as a whole in an effort to more effectively maximize the growth opportunity in front of us.
The most noteworthy of the operational changes we implemented recently is the appointment of TJ Kennedy as our new President and Chief Executive Officer.
TJ sick succeeds Vern hanzlik, who capably led to move as a CEO for nearly five years.
Be half of the board and the leadership team I would like to thank burned for his service and invaluable contributions to qunar.
Burn was instrumental in transforming qumu software platform or to what it is today and award winning globally recognized into in solution for securely, creating managing and delivering life and onto that demand video across any organization.
We wish burn all the best Cadiz future pursuits.
Today, Kumo is focused on accelerating sales growth and profitability.
Pandemic has highlighted the immediate and far reaching market need for our platform and transitioning to a leader with TJ deep sales and marketing experience best positions qunar to capture the opportunity in front of us.
TJ has previously been on the board for Communications platform company in the Tele medicine space given him a solid understanding of software as a service and platform as a service business models.
He has also been involved into point video on an enterprise level for deployments going back into the early 2000 during his time with S.A. I see a fortune 500 technology integrator.
Let's say I see as well this raytheon TJ gained significant experienced a point large complex systems on premise as well as hosted cloud based solutions TJ. It's also led initiatives and cyber security large network implementations large software development efforts in enterprise storage device.
Deployment clearly he has the experience and the skill set to take to move to the next level.
Although TJ is only been on the board for a very short time. He has already made mark contributions to our organizations.
The significant experience and overseen highly innovative projects imagine complex deployments that skill makes him the right leader at the right time for Kumar.
From his extensive work within various critical technology markets TJ understands that perfect execution is ops absolutely essential.
With the larger digital transportation transformation continues in virtually every industry. We are confident TJ will lead to move to even greater heights.
We're looking forward to benefiting from is uniquely qualified skillset and capitalizing on our near and long term pipeline of opportunities, which we believe will drive shareholder value over the long run.
I would now like turn the call over to T.J. So he can share with you why he's excited to join can some of his early observations and what he will be focused on over the upcoming quarters TJ.
Thank you for the warm introduction Neal I really appreciate it.
Thank you everyone for joining our call this afternoon.
I'm really excited to be speaking with you today as couldn't use new president and CEO.
Although I've only been onboard for a brief period of time, one thing that has already been absolutely clear to me just a passion expertise and dedication of our team.
And what they have for both the organization and our customers.
I have also been amazed by their ability to effectively adaptive today's dynamic working environment and to meet the increasing demands from a cobot 19 world.
Now as you can see by our strong financial performance in the second quarter.
It was an inflection point experienced unprecedented use in demand for our best in class solutions.
Global pandemic has positioned to move as an even more essential part of our customers businesses showing an exponential increase in usage of our platform over the last several months.
One illustrative example of this paradigm shift just a larger expansion order we received at the end of first quarter from one of our financial institution customers that multiplied from 3002 50000 users just a matter of days.
This when well notable in its own right. It's indicative of an overall surge we're experiencing across your customer base. We're usage is running at orders of magnitude above base levels, which will ultimately translate to real revenue growth in the coming quarters.
In fact over the past 90 days, we've experienced greater than 100% growth and brought the number of users and streaming bandwidth on her platform.
Two notable examples of power users during the past quarter include health insurance company that conducted executive broadcast in more than 20000 lives viewers and receive 50000 on demand views for each event.
And a computer manufacturing company. That's access we ran multiple events with over 50000 users participating from home and even producers working from their home studios.
They used or self service streaming and sophisticated management platform on a cloud hybrid platform to make this happen.
As customers and prospects first solve their immediate video and collaboration needs in the wake up a pandemic with applications like soon Microsoft teams and Webex, we've seen a material increase in demand from both constituencies.
Okay moves back in video infrastructure platform to help them security management scale their video needs that have outgrown. These initial stop gap applications.
As Neal highlighted the pandemic has accelerated the market shift to video.
Compressing what we believe would've happened over the next few years into just a few months.
Our sales pipeline activity tells us that customers are making strategic investments in video infrastructure.
They are witnessing the savings and efficiencies of dramatically reduce business travel and be more connected workforce.
We have seen a new hybrid workstyle emerging which individuals can fluidly move between face to face in video communications from wherever they are in whatever device is most convenient.
In one offices open up again. These individuals may go back to the office stepping backwards in terms of efficiency and quality of life will not be an option.
He was best in class technology has positioned the company perfectly for this booming video market.
Even in just my first few days at the company, it's clear what sets us apart from the competition and why enterprises are selecting our platform.
First we make self service video streaming easy.
Sure and infinitely scalable by integrating or enterprise grade streaming platform with popular video conferencing applications.
This is very important because it brings the power to move streaming platform to everyone within an enterprise.
Anyone who can conduct or take part in a small video conference meeting now has the skills and technology to launch a global what webcast to thousands or even tens of thousands of viewers.
Secondly, we help organizations realize the value for video content management with robust repositories editing captioning analytics archiving anymore.
The volume and value of video content, it's just it's increasing exponentially.
And therefore, so what's the problem of managing in securing it all in Qumu solves that problem, which otherwise would quickly overwhelm customer capabilities dramatically reduce the value to these customers of their video content.
And last but not least we mastered intelligent delivery of life streaming video at scale.
Cross internal and external networks any type of device and any location.
This last one is a clincher because without large scale streaming and intelligent delivery video conferencing solutions are limited to small group meetings.
We're still being a major gap.
As I'm sure you can hear in the general My voice I'm very excited about where the company used today and even more excited about the potential the company has to become a much larger organization.
Along that line over the next 90 days the leadership team and I will formulated refreshed and optimize growth strategy for not only 2020, but for the years ahead as well.
Well be considering our product offerings, our geographic markets, our target customers as well as our overall go to market strategy.
This process will aim to refine or future strategic roadmap and identify opportunities to accelerate our growth.
This means we will have to change in adapt to take advantage of new opportunities. The board and I are confident that will emerge from this process as a company in a path to becoming the leader in video technology for the enterprise, which in turn will accelerate our growth and profitability.
I'll now turn the call over to Dave to discuss some additional operational insights from Q2.
As well and walk you through our financial performance for the period Dave.
Thanks, TJ and good afternoon everybody.
Turning to our financial and select operational results for the quarter and six months ended June Thirtyth 2020.
Revenue for the second quarter of 2020 increased 74% to $9.3 million from $5.4 million in Q2 of last year.
For the first six months of 2020 revenue increased 25% to $15.6 million from 12.5 million dollar for the comparable period last year.
The increase in revenue for both the quarter and six month period was primarily due to a large customer order received at the end of Q1, 2020, which the customer identified a specifically driven by covert 19, a significant portion of that revenue was recognized in the second quarter 2020 with incremental revenue to be recognized in the third and fourth quarter of this year.
During the quarter, we added five new customers and converted to enterprise customers to cloud hybrid it's worth noting that the to cloud conversions were secured in the quarter and on three year contracts, representing an average 78%.
They are our uplift on their base renewals for the first six months of 2020, we secured 17, new customer deployments with an average a our our of 66% in comparison, we had 20 new customer deployments for all of 2019 with an average A.R.R. a $49000. So.
We're on pace to exceed prior your account with a higher average Jr.
New customer deployments.
Subscription maintenance and support revenue for Q2, 2020 increased 12% to $4.7 million from $4.2 million in Q2 of last year, which was driven in part by revenue related to the large customer order I just mentioned for the six month period subscription maintenance and support revenue decreased 9%.
To $8.8 million from $9.7 million for the comparable period in 2019.
The decrease was due to the recognition of large multiyear term license renewals and the first quarter of 2019 that was not applicable and the comparable period and 2020.
Looking at our margins gross margin for Q2, 2020 was 68.5 per cent compared to 70.9% in Q2 of last year. The Ti decrease was primarily due to higher mix of appliance revenue, which generally carries lower margins compared to term license revenue.
For the six month period gross margins was 67.7% compared to 75.1% for the comparable period last year. The decrease was primarily due to a higher mix of appliance revenue and outsource professional services expense for certain customer specific projects in the first quarter of 2020, which also negatively impact.
Good services gross margin then.
Turning to our profitability metrics for the second quarter 2020.
Net loss was $692000 or a five cents loss per basic share and a six cents loss per diluted share. This is an improvement compared to the net loss of $3.6 million or 37 cents loss per basic and diluted share in Q2 of last year.
Net loss for Q2 2020 included transaction related expenses of $699000 related to the merger termination with Synacor for the six month period net loss was $3.4 million for 25 cents loss per basic.
Basic share and 27 sat loss per diluted share. This was an improvement compared to net loss of $4.6 million or 47 cents loss per basic and diluted share for the six month six months ended June Thirtyth 2019 included a net loss for the six months ended June Thirtyth 2020 was one point.
$5 million and transaction related expense for the merger termination with Synacor.
Adjusted EBITDA, a non-GAAP metric for the second quarter of 2020 totaled a positive $809000 an improvement from a loss of $1.4 million in Q2 of last year for the six month period adjusted EBITDA loss totaled $436000. This was an improvement from a loss of one point.
$2 million for the comparable 2019 period.
At quarter end, we had a healthy liquidity position with $9.9 million in cash and cash equivalents on may 1st we had canceled the amended and restated worn agreement with DSW holdings to purchase 925000 shares of our common stock.
Concurrently we signed a promissory note with the SW for up to $1.8 million, which equates to approximately $1.98 cents per share and reflects a deferred payment of the purchase price and respect to the prior warrant agreement. We believe this was a prudent move, especially given our current share price.
Excluding the $1.8 million promissory note qumu is that free.
Switching gears to outlook as we talked about on prior calls we provide revenue guidance based on current market conditions and expectations, including the unknown financial impact to covert 19 will have on economies and enterprises around the world.
Based on our strong second quarter 2020, <unk> financial results as well as our expanded pipeline. We currently expect revenue for fiscal 2020 to be approximately $29 million compared to 25.4 million in 2019, representing a year over year growth of 14%, we will continue to assess our outlook.
For the second half of the year as more information becomes available on customer ordering trends and the economic disruptions caused by covered 19th.
This concludes our prepared remarks, we will now open it up for questions.
Operator, Justin please provide the appropriate instructions. Thank you as a reminder to ask a question you'll need to press star one on your telephone. So it's all your question press the pound Keith Please standby, we've compiled accuen a roster and once again, if you'd like to ask a question that is star one.
And our first question is on the come from Jeff Van Rhee from Craig Hallum Capital.
Line is now open.
Hey, guys. This is really on for Jeff Thanks for taking my questions.
I want to start with the large deal that was signed at the end of Q1, I just want to understand the terms of and where the revenue is falling how much. The total onetime revenue is there going to be from idea this year and how much fell in the quarter, how much will fall in Q3, and four and been as opposed to there's likely a recurring.
<unk> piece to it how much is that recurring fees, yes, certainly a good question and thanks Rudy.
Total onetime within the quarter was 3.9 million it relates predominantly to the appliances that were delivered to guide and expand their delivery network.
Recurring in the quarter was about $360000.
And then if you look forward to Q3 in Q4, you're going to see a approximately $450000 and each successive quarter thereafter.
Got it Gotta helpful. And then I guess as you guys you know sort of front for restaurant or I don't have as and would you sort of quantify.
Uptick in demand I know historically, you guys have talked about pipeline I'm sort of the 2.5 to three experienced can you share where that's at now any color on on bookings in the quarter just any any other metrics that can help sort of quantify the demand you guys are seeing.
Certainly.
TJ when it comes up pipeline do you want to speak to coverage would you like me to take that.
Just cupboards right now that's fine.
Certainly so rudy coverage today on over essentially bookings for the remainder of the years about 4.2 X. was up from our historical kinda.
Two to three I think whats of most significance here is that the the strategy. The company has to transition to a SaaS focused business the pipeline within essentially that 4.2 times coverage is up 33% and our cloud and cloud hybrid.
Pipeline. So what we're seeing a is a lot more activity.
In essentially our cloud cloud hybrid and fast based revenue, which is 100% consistent with the strategy that we've we've been working towards.
Got it got a great and then.
If you could I know you said you guys are going to undergo a 90 day sort of re formulation of your growth strategy going forward.
Yes first of all congrats and welcome to team, but I guess, maybe as you see it or you just lay out the top couple priorities or.
If you call it low hanging fruit, but.
Just sort of lay out the opportunity that you see where we can really take it to the next level and capitalize on the opportunity in front of that Covance presented.
Thank you I'm happy to jump into that and really excited to be in the role.
Initially as you noted my customer focus right now is really on our team and our customers evaluating areas for growth and we used to drive topline and bottom line improvement.
Specifically over the next 90 days were going to be building a strategic roadmap with the leadership team did really solidify are forward looking vision.
Most important thing that will come out of this process will be any specific needs for talent resources to drive that long term growth, but I do believe we have some immediate opportunities. We're looking at what potential there isn't the midmarket enterprise space as there is increasing demand based on what's happening with cobot 19.
These companies to support a distributed workforce and to find new way used to reach both customers and stakeholders and overcome the travel restrictions I think thats really important and that's where we're seeing a lot of the driving this this big change to work from home and how that's affecting not just the internal communications, but also those communications with customers we.
We will be looking at what kinds of things, we can be doing more and healthcare and life Sciences, we'll be taking a look at different spaces, where there is other vertical growth for us to have an education and so what we're taking that into the strategic roadmap process and making sure that we focus on those areas that will provide the most valued.
Got it very helpful I'll jump back into queue. Thanks.
Thank you and again, ladies and gentlemen, if you have a question that is star one to ask the question.
Again, ladies and gentlemen star one that's a question one moment for questions.
And again, ladies and gentleman that star one.
I would now like to turn the call back to TJ, Kennedy, President and CEO for closing remarks.
Thank you so much I appreciate that Justin.
In summary, Qumu completed its strongest quarter in first half since his transformation to a video solutions company and Gilbert and given the current sales activity. We anticipate we will come through the current global crisis in a powerful position to take advantage of the tremendous growth in video.
Interest in her platform is high by multiple measures.
More specifically, our cloud and hybrid SaaS pipeline has grown by 33%.
We have a significant revenue backlog and our country customer retention rates remained high at 90%.
The recent change in world events prevents in person meetings and the work from home environment has created new technology enabled opportunities that can we can leverage should take us to new level.
The environment is also dynamic and changing quickly.
We will need to be responsive to these new opportunities to achieve success.
I'm confident that are industry, leading platform and world class team will be up to the task.
Thank you for your time. This afternoon I look forward just speaking with you again soon.
And ladies and gentlemen, this concludes todays conference call. Thank you for participation you may now disconnect.
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