Q2 2021 Qumu Corp Earnings Call
[music].
Welcome to <unk> second quarter, 2021 conference call.
My name is Lisa and I will be your operator this afternoon join.
Joining on.
It's kulis, President and C O P J Kennedy.
Oh, the Bristow and Mike Glover from Gateway Investor Relations.
The results we want we viewed the day further enhance our pre announcement shared on June 29th 'twenty 'twenty 1.
At this time all participant lines.
Listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone if you require any further assistance. Please press star zero I would now like to turn the call over to.
Matt Glover, Sir you may begin.
Thanks, operator, and good afternoon, everyone. After the market closed today at least through the press release announcing its financial results for the second quarter ended June 32021.
<unk>, which is available on the Investor Relations section of the company's website.
During today's call management will make certain.
Statements with respect to the company's expected financial results the impact of COVID-19 on the use and adoption of video in the enterprise companies go to market strategy and efforts designed to increase the company's traction and penetration with customers. 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 management's opinion.
<unk> only as of the date of this call and the company undertakes no obligation to publicly update or revise any forward looking statements, whether a result of new information future events or otherwise except as required by law.
Please refer to <unk> SEC filings.
Specifically its form 10-K and financial results press release for a more detailed description of risk factors that may affect the companys results.
During the call today management will discuss adjusted EBITDA, a non-GAAP financial measure in the Companys press release and filings with the SEC both of which are posted on the company's website you will find additional disclose.
<unk> regarding the non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure.
Non-GAAP financial measures are not intended to be considered in isolation from a substitute for or superior to GAAP results.
We encourage you to consider all measures when analyzing its performance.
I would like to remind everyone that this.
The closure will be recorded and made available for replay via link available in the Investor Relations section of <unk> website, now I would like to turn the call over to <unk>, President and CEO TJ Kennedy D J.
Thank you, Matt and good afternoon, everyone. It's a pleasure to be speaking with you today.
Just over a year since I joined as CEO.
This call and a lot has happened in that time. Most importantly, we have made significant progress through the early stages of our company's ongoing transformation into a SaaS first organization that is capable of generating robust and predictable long term growth.
Execution on our strategic roadmap has undoubtedly strengthens <unk> position as a leader in cloud first enterprise.
Video Jumpstarted, our evolution towards becoming a subscription first business.
The work has not been without its challenges.
We still have much to do in order to realize our vision.
As we shared in our second quarter preliminary results conference call on June 29, our financial results were lower than expected driven by longer than anticipated.
Transitions and ramp up periods with our organization, which has impacted our ability to achieve our overall revenue growth target for 2021 and pushed our growth inflection point into early 2022.
On that recent call we covered in great detail the challenges we experienced in Q2, specifically what happened why it happened and how we are addressing it.
Enterprise, let me first recap what happened and why.
Then our CFO, Dave Ristow will walk you through our financial details for Q2, which as you.
You may have seen in our earnings release today, we are largely in line with where a modest improvement over the preliminary range as we previously reported.
Afterwards, I will discuss our plans on key <unk>.
<unk> for the second half of the year.
To be clear our leadership team is absolutely committed to this transformation and our board remains confident in our near and long term business prospects and organizational sustainability and we will share why in just a few minutes.
So what happened.
At a high level sales cycles in Q2 lagged our initial estimates.
This delay was based in part on lengthy procurement timeframes more specifically indecision about tiny for returning to a hybrid office environment and other key decisions on work location and technology.
Furthermore, it took longer than expected to align our legacy sales force with our new SaaS based value driven sales process.
New SaaS sales.
<unk> team ramps slower than expected.
Given the nearly universal move to remote work environment accelerated by the pandemic.
We had estimated a quicker ramp in sales productivity and then we've recently experienced in selling to our enterprise customers.
The initial initially modeled this process as a 5 to 7 month timeframe. However in practice, we now believe this.
The complete ramp for new sales professionals to reach full productivity will likely take around 12 months.
The elongated ramp due to the complexity of the sale individual enablement marketing implementation and procurement time cycles.
We also realize that the new SaaS resources in our customer success team took longer to higher than <unk>.
Marketing personnel.
In turn the extended on boarding rep market conditions, and resulting sales efforts caused our bookings velocity and new logo acquisition to be lower than originally modeled.
Our initial new logo demand plan called for 25% inbound marketing and 75% outbound marketing.
Our sales, while we put a great deal of effort towards enhancing our updated enablement messaging launching new products as well as expanding our go to market motions. We didn't gave me anticipated traction from our outbound marketing efforts and looking back we likely would have been better to focus on inbound marketing strategies.
Inbound marketing is a critical element required to pull in more.
That's increased brand exposure and create more brand authority.
Nevertheless, the key learnings from these challenges have helped us to refocus our approach and prompted us to implement key adjustments in our business planning for the second half of 2021.
Before I get into those plans I'm going to hand, the call over to Dave to cover the financials.
David.
Thank you T J and good afternoon, everyone turning to our Q2 results in more detail revenue for the second quarter of 2021 was $5.9 million compared to $9.3 million in Q2 of last year and up from $5.8 million in Q1 of 2021.5.
$5.9 million.
Our process at the high end of the range, we had provided in our preliminary results last month.
As we communicated the year over year decline in revenue was due to a significant 1 time license and appliance revenue. We recognized in Q2 of 2020 from a single large customer. We also experienced slightly lower on premise maintenance and support revenue on Q2 of 2000.
It wasn't due to cloud conversions and lower on premise maintenance recognized for customers not using on premise appliances go to remote working relationships.
Subscription maintenance and support revenue for the second quarter of 2021 increased 9% to $5.1 million from $4.7 million in Q2 of last year.
<unk> was up 2% from $5 million in Q1 of 2021.
$5.1 million was at the high end of the range. We provided in our preliminary results and was driven by new cloud and term deals subscription as a percentage of total annual recurring revenue was 49% for the second quarter of 2020.
1 compared to 41% for the second quarter of 2020.
Looking at our SaaS metrics subscription IRR increased 28% to $12.4 million up from $9.7 million in Q2 of last year. The 28% growth was primarily due to increased subscription renewal rates and cloud conversion.
As well as increased SaaS sales.
The $12.4 million on annual <unk>.
Seeded our preliminary results.
<unk> has grown 7% during the first half of 2021, driven primarily by 3 meaningful.
On premise to cloud conversions and a new key customer we continue to analysts.
<unk>.
<unk> will grow as bookings of mid and large enterprises ramp with our SaaS sales efforts.
And as our on premise customers convert to our SaaS platform on.
Our efforts to drive subscription growth is anticipated to provide us with good visibility into future revenue due to the ratable recognition.
Anti subscription revenues on.
All of our SaaS renewal rates of increase since Q2 of last year at quarter end, our SaaS gross renewal rate or <unk> was 93% compared to 87% at the end of Q2 last year, our SaaS net renewal rate or <unk> was 132%.
As compared to 118% at the end of Q2 of last year and finally, our SaaS dollar value retention was 104% compared to 96% at the end of Q2.2020.
Looking at our margins gross margin for the second quarter of 2021 was 74% an improvement.
On 69% in Q2 of last year.
Driven by a favorable sales mix and higher margin SaaS revenue, 74% exceeded the range that we had provided in our preliminary results last month look.
Looking at our profitability metrics net loss for the second quarter of 2021 totaled $4.3.
<unk> from dollars or 24 loss per basic share and a 30 loss per diluted share.
This compares to a net loss of $692000 or a 5 cent loss per basic share and a 6 net loss per diluted share in Q2 of last year.
Our net loss for Q.
Q2, 2021 was in line with the range that we had provided in our preliminary results.
Adjusted EBITDA loss, a non-GAAP metric for the second quarter of 2021 total of $4.5 million compared to the adjusted EBITDA income on.
$809000 in Q2 of last year.
Millions dusted EBITDA loss came in better than the range, we had provided in our preliminary results.
As expected the higher adjusted EBITDA loss, we reported in Q2 of 2021 was due to the strategic investments we are making in connection with our strategic roadmap.
Moving to our balance sheet at quarter end.
And we had a healthy liquidity position with $21.3 million in cash and cash equivalents.
As we discussed on our June 29th call, we initiated a cost optimization program to align our expenses with our new level of anticipated revenues. This.
This includes reducing our burn rate slowing our hiring and implement.
Alright, other cost cutting measures to ensure adequate working capital to support our SaaS transition.
Our cost optimization program implemented early in this third quarter is expected to result in more than $4.5 million in annualized expense savings compared to annualized expenses in the second quarter of 2021.
Implemented this expense reduction came from all functional areas, but focused on administrative functions and included both head count and outside services providers and other costs.
We remain focused on our SaaS go to market efforts, while preserving our capital resources.
To be sure.
These measures will create more focused on more nimble and more efficient organization.
We have the capital resources, including more than $21 million on cash that will ensure sustainability as we execute our long term SaaS gross growth initiatives.
Along the way, we will continue to monitor spending.
<unk> closely as we March towards adjusted EBITDA positivity expected late in the second half of 2022 with the goal of maintaining a solid cash position throughout this process.
Looking at our financial outlook for 2021 to provide better insight into the progress of our SaaS business transformation, we are providing our.
Outlook based on the percentage of recurring revenue comprised of SaaS subscription revenue.
For the second quarter or for the quarter ended June 32021, SaaS recurring revenue was approximately 49% of the overall recurring revenue as compared to 46% for the quarter ended March 30.
31st 2021.
The improvement in SaaS recurring revenue as a percentage of recurring revenues due to on premise to cloud conversions.
Incremental cloud customer expansion and new customers.
Future consolidated revenues will be dependent upon many factors including existing.
<unk> customer renewals the rate of adoption of the Companys software solutions in its targeted markets whether arrangements with customers are structured as perpetual term on SaaS licenses, which impacts the timing of revenue recognition and success of our efforts to drive customer conversions from on premise to cloud.
As part of the company's long term strategic roadmap. The company is accelerating the evolution of SaaS business.
Our SaaS based business model with a cloud first focus which is expected to shift a greater proportion of revenues to SaaS license revenues, which is recognized over the term of the license.
2 months management.
We anticipate SaaS recurring revenue to comprise approximately 60% of its overall recurring revenue mix by the end of 2022 with a targeted growth to approximately 70% by the end of 2023.
Other factors that will influence future consolidated revenues, including the timing of customer.
Or orders on renewals.
Product and service mix of customer orders and the impact of changes in economic conditions and the impact of foreign currency exchange rate fluctuations.
For a more detailed analysis of our financial results. Please refer to today's earnings release as well as our form 10-Q.
This complete.
Carl Natural summary, and T J I'll turn it back over to you.
Thank you Dave.
Now that we've covered what happened and the related financial results I'm going to discuss our key go forward initiatives.
Which will enable us to achieve profitability and also our updated growth goals.
My objective is for you to take away 3 main points.
From my remarks.
First.
We have the right plan and sufficient resources to execute on our plan without the need to raise additional capital.
Second we have the dedicated leadership team with the right experience to successfully execute the plan.
And third we have a solid and growing SaaS business.
Supported by improving SaaS metrics.
Now with that let me pivot to our plan for the second half of the year and some of the specific strategies, we are executing on.
We have adjusted our expenditures in Q3 to take into account the longer ramp up our sales team.
We have refined our sales strategy and product pricing based on specific customer use cases.
Does that change has helped.
To define how we land more customers and how we then expand into additional use cases.
Supporting these efforts we have supplemented our historical technology focused sales approach with a line of business sales focus to drive greater land and expand possibilities.
Speaking.
I mean, the technology sales process has undergone a radical change over the last several years.
This company is today no longer want to make very large upfront investments, but instead are focused on procuring lower cost subscriptions and value added services.
As a result, the features and functions from technology are now less important when compared to the business outcome.
In general on return on investment achieved by using the technology.
Enterprise is simply want to solve the business problem. They are experience experiencing and to leverage key technology that makes them more productive efficient and effective.
The traditional make sell ship business model with the key.
Stone of lending the customer has given way to 1 focused on preventing churn.
To that end, we recently implemented the 5 phase customer engagement model that focused on attract land adopt expand and renew also known as the Alere methodology.
Let me briefly touch on each phase.
<unk> has a track.
Focus is on the recognition that cooler solve significant communication issues for fortune 500, and global 2000 companies and has for years been their trusted enterprise video platform.
We also provide robust professional and consulting services to assist enterprises with both quickly and properly implementing their improved communications.
Different issues leveraging best video practices to address their particular use cases.
Second face land involves the key activities required to land the first sale to a new customer and the initial implementation of that solution.
The third phase adopt ensures the customer successfully adopting our solution.
<unk> strong ways of leveraging our technology to improve their work their productivity and their results and expanding their use of <unk> solution into new use cases as well as other parts of the organization.
The step is also where we help the customer successfully use our solution to achieve their desired business outcomes.
Fourth phase expand.
<unk> involves the activities required to cost effectively help current customers expand their capabilities as their usage of our platform increases, including adding additional capabilities and leveraging partners and alliances.
The fifth phase renew includes all activities required to ensure the customer timely renews their agreement with us and sees the important value that.
<unk> brings to their enterprise the phase is key and ensuring our customers are realizing the significant value, we bring and seek to maintain and further expand our offerings.
Simple by design. This proven framework will enable us to successfully deliver positive customer outcomes retain customers on our platform and then get them to expand their use.
So the <unk> platform, which is ultimately what will drive increased profitability long term growth and sustainability.
In parallel with our Alere framework, we are judiciously invested in strategic sales initiatives, including field enablement with new messaging product training and systems, which has provided us with key data.
On valuable insights to identify what's working well and where we need to adjust.
Additionally, our focus on partners sales management and sales coaching has aligned our direct and indirect sales motions.
We have done this while conserving cash and reducing our burn rate in Q3 compared to Q2.
Another key initiative for us is to extend Cumulus.
And value to customers through strategic partnerships, we have doubled down on our channel strategy, including developing more channel offerings and investing in channel relationships teams and programs.
Earlier this month to move on social life announced a new SaaS video streaming integration that allows businesses of all sizes to produce scalable studio quality.
Quality video content and manage and deliver that content to any audience.
Integration is the result of a growing partnership between our 2 companies, where we are leveraging our combined expertise to enhance video content creation management and distribution capabilities for businesses.
The integration provides customers with the seamless sales.
Self service experience from video creation storage and delivery to management measurement and insights on their video consumption.
We are really excited about the partnership and the potential it has or both of our businesses.
From a marketing standpoint, we have placed significantly more emphasis on our inbound.
Inbound marketing initiatives to drive new logo generation and are keeping our customer success team laser focused on renewals and expansion on.
New account based marketing campaigns targeting both large and medium enterprises continue to gain traction in our customer success efforts are deepening relationships with our customers and driving solid SaaS retention metrics.
Our entire focus from our sales marketing and account management perspective is to ensure we are keeping our customers at the center of all of our decision making.
We are continuing to make progress on converting our on premise customers to the cloud we're upgrading them to our latest software versions on Prem.
This process will help us drive towards.
<unk> long term reliability and maintainability of the customer is still on prem or to successfully migrate them to the cloud if that is the best fit for their enterprise.
Over time, these conversions will add to our larger subscription mix of our total business.
To be sure we do not anticipate all customers to make the transition, but we are encouraged by.
The cohort that is already converted and the prospects. We are currently nurturing.
We also have commitments from a number of our existing on premise customers to upgrade to our latest on premise software versions that provide them with more capability and even more reliability we.
We are fully committed to our enterprise customers, whether they are leveraging our on premise installations as.
<unk> returned to the office or utilizing a SaaS cloud platform for both highly distributed remote and hybrid work environments.
From a leadership standpoint, we have significantly strengthened our team from top to bottom.
This includes bolstering our customer facing teams, adding experienced SaaS sales executives and appointing world class business leaders.
Most recently, we announced Andy manage our Chief Technology Officer, who joined <unk> a few weeks ago.
Andy will lead our technology efforts to deepen and enhance our enterprise video portfolio, including expanding our advanced capabilities to generate video platform insights that provide important business intelligence to our customers and ensuring best in class cloud.
Employers.
And you will also be leading up our innovation function working with our customer success organization to anticipate market needs and address customer requests and requirements.
Andy brings to <unk> more than 30 years of experience, leading digital transformation efforts for companies like BMC software NCA technologies.
He recently.
He served as chief technology advocate for Splunk, where he drove Splunk machine learning focused business growth and product innovation through SaaS transformation agile development cloud operations data and analytics and cyber security.
And he has deep understanding of digital transformation and cloud software expertise will be central to our next phase of video.
Content creation management and analytics.
His professional experience applying technology to achieve business results combined with his enthusiasm for leveraging technology to bring people together as a tremendous assets of our company as we continue to expand the possibilities of human engagement through enterprise video.
With any appointment come his leadership teams.
Undoubtedly the strongest and deepest in company history, and the collective experience gives me absolute confidence in our ability to execute on our long term strategy.
The executive leadership team is now fully staffed and committed to driving the next phase of our transformation of <unk> to a growing and profitable SaaS business with Roes Bentley as our Chief operating officer, Jim <unk> as our chief marketing.
On officer, Chad Cheers, as our Chief customer Officer, Dave <unk>, Our Chief Financial Officer, and Jason <unk>, Our Chief commercial officer, and Alex Couture as our SVP of global sales leadership team believes in the future of chemo and how we will enable our customers to succeed in the new way that they work and that the future of work has changed forever.
We believe that <unk> can drive significant new capability in their enterprises of all sizes and that this transformation of where we work and when we work we will define how enterprises create value and drive business success.
SaaS businesses are built on strong foundations of people process and technology and.
Now put in place the foundation for our long term success on.
Go to market motions targeting both large medium enterprises are gaining traction on <unk>.
Customer success efforts are deepening customer relationships and driving growth in our subscription <unk> and.
Continuing on Prem to cloud conversions as we transform our business our focus remains on delivering SaaS recurring.
And we have new growth.
As you evaluate our results and business performance. It is important to keep in mind that we are not starting from square 1.
As Dave mentioned at the end of Q2, our SaaS IRR was $12.4 million up 28% year over year. This is already a very meaningful SaaS business and the subscription growth is a key milestone procurement.
Robert demonstrates that our strategic roadmap is yielding results and we remain committed to taking the necessary steps to continue to accelerate our subscription revenue growth as we fully ramp our sales teams. We will continue to drive our SaaS business through our direct sales teams or new customer success and account management organization, and our newly invigorated channel and partnership ecosystem, which.
Enables us to scale and accelerate the value we deliver to our customers.
Looking ahead hybrid work on the use of video by enterprises is here to stay.
<unk> is building for the long term success of the company and its shareholders. We have the right plan on the right team in place and the resources to ensure sustainability and the successful achievement of our strategic roadmap.
Which 1 we may have reduced expenses and planned and a slower ramp, but we remain confident that <unk> will emerge as a subscription driven growth company operating at scale on the future debt.
On a sitting from high margin recurring revenues sustainable and growing adjusted EBITDA and net income profitability.
We will now take your questions operator, please provide the appropriate instructions.
As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question press the pound or hospital based on Viva, we compile the Q&A roster.
Your first question comes from the line of Mike Latimore from Northland.
Michael Your line is now open.
Hi, guys.
Does it until it's out on for Mike Latimore.
I have a couple of questions here you would talk about rising based on use cases.
What is this data stock debt initiative, and what it would be meaningful.
Yes.
Sure I'll start off with the main use cases, our crisis communications.
<unk> Town Hall, and executive Communications.
Marketing or product launches on.
On boarding for employees and on boarding for customers.
Gas that can also include learning management system. So those are the main 5 that we most often get asked to address and we have now updated to those use cases to be able to make it easier for our sales team to be able to make it quite clear what kind of solutions, we can bring to them and as they expand those use cases across a large enterprise. We can then add on additional.
And what he says and he did.
Alright.
What are the top 1 or 2 priorities for your new seat deal.
Number 1 is helping to drive the technical innovation to make sure that we're meeting the future needs related to the move to the new work and if.
<unk> built hybrid work being the majority of probably future work as well as remote and on premise work really going to be critical that we continue to innovate to meet those needs of that new work. So the top priority for <unk> as part of that also he's overseeing both our on premise hybrid and cloud capabilities and making sure that we have the best technology from all being.
Are you able to be presented to our customers and to help drive that innovation on a timely manner.
Alright and day.
Demand for virtual events slowed this year.
Virtual events, maybe more hybrid and virtual events now we're seeing more conferences and.
Events that do happen, partially in person, but we're still seeing a demand for virtual events that are part of that hybrid event structure.
So definitely still having a lot of demand for for that that video to go along with both in person and remote events and corporations that are working with us from an enterprise video standpoint.
Also continued to extend a lot of their work from home.
Our capabilities on the timing of when they return to the office is still being pushed out into the future somehow but theres still a lot of uncertainty for when people go on full hybrid or go back into the offices that I think will trickle into the fall on potentially longer this year.
Alright, thank you.
Thank you.
Once again to ask a question. Please press star 1 on your telephone.
There are no further questions. Thank you at this time. This concludes the company's question and answer session. If your question was net taken please contact <unk> IR team at <unk> at Gateway IR Dot Com I would now like to turn the call back over to Mr. Kennedy for any closing remarks.
Thank you operator.
Thank you everyone for joining our call. This afternoon and look forward to speaking with you again soon thanks so much.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Greater interest.
[music].
No.
[music].
On that.
Yes.
Yeah.
[music].
Yeah.
[music].
[music].
Welcome to <unk> second quarter, 2021 conference call.
My name is snicker and I will be your operator this afternoon.
Joining us is kulis, president and C O P J E T.
Yes, Oh, they Bristow and Mike Glover from Gateway Investor Relations.
The results, we will review the day further enhance our pre announcements shared on June 29th 'twenty 'twenty 1.
At this time all participant lines are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during this session.
You will need to press star 1 on your telephone if you require any further assistance. Please press star zero I would now like to turn the call over to Matt Glover, Sir you may begin.
Thanks, operator, and good afternoon, everyone.
On the market closed today currently issued a press release announcing its financial results.
The second quarter ended June 32021 copy of which is available on the Investor Relations section of the company's website.
During today's call management will make certain statements with respect to the company's expected financial results the impact of COVID-19 on the use and adoption of video in the enterprise companies go to market strategy and.
Efforts designed to increase the company's traction and penetration with customers.
Statements are forward looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please.
Please note that these forward looking statements reflect management's opinion.
Opinions only as of the date of this call and the company undertakes no obligation to publicly update or.
Revise any forward looking statements, whether a result of new information future events or otherwise except as required by law.
Please refer to <unk> SEC filings, specifically its form 10-K and financial results press release for a more detailed description of risk factors that may affect the companys results.
During the call today.
Management will discuss adjusted EBITDA, a non-GAAP financial measure in the Companys press release and filings with the SEC both of which are posted on the company's website you will find additional disclosures regarding these non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure non.
Non-GAAP financial measures are not intended to be considered in.
From a sub.
Stuart for or superior to GAAP results. The company encourage you to consider all measures when analyzing its performance.
I'd like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of <unk> website, now I would like to turn the call over to <unk> President and CEO.
Nation from Jack Kennedy T J.
Thank you, Matt and good afternoon, everyone. It's a pleasure to be speaking with you today.
It's been just over a year since I joined as CEO and a lot has happened in that time. Most importantly, we have made significant progress through the early stages of our company's ongoing transformation into a SaaS first organization.
That is capable of generating robust and predictable long term growth.
Execution on our strategic roadmap has undoubtedly strengthens <unk> position as a leader in cloud first enterprise video Jumpstarted, our evolution towards becoming a subscription first business.
The work has not been without its challenges.
And we still have much to do.
Do you realize our vision.
As we shared on your second quarter preliminary results conference call on June 29th our financial results were lower than expected driven by longer than anticipated transition and ramp up periods with our organization, which has impacted our ability to achieve our overall revenue growth target for 2021 and pushed our growth inflection point into early 2020.
In order to.
On that recent call we covered in great detail the challenges we experienced in Q2, specifically what happened why it happened and how we are addressing it.
Let me first recap what happened and why.
Then our CFO, Dave Ristow will walk you through our financial details for Q2.
Which <expletive>.
2 you may have seen in our earnings release today, we are largely in line with where a modest improvement over the preliminary range as we previously reported.
Afterward, I will discuss our plans on key initiatives for the second half of the year.
To be clear our leadership team is absolutely committed to this transformation and our board remains confident in our near and long term business prospects.
And organizational sustainability, and we will share why in just a few minutes.
So what happened.
At a high level sales cycles in Q2 lagged. Our initial estimates this delay was based in part on lengthy procurement timeframes more specifically indecision about timings of returning to a hybrid office environment and other key decisions on work location.
Acts and technology.
Furthermore, it took longer than expected to align our legacy sales force with our new SaaS based value driven sales process and our new SaaS sales team ramps slower than expected given.
Given the nearly universal move to remote work environment accelerated by the pandemic, we had estimated a quicker ramp in sales productivity.
Recently experienced in selling to our enterprise customers.
The initial initially modeled this process as a 5 to 7 month timeframe. However in practice, we now believe this debt.
Fleet ramp for new sales professionals to reach full productivity will likely take around 12 months.
The elongated ramp due to the complexity of the sale individual.
Digital enablement marketing implementation and procurement time cycles.
We also realize that the new SaaS resources in our customer success team took longer to higher than our sales and marketing personnel.
In turn the extended on boarding rep market conditions, and resulting sales efforts caused our bookings velocity and.
So on acquisition to be lower than originally modeled.
Our initial new logo demand plan called for 25% inbound marketing and 75% outbound marketing.
While we put a great deal of effort towards enhancing our updated enablement messaging launching new products as well as expanding our go to market motions. We didn't gave me.
Anticipated traction from our outbound marketing efforts and looking back we likely would have been better to focus on inbound marketing strategies.
Inbound marketing is a critical element required to pull in more prospects increased brand exposure and create more brand authority.
Nevertheless, the key learnings from these challenges have helped us to refocus.
Our approach and prompted us to implement key adjustments in our business planning for the second half of 2021.
Before I get into those plans I'm going to hand, the call over to Dave to cover the financials Dave.
Thank you T J and good afternoon, everyone turning to our Q2 results in more detail revenue for the second quarter of 2021.
$9 million compared to $9.3 million in Q2 of last year and up from $5.8 million in Q1 of 2021.
$5.9 million was at the high end of the range, we provided in our preliminary results last month.
As we communicated the year over year decline in revenue was due to a significant 1 time.
It was filings on appliance revenue we recognized in Q2 of 2020 from a single large customer. We also experienced slightly lower on premise maintenance and support revenue on Q2 of 2021 due to cloud conversions and lower on premise maintenance recognized for customers not using on premise appliances due to remote working relationships.
Subscription maintenance and support revenue for the second quarter of 2021 increased 9% to $5.1 million from $4.7 million in Q2 of last year and was up 2% from $5 million in Q1 of 2021, the $5.1 million was at the high end of the range we provided in our preliminary.
Our results and was driven by new cloud and term deals subscription as a percentage of total annual recurring revenue was 49% for the second quarter of 2021 compared to 41% for the second quarter of 2020 looking at our SaaS metrics subscription <unk> increased 28% to $12.4.
Up from $9.7 million in Q2 of last year, the 28% growth was primarily due to increased subscription renewal rates and cloud conversions as well as increased <unk> sales.
The $12.4 million on annual <unk> exceeded our preliminary results.
<unk> has grown 7.
Millions on.
During the first half of 2021, driven primarily by 3 meaningful on premise to cloud conversions and a new key customer. We continue to anticipate a will grow as bookings of mid and large enterprises ramp with our SaaS sales efforts and as our on premise customers convert.
Even pursue our SaaS platform.
Our efforts to drive subscription growth is anticipated to provide us with good visibility into future revenue due to the ratable recognition of subscription revenues.
All of our SaaS renewal rates have increased since Q2 of last year at quarter end, our SaaS grocery normal rate or <unk>.
<unk> was <unk> 93 per cent compared to 87% at the end of Q2 last year, our SaaS net renewal rate or <unk> was 132% compared to 118% at the end of Q2 of last year and finally, our SaaS dollar value retention was 104 per cent.
Compared to 96% at the end of Q2.2020.
Looking at our margins gross margin for the second quarter of 2021 was 74% an improvement from 69% in Q2 of last year, driven by a favorable sales mix and higher margin SaaS revenue.
74% exceeded the range.
<unk> provided in our preliminary results last month.
Looking at our profitability metrics net loss for the second quarter of 2021 totaled $4.3 million or 24 cent loss per basic share and a <unk> 30 loss per diluted share.
This compares to a net loss of 690.
$1000 or a 5 cent loss per basic share and a 6 loss per diluted share in Q2 of last year.
Our net loss for Q2.2021 was in line with the range that we had provided in our preliminary results.
Adjusted EBITDA loss, a non-GAAP metric for.
The second quarter of 2021 total of $4.5 million compared to the adjusted EBITDA income of $809000 in Q2 of last year, our adjusted EBITDA loss came in better than the range. We had provided in our preliminary results as expected the higher adjusted EBITDA loss, we reported in.
92% to 2021 was due to the strategic investments, we are making in connection with our strategic roadmap.
Moving to our balance sheet at quarter end, we had a healthy liquidity position with $21.3 million on cash and cash equivalents.
As we discussed on our June 29th call.
We initiated a cost optimization program to align our expenses with our new level of anticipated revenues.
This includes reducing our burn rate slowing our hiring and implementing other cost cutting measures to ensure adequate working capital to support our SaaS transition.
Our cost optimization program implemented early.
Early in this third quarter is expected to result in more than $4.5 million in annualized expense savings compared to annualized expenses in the second quarter of 2021.
This expense reduction came from all functional areas, but focused on the administrative functions and included both head count.
And outside services providers and other costs.
We remain focused on our SaaS go to market efforts, while preserving our capital resources.
To be sure. These measures will create more focused a more nimble and more efficient organization.
We have the capital resources, including more than 20.
Cash and cash that will ensure sustainability as we execute our long term SaaS gross growth initiatives.
Along the way we will continue to monitor spending closely as we March towards adjusted EBITDA positivity expected late in the second half of 2022 with the goal of maintaining a solid cash position.
1 man throughout this process.
Looking at our financial outlook for 2021 to provide better insight into the progress of our SaaS business transformation, we are providing our business outlook based on the percentage of recurring revenue comprised of SaaS subscription revenue.
For the second quarter or for the quarter ended June 30.
From 2021, SaaS recurring revenue was approximately 49% of the overall recurring revenue as compared to 46 per cent for the quarter ended March 31st 2021.
The improvement in SaaS recurring revenue as a percentage of recurring revenue is due to on premise to cloud conversions.
Incremental cloud customer expansion and new customers.
Future consolidated revenues will be dependent upon many factors, including existing customer renewals the rate of adoption of the Companys software solutions in its targeted markets whether arrangements with customers are structured as perpetual.
In term of SaaS licenses.
<unk> impacts the timing of revenue recognition and success of our efforts to drive customer conversions from on premise to cloud.
As part of the company's long term strategic roadmap. The company is accelerating the evolution of SaaS business.
SaaS based business model with a cloud.
First focus which is expected to shift a greater proportion of revenues to SaaS license revenues, which is recognized over the term of the license tumors.
Management currently anticipates SaaS recurring revenue to comprise approximately 60% of its overall recurring revenue mix by the end of 2022 with it.
Petrol weighted growth to approximately 70% by the end of 2023.
Other factors that will influence future consolidated revenues, including the timing of customer orders and renewals.
Product and service mix of customer orders and the impact of changes in economic conditions and the impact of foreign currency exchange rate.
Fluctuations.
From a more detailed analysis of our financial results. Please refer to today's earnings release as well as our form 10-Q.
This completes the financial summary, and T J I'll turn it back over to you.
Thank you Dave.
Now that we've covered what happened and the related financial results.
It's hard to discuss our key go forward initiatives, which.
Which will enable us to achieve profitability and also our updated growth goals.
My objective is for you to take away 3 main points from my remarks.
<unk>.
We have the right plan and sufficient resources to execute on our plan without the need to raise additional capital.
Going second we have the dedicated leadership team with the right experience to successfully execute the plan.
And third we have a solid and growing SaaS business supported by improving SaaS metrics.
Now with that let me pivot to our plan for the second half of the year and some of the specific strategies, we are executing on.
We have adjusted our expenditures in Q3, you take into account the longer ramp up our sales team we.
We have refined our sales strategy and product pricing based on specific customer use cases that.
That changes helped.
To define how we land more customers and how we then expand into additional use cases.
Supporting these efforts we are.
I think our historical technology focused sales approach with a line of business sales focus to drive greater land and expand possibilities.
Speaking generally the technology sales process has undergone radical change over the last several years most.
Most companies today, no longer want to make very large upfront investments.
Supplement instead are focused on procuring lower cost subscriptions and value added services.
As a result, the features and functions and technology are now less important when compared to the business outcome on a return on investment achieved by using the technology.
Enterprise is simply want to solve the business problem they are experience experiencing.
And to leverage key technology that makes them more productive efficient and effective.
The traditional make so ship business model with the key milestone of lending the customer has given way to 1 focused on preventing churn.
To that end, we recently implemented the 5 phase customer engagement model that focused.
It's on attract land adopt expand and renew on.
Also known as the Alere methodology.
Let me briefly touch on each phase.
The first phase of track focuses on the recognition that cooler solve significant communication issues from Fortune 500, and global 2000 companies and has for years.
Brokers, they're trusted enterprise video platform.
We also provide robust professional and consulting services to assist enterprises with both quickly and properly implementing their improved communication strategies leveraging best video practices to address their particular use cases.
The second phase land involves the key activities required to.
Land, the first sale to a new customer and the initial implementation of that solution.
The third phase adopt ensures the customer successfully adopting our solution learning new ways of leveraging our technology to improve their work their productivity and their results and expanding their use of <unk> solution into new use cases as.
There has been other parts of the organization.
This step is also where we help the customer successfully user solution to achieve their desired business outcomes.
Fourth day, he's expand involves the activities required to cost effectively help current customers extend their capabilities as their usage of our platform increases, including adding additional capability.
Well, it's been leveraging partners and alliances.
The fifth phase renew includes all activities required to ensure the customer timely renews their agreement with us and sees the important value that <unk> brings to their enterprise the phases key and ensuring our customers are realizing the significant value, we bring and seek to maintain and further expand our offerings.
Abilities simple by design. This proven framework will enable us to successfully deliver positive customer outcomes retain customers on our platform and then get them to expand their use of the <unk> platform, which is ultimately what will drive increased profitability long term growth and sustainability.
In parallel with our Alere framework.
We are judiciously invested in strategic sales initiatives, including field enablement with new messaging product training and systems, which has provided us with key data and valuable insights to identify what's working well and where we need to adjust.
Additionally, our focus on partners sales management and sales coaching has aligned our direct and indirect sales.
<unk> motions.
We have done this while conserving cash and reducing our burn rate in Q3 compared to Q2.
Another key initiative for us is to extend kudos footprint and value to customers through strategic partnerships, we have doubled down on our channel strategy, including developing more channel offerings and investing in channel relationships teams and.
And programs.
Earlier this month can move on social I've announced a new SaaS video streaming integration that allows businesses of all sizes to produce scalable studio quality video content and manage and deliver that content to any audience.
Integration is the result of a growing partnership between our 2 companies, where we are leveraging our combined expertise.
To enhance video content creation management and distribution capabilities for businesses.
Integration provides customers with a seamless self service experience from video creation storage and delivery to management measurement and insights on their video consumption.
We are really excited about the partnership and the potential it has or both of our businesses.
From a marketing standpoint, we have placed significantly more emphasis on our inbound marketing initiatives to drive new logo generation and are keeping our customer success team laser focused on renewals and expansion.
Our new account based marketing campaigns targeting both larger.
Large and medium enterprises continued to gain traction in our customer success efforts are deepening relationships with our customers and driving solid SaaS retention metrics.
Our entire focus from a sales marketing and account management perspective is to ensure we are keeping our customers at the center of all of our decision making.
We are continuing.
Moving to make progress on converting our on premise customers to the cloud we're upgrading them to our latest software versions on Prem.
This process will help us drive towards long term reliability and maintainability, if a customer is still on prem or to successfully migrate them to the cloud if that is the best fit for their enterprise.
Per time, these conversions will add to a larger subscription mix of our total business.
To be sure we do not anticipate all customers to make the transition, but we are encouraged by the cohort that is already converted and the prospects. We are currently nurturing.
We also have commitments from a number of our existing on premise customers to upgrade to our latest on premise software.
Versions that provide them with more capability and even more reliability we.
We are fully committed to our enterprise customers, whether they are leveraging our on premise installations as employees return to the office, we're utilizing a SaaS cloud platform for both highly distributed remote and hybrid work environments.
From a leadership standpoint, we are significantly.
Golden Star team from top to bottom.
This includes bolstering our customer facing teams adding.
Adding experienced SaaS sales executives and appointing world class business leaders.
Most recently, we announced Andy Man as our Chief Technology Officer, who joined <unk>, a few weeks ago Andy.
And he will lead our technology efforts to deepen and enhance our.
Price video portfolio.
Putting expanding our advanced capabilities to generate video platform insights that provide important business intelligence to our customers and ensuring best in class cloud security.
And you will also be leading up our innovation function working with our customer success organization to anticipate market needs and address customer.
We're requesting requirements.
Andy brings to <unk> more than 30 years of experience, leading digital transformation efforts for companies like BMC software NCA technologies he.
He recently served as Chief Technology advocate for Splunk, where he drove Splunk machine learning focused business growth and product innovation through SaaS transformation.
AGL development cloud operations data and analytics and cyber security.
And he has deep understanding of digital transformation and cloud software expertise will be central to our next phase of video content creation management and analytics.
His professional experience applying technology to achieve business results combined with his enthusiasm.
It hasnt for leveraging technology to bring people together as a tremendous assets of our company as we continue to expand the possibilities of human engagement through enterprise video.
With any of the appointment of <unk> leadership team is undoubtedly the strongest and deepest in company history and the collective experience gives me absolute confidence in our ability to execute on our long term strategy.
The executive.
Leadership team is now fully staffed and committed to driving the next phase of our transformation that chemo to a growing and profitable SaaS business with Rosebel on the as our Chief operating officer, Jim <unk>, as our Chief Marketing Officer, Chad Sirius as our Chief customer Officer, Dave <unk>, Our Chief Financial Officer, and Jason <unk>, Our Chief commercial officer, and Alex Couture as our SVP.
<unk> sales leadership team believes in the future of chemo and how we will enable our customers to succeed in the new way that they work in.
And at the future of work has changed forever.
We believe that <unk> can drive significant new capability in their enterprises of all sizes and that this transformation of where we work and when we.
Work will define how enterprises create value and drive business success.
SaaS businesses are built on strong foundations of people process and technology and we have now put in place the foundation for our long term success.
Our go to market motions targeting both large medium enterprises are getting traction on.
Of global from her success efforts are deepening customer relationships and driving growth in our subscription <unk> and continuing on Prem to cloud conversions as we transform our business our focus remains on delivering SaaS recurring revenue growth as you evaluate our results and business performance. It is important to keep in mind that we are not starting from square 1.
As Dave mentioned.
And at the end of Q2, our SaaS IRR was $12.4 million up 28% year over year. This is already a very meaningful SaaS business on the subscription growth is a key milestone procurement demonstrates that our strategic roadmap is yielding results and we remain committed to taking the necessary steps to continue to accelerate our subscription revenue growth as.
Probably ramp our sales teams, we will continue to drive our SaaS business through our direct sales teams on new customer success and account management organization and our newly invigorated channel and partnership ecosystem, which will enable us to scale and accelerate the value we deliver to our customers.
Looking ahead hybrid work on the use of video by enterprises is here to stay.
As we move is building for the long term success of the company and its shareholders. We have the right plan on the right team in place and the resources to ensure sustainability and the successful achievement of our strategic roadmap.
We may have reduced expenses and planned and a slower ramp, but we remain confident that <unk> will emerge as a subscription driven growth company operating a scale on the future.
<unk> benefiting from high margin recurring revenues sustainable and growing adjusted EBITDA and net income profitability.
We will now take your questions operator, please provide the appropriate instructions.
As a reminder to ask a question you will need to press star 1 on your telephone Covid.
I had a question.
Press the pound per hospital.
Based on Viva, we compile the Q&A roster.
Your first question comes from the line of Mike Latimore from Northland Capital markets. Your line is now open.
Hi, guys.
Until it's out on.
Mike Latimore.
I have a couple of questions here you talk about pricing based on use cases.
What is the status of that initiative and what would be main use cases.
Sure I'll start off with the main use cases, our crisis communications.
On from CEO Town Hall, and Executive Communications.
Marketing or product launches.
On boarding for employees and on boarding for customers and that can also include learning management system. So those are the main 5 that we most often get asked to address and.
We have now updated to those use cases to be able to make it easier for our sales team to be able to make it quite clear what kind of solutions, we can bring to them and as they expand those use cases across a large enterprise. We can then add on additional capabilities as needed.
Alright.
What are the top 1 or 2.
<unk> for.
Are you on new deal.
Number 1 is helping to drive the technical innovation to make sure that we're meeting the future needs related to the move to the new work and if we look at hybrid work being the majority of probably future work as well as remote and on premise work really going to be critical that we continue.
Innovate to meet those needs of that new works on the top priority for Andy as part of that also he's overseeing both our on premise hybrid and cloud capabilities and making sure that we have the best technology from all being able to get presented to our customers and to help drive that innovation in a timely manner.
Yeah.
<unk>.
Demand for virtual events slowed this year.
Virtual events, maybe more hybrid and virtual events now, we're seeing more conferences and events that do happen partially in person, but we're still seeing a demand for virtual events that are part of that hybrid event.
<unk> structure, so definitely still having a lot of demand for for that that video to go along with those in person and remote events and corporations that are working with us from an enterprise video standpoint also continued to extend a lot of their work from home.
Our capabilities on the timing of when they return.
Or I guess is still being pushed out into the future somehow but theres still a lot of uncertainty for when people go full hybrid or go back into the offices that I think will trickle into the fall on potentially longer this year.
Alright, thank you.
Thank you.
Once again to ask a question please press.
The other 1 on net telephone.
There are no further questions. Thank you at this time. This concludes the company's question and answer session. If your question was net taken please contact <unk> IR team Mccomber at Gateway IR Dot Com I would now like to turn the call back over to Mr. Kennedy.
For his closing remarks.
Thank you operator, and thank you everyone for joining our call. This afternoon and look forward to speaking with you again soon thanks so much.
This.
Today's conference call. Thank you for participating you may now disconnect.