Q4 2021 Qumu Corp Earnings Call
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Welcome to <unk> fourth quarter and full year 2021 conference call. My name is dilemma and I'll be your operator this afternoon.
Joining us as COO moves president and CEO T. J Kennedy CFO, Tom Cougar C O O Rose Bentley and Matt Glover from Gateway Investor Relations.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one 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, and good afternoon, everyone. After the market closed today <unk> issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2021 copy of which is available in 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 companies go to market strategy and efforts designed to increase the company's traction 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. These forward looking statements reflect management's opinions only as of the date of this call. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as 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 filing.
The results press release for a more detailed description of risk factors that may affect the company's results.
During the call today management will discuss adjusted EBITDA non-GAAP financial measure.
These press release and filings with the SEC both of which are posted on the company's website you will find additional disclosures regarding this 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.
The company heard you to consider all measures when analyzing its performance.
I'd 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 site of Koumas website, now I will turn the call over to <unk>, President and CEO T. J P. J.
Thank you, Matt and good afternoon to everyone on the call. Thank you for joining us.
From a high level, our results for the quarter and the year demonstrate the continued execution of our strategic roadmap.
Which emphasizes growing our cloud business and scaling our SaaS revenue base.
Highlighting the success is the 35% SaaS revenue growth we delivered in 2021.
Bringing our total SaaS revenue to a record $10 2 million at year end.
Our SaaS revenue as a percentage of total revenue has grown from 18% of total revenue in Q2 of 2020% to 48% of total revenue for Q4 2021.
This is a dramatic shift of our business to SaaS in just six quarters.
SaaS revenue accounted for 56% of our total recurring revenue exceeding our guidance for 2021 and.
And giving us encouraging momentum as we begin 2022.
SaaS annual recurring revenue also grew by 16% in 2021, bringing the compounded annual growth rate for SaaS <unk> over the last two years to 40%.
Which we expect to serve as a strong benchmark going forward.
Our SaaS revenue and AOR growth in Q4, and 2021, clearly demonstrate that our SaaS transformation is underway.
As expected our overall top line was down for the year, which was a result of certain legacy on Prem contracts sunsetting as we focus our attention on higher margin recurring revenue deals.
Our partner led sales motions and customer success efforts are gaining momentum and driving new logos deeper relationships higher retention and cloud conversions.
In 2021, we completed five on Prem to SaaS conversions, and we expect to complete a similar number this year.
Partner generated revenue grew 25% to 2020.
Compared to 2020 and accounted for more than 30% of our total revenue in 2021.
Looking at our cost the optimization measures we implemented in the second half of 2021 have made us a more nimble and efficient organization.
Reflected by strong margins and reduced operating expenses, which we expect to maintain throughout the course of this year.
That commentary provides a nice segue to introduce our new CFO, Tom Cooper, who joined <unk> last December.
And less than four months, Tom has already made a marked impact on our finance organization and has helped to augment our ongoing evolution into a SaaS first organization.
For those that haven't had the pleasure to get to know Tom. He is a seasoned finance leader with more than 20 years of experience working with leading SaaS centric and technology companies, including chorus, meltwater Salesforce and Sun Microsystems.
Prior to <unk>, he was acting CFO and VP of finance for chorus, a $200 million of SaaS based customer engagement software company.
Prior to <unk>, he let F P nee for meltwater the $165 million of SaaS based social media monitoring business.
And with that introduction as a background I'll now turn it over to Tom to discuss our financial results for the fourth quarter and full year 2021, Tom.
Thanks for the warm welcome T J and it's great to be speaking with everyone. This afternoon.
I will expand on a few items not already addressed a T J or included in our earnings release. This afternoon.
The metrics that we use to measure the success of our SaaS transformation continue to move into right direction.
During Q4 subscription <unk> increased 16%.
$12 8 million from $11 $1 million in Q4 of 2020.
And increased sequentially from $12 $6 million in Q3 2021.
At quarter end.
<unk> gross retention rate.
E R. R was 91%.
Compared to 80% at the end of Q4 2020.
Or is that net retention rate for NR.
114% at the end of Q4 2021 compared to 141% at the end of Q4 2020.
Well enter our decreased compared to the prior year period.
We believe that Q4 2021 retention rate of 114% reflects the value that our customers see in the cooler solution.
And provides a solid foundation for continuing to expand into our customer base in future periods.
Moving on to operating expenses and adjusted EBITDA, a non-GAAP measure.
Expenses for 2021, and 2020 reflects the impact of our long term strategic plan implemented in late 2020, as we transition to a SaaS business model.
This transition prioritizes the use of resources for initiatives that grow recurring cloud revenue through the acquisition of new customers from an increasingly broad target market.
Medical expansion within <unk> customer base.
And the conversion of existing customers from an on premise solution to our SaaS solution.
Such prioritization is reflected in higher cost incurred during 2021 and 2020 for sales and marketing initiatives. These.
These initiatives.
Are designed to build our sales pipeline by creating engaging content.
<unk> brand visibility.
Securing top rankings with industry Influencers and analysts.
Investing in top management and sales talent globally, and Onboarding, New channel partners with resources training and ongoing support for immediate penetration into their client bases.
Much of these costs were incurred within our sales and marketing function. During the first half of 2021 as we were building the foundation for our SaaS transformation.
These costs have since paper as we focus on leveraging that initial investment.
Sales and marketing expense for the second half of 2020 was $8 8 million compared to $9 $6 million in the first half of 2021, representing an 8% decrease.
We will further focus and reduce sales and marketing expenses as needed to align resources with the strategic plan in 2022.
The cost optimization measures, we implemented during Q3 drove a 4% sequential decrease in overall operating expenses.
As operating expenses were $8 $5 million in Q4 of 2021.
<unk> to $8 $8 million in Q3 2021.
For the second half of 2021 operating expenses decreased to $17 $3 million.
From $18 $9 million in the first half of 2021, representing an 8% decrease.
These cost savings during the second half of 2021 were also reflected in adjusted EBITDA, a non-GAAP measure, which improved to a loss of $3 $1 million in Q4 2021.
Compared to a loss of $3 $5 million in Q3 2021.
Net loss was $3 $7 million for both Q4, 2021 and Q3 2021.
A reconciliation of adjusted EBITDA.
GAAP measure to net loss GAAP measure is included in our earnings releases for the respective periods.
Now for the balance sheet.
Cash increased to $26 million at the end of Q4 2021 compared to $18 $2 million at the end of Q3 2021.
We drew $5 million.
On our line of credit during the fourth quarter.
As of December 31, 2021, we maintained a balance of $5 million on our line of credit and we're in compliance with all violating a covenant.
We continue to manage cash closely and have seen improvement to cash burn after initiating a cost optimization program in the third quarter 2021.
We'll continue to monitor expenses and leverage available financing to align expenditures with bookings and collections on our path to becoming cash flow positive.
This concludes my prepared remarks.
I'll turn it over to our CEO Robin.
Secondly to discuss the key elements of our strategic roadmap and the traction we're realizing on key initiatives.
Rose.
Thank you Tom and good afternoon, everyone.
T J alluded in his opening remarks, a key component to driving new logos and generating SaaS revenue calls has been our partner led sales function, which is a tent pole of our transformational roadmap.
Our partner strategy has reduced sales friction and facilitated higher velocity adoption of acumen platform, because our partners know their enterprise customers needs best and already have a value based relationship with them.
Large enterprise customers are also buying through the channel more than ever before because enterprise customers expect a level of integration innovation and end to end solution that only apartment less chance you can provide.
It's because of this favorable dynamic that we even more emphasis on expanding our channel led sales initiatives to scale, our customer footprint and create new and larger SaaS revenue opportunities.
Okay.
At the outset of this year, we made the strategic decision to flip our go to market strategy in place, 80% of our focus on channel selling with the remaining 20% on our direct sales motion.
Instead of this model is that we're able to redirect resources and reallocate them towards expanding our partner network and partner success initiatives.
Of which are yielding strong results demonstrated by our partner generated revenue growing by 25% in 2020.
For more than 30% of total revenue in 2021.
To ensure we continue to see this level of investment in our partners' success in 2022 and built on the partner program. We launched in Q3 of 2021, we are working closely with our partners in the program to integrate the <unk> video engagement platform with their enterprise technology solutions to better meet our customers' needs.
Olive garden revenue.
Today's global enterprise demand high quality.
Secure video options for their workforce.
And our partners recognize that having access to a leading cloud based enterprise video platform is a way to make that happen.
One of our active partners and its resellers are having great success, incorporating tumor platform into their customers' technologies work.
Which we expect to start translating to new deals in the second half of this year.
Our continued ability to deliver additional support and an enterprise video solution to our partner is just one example of our commitment to co innovating with our partners.
And we're able to provide the dual benefit of ensuring we're able to offer video solution into what.
Bringing to the market with our customers today and they can still has ample buried and evolving.
No question.
Additionally, our partnership with Gaslog, a full scale provider of products to the government is building momentum.
As we talked about on the last call that smart was instrumental in helping secure our largest customer win in Q3.
Many government sectors are working with outdated video solution, which impact how effectively teams can communicate from training to collapsing.
<unk> selected us to bring.
Their government customers video engagement platform that is scalable configurable and easy to use but can also meet the most stringent security requirement and content creation and federal agencies.
The Gulf Smart prospect pipeline continues to build and prepare for the government banking turning here in September.
Perhaps one of our most exciting new strategic partner is with collecting a provider of enterprise content delivery networking or E CDN infrastructure for internal communications.
Collective incorporating Andrew.
Enterprise grade video software platform to deliver.
Internal content faster more reliably and with less bandwidth to its network of customers.
Combining kumar video engagement tools with collective delivery platform.
Customers receive scalable video communication solution.
We're really excited about this partnership and we're looking forward to reporting on our success in the coming quarters.
No it'd be close of last year and into this year, we have been working seriously to bring differentiated innovative partners to our ecosystem.
Because our partner led strategy is not only supporting how we go to market and acquire new customers and also supports our current customer success.
It also supports our current customer success and expansion strategy, which are critical pillars in our transformation to SaaS.
Our customers today expect a secure and reliable enterprise grade cloud solution.
And as I spoke at the beginning of my remarks, our enterprise customers expect a level of innovation and integration, which yields a more streamline independent end to end solution that meets the growing business.
Our approach to how we are strategically building our partner ecosystem allows us to deliver more value for our current customers by providing them with end to end solution.
Good to deliver it confer with young.
Our channel led strategy is keeping our customers at the heart of all that we do and every decision that we make and on a path to leverage the best in breed video solution at scale.
And with that I'll turn it back over to you P. J.
Thank you rose.
As many of you have experienced personally workplaces have been permanently transformed by the pandemic as remote and hybrid work becomes the norm the need for an enterprise grade video platform that can provide the security.
Performance features and ease of administration has never been greater.
<unk> is the answer.
And it's not just us or our valued customers that are recognized the power of our platform.
Congress video engagement platform, that's been recognized by several industry firms like Aragon research and most recently the cloud awards, which included our cloud platform as the best software as a service finalist.
Reflecting on 2021, it was a transformative year for our organization and I'm incredibly proud of what the team accomplished.
We scaled our cloud offerings.
Spaniard our partner network converted key on from customers to the cloud and delivered robust SaaS revenue growth.
We also established a comprehensive ESG framework grounded on one of <unk> key organizational troops.
Work from wherever whenever which impacts both the environmental and social areas.
If you haven't done so already I encourage you to visit our ESG page located within the Investor Relations section of our corporate website.
Looking ahead, the progress, we're making with partners and strategic alliances is gaining traction, which we believe will translate to more results starting in the second quarter of this year.
As we continue to transform our business. We are focused on delivering robust SaaS revenue growth, which will be driven by new customer and expansion bookings sourced through the channel in 2022.
Based on our success driving SaaS revenue and <unk> in 2021, we are increasing our goals for 2022, we now expect SaaS recurring revenue as a percentage of our recurring revenue to be at least 65% by the end of 2022 and 75% of recurring revenue mix by the end of 2023.
Longer term, we are confident that Cooper will emerge as a subscription driven growth company operating at scale benefiting from high margin recurring revenues sustainable and growing cash flow and adjusted EBITDA and net income profitability.
We will now take your questions.
Glenn please provide the appropriate instructions.
Thank you Sir as a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.
I show. Our first question comes from the line of Jeff Van <unk> from Craig Hallum. Please go ahead.
Hey, guys a couple from me the spin.
It's been a little bit, but I know you had historically given a metric or several metrics around platform usage.
Do you know talk to I don't know how you can quantify just the activity on the cloud with it with respect to the platform and how it's changed.
Yes, Great question, Jeff This T J.
One of the things that we've seen is the high peaks that occurred during COVID-19 have started to plateau, but our overall usage is still a way higher than pre pandemic and we continue to see growth in our cloud platform with the amount of both number of meetings and events that are happening as well as the total amount of video total number of.
Livestreams and the amount of storage, we're seeing more and more customer security store more and more video we have stopped continuing.
Continuing to report out on just the daily changes in that but we have seen that plateau from the peak that we had during COVID-19, but we definitely see just an ongoing incremental increase now both to the amount of meetings and events being held.
Mount that is being stored as well as the total number of livestreams.
And is that does that hold on a per customer basis, as well I know, you're adding more customers as you migrate people over to the cloud, but on a per customer basis the activity levels.
Yeah, I mean, it's a good question, Jeff and we haven't necessarily sliced and diced it that way from.
Like reporting perspective, but it's a fair question I think some of our pandemic uses that really had grown into individual customers. We have seen some of that plateau, but we still see that their usage is much higher than it was pre pandemic. So it's less is.
As less surgeries or spikes to it as it had during the pandemic and its much more regular now, but it's still at a higher level than pre pandemic.
Okay.
And and how I'm just sort of shifting gears, obviously, we've got Oh, sorry about that we've got a number of air our retention metrics that you've shared.
With respect to the SaaS side, but can you talk to the Prem side I know, you've given kind of a percent of revenue mix, but there's a number of variables in there that that remain unknown. So prem talk about kind of what youre seeing on the retention side and maybe how that is likely to translate into the maintenance number over the next several quarters.
Yeah. Good question I'll have Tom go ahead and dive into that Tom.
Sure.
We're seeing.
Retention for the on Prem business.
And the 70% range.
Which is giving us a headwind on that maintenance revenue.
So we do expect that to be to be coming down.
In the future.
Mhm, Okay, and then just a couple of other quick ones if I could the.
On the cash flow how do you think about the path to cash flow do you have any any targets you can share. When you think we'll get to break even or how do you think about cash flow for the year.
Tom Once again do you want to go ahead with that.
Sure we are.
Our.
We do expect to see some burn in the beginning part of this year, but we are pushing towards cash flow breakeven, we will see will be much closer to that.
In Q3, and Q4 this coming year.
And we expect to be cash flow positive.
In the beginning in Q1 of 2023.
Okay.
Q1, 'twenty was helpful. And then I guess, just lastly on the.
So back to the cloud briefly on the E. R. R front.
How should we expect that number over the next couple of quarters I know, it's been blipping up gradually it looks like it was down just modestly in Q4, how do you think about it for Q1 and progression through 'twenty two.
Yes at a high level I think what we're going to see as you know were 16%.
Today on AOR growth I think we're gonna see that gradually increase in the latter half of the year I think we'll see it start to pick up more in Q3 and Q4.
Sure.
Okay got it and obviously I think the messaging as you see that being driven by by channel as you've you've definitely made the all in shift on channel.
That's correct, we made the 80% in just all I would say that we definitely have shifted too focused on that 80% channel driven growth and we do think that a lot of that Q3 Q4 growth will come due to those new channel relationships, becoming more prolific in the latter half of the year.
Got it okay, I'll, let somebody else jump on and thanks for taking my questions.
Thank you Justin.
Thank you.
Sure. Our next question comes from the line of Sharon <unk> from Northland Securities. Please go ahead.
Hi, guys. This is Sharon on behalf of Mike Latimore of Northland Securities.
My question is how many salespeople do you have now and that made the number good this year.
Very good question Sharon. So this year, we have hang on one second I'm just going to double check my notes to make sure I get the exact numbers here. We have about 26 personnel that are in sales and our go to market account management and customer success.
We see that number being fairly steady at that level. This year and we see that they will be working very closely with our channel and partnerships to continue to excel growth, we will adjust to those channels that are more prolific from a resource perspective, but that's where we see ourselves being this year.
Okay great.
And then.
What percentage of your base has migrated to the cloud.
So today, what we've talked about is about 65% of our base from on premise has either done one of two things they've either converted to the cloud or in process of doing so or they have upgraded to our latest.
Greg is on Prem versions, which was $10 $10 five releases and so over the past two and a half years or so that's what we've seen happen and pretty successful transition. We saw last year that about five specifically a transition to the cloud and we expect a similar number here in 2022.
Thank you.
Thank you Sharon.
Thank you.
I'm showing no further questions at this time.
This concludes the company's question and answer session. If your question was not taken please contact <unk> IR team at Kumar at Gateway IR Dot com.
I would now like to turn the call back over to Mr. Kennedy for his closing remarks.
Thank you so much dilemma, we really appreciate your help and thank you for everyone. Joining our call. This afternoon I look forward to speaking with you again soon thanks so much.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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