Q1 2022 Qumu Corp Earnings Call

May 12, 2022

Name is Eli and I will be your operator. This afternoon, joining us is president and CEO Rosa Bentley.

CFO Tom <unk>.

And Matt Glover from Gateway Investor Relations at this time, all participant lines are in a 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 one on your telephone if you require any further assistance. Please press star zero.

Now I'd like to turn the call over to Matt <unk>, Sir you may begin.

Thanks, operator, and good afternoon, everyone. After the market closed today <unk> issued a press release announcing its financial results for the first quarter ended March 31, 2022 copy of which is available on the Investor Relations section of the Companys website during.

During today's call management will make certain statements with respect to the company's expected financial results.

These 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 only as the date of this call and 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.

Please refer to <unk> SEC filings, specifically its Form 10-Q financial 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, 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'll 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.

Insulation from a substitute for or superior to GAAP results.

We encourage you to consider all measures when analyzing <unk> performance.

I'd like to remind everyone that this call is being recorded and will be made available for replay via link available in the Investor Relations section of <unk> Web site now.

Now I'd like to turn the call over to <unk>, President and CEO roads Bentley.

Thank you Mac and good afternoon, everyone and thank you for joining us today, it's great to be here with you.

New President and CEO as many of you know I joined <unk> as Chief operations Officer in March of 2021 since joining the company I have played a key role in the development and execution of cumin strategic roadmap, which emphasizes growing our cloud business leveraging innovative technology and scaling our SaaS revenue base.

CLO I spearheaded coolers partner led sales motion and customer experience efforts, which continue to be a critical element in our ability to secure new logos deepen customer relationships and drive higher retention and cloud conversion.

My appointment will ensure absolute continuity in leadership and execution of our strategy.

And is a direct reflection of the succession plan, we have had in place for several months for those of you that I haven't had the pleasure of meeting prior to criminal I held leadership roles at several SaaS technology companies. Most recently I led operations and strategy for care data of $1 $8 billion revenue analytics company, where he played an important part of the company successful.

<unk> transitioned from a perpetual license business model to a subscription based cloud first revenue model.

Terry data transition was in many ways similar to the transformation currently underway here at <unk>.

It has given me a playbook to referenced along this journey.

Looking ahead I appreciate the opportunity to lead <unk> into the next stage of development.

I also look forward to building stronger relationships with our existing partners and customers as well as making new connections with our investors and other stakeholders over the coming months.

Switching gears to our most recent performance during the first quarter, we landed several new wins and customer expansion, both of which support our view that Cumulus transformation is well underway.

Our partner led sales motions are working demonstrated by the fact that 75% of our wins in Q1 were through channel partners, including collective BT and socialize.

The traction we realized also demonstrates our execution against our strategy around customers' product adoption innovation and partners.

Our performance is now also translating into growing SaaS metrics in AP.

Yes.

As we've mentioned previously our team is committed to driving cloud business and scaling our SaaS revenue base. We expect this trend to continue in 2022 and beyond.

Highlighting our ongoing success is the 15% year over year SaaS revenue growth, we generated in the first quarter, bringing.

Bringing our total SaaS revenue as a percentage of total revenue to 54%.

Up from 46 in the prior quarter and 40% in Q1 of last year.

On top of this our SaaS revenue as a percentage of reoccurring revenue continues to grow.

Up to 60% in Q1 compared to 56% in the prior quarter and 46%.

In Q1 of last year.

Additionally, our SaaS annual recurring revenue or <unk> increased 10% year over year to a record $13 million.

Our encouraging SaaS and recurring revenue growth is supported by our solid balance sheet, including $15 $5 million of cash a level that provides significant runway to execute our strategy.

In addition to diligently managing our cash the leadership team and I are continually looking for areas to optimize costs and drive efficiencies.

I'll now turn it over to.

Our CFO Tom to provide more detail on our Q1 financial performance Tom.

Thanks Rose, it's a pleasure to be speaking with you today.

Like last quarter I will expand on a few items not already addressed by rows were included in our earnings release. This afternoon.

The metrics that we use to measure the success of our SaaS transformation continue to move in the right direction.

Now, let's look at them.

As rose mentioned during Q1 subscription <unk> increased 10% to 13.0 million.

From $11 8 million in Q1 2021.

And increased sequentially from $12 8 billion in Q4 2021.

Our SaaS Kpis remained strong with gross retention rate or <unk>.

At 88% at quarter end and that retention rate or MRO at 107% at quarter end.

Moving on to operating expenses and adjusted EBITDA, a non-GAAP measure.

Our transformation is also focused on rationalizing our cost structure and realizing efficiencies to reduce cash burn.

Our total operating expenses in the first quarter of 2022 were $8 2 million down, 3% sequentially and 10% year over year.

Going forward, we will reduce operating expenses as needed.

<unk> resources.

Who moves strategic plan for the balance of 2022.

Adjusted EBITDA, a non-GAAP measure was a loss of $4 1 million in Q1 2022.

To a loss of $3 1 million in.

In Q4 of 2021.

Net loss was $4 6 million for Q1 2022.

<unk> net loss of $3 8 million in.

In Q4 2021.

A reconciliation of adjusted EBITDA, a non-GAAP measure to net loss. The GAAP measure is included in our earnings releases for the respective periods.

Now for the balance sheet.

At the end of Q1 2020 to our cash position was as expected and tracking to plan.

$15 $5 million.

We continue to tightly manage cash.

And I've seen an improvement to cash burn after initiating a cost optimization program in Q3 last year.

We will continue to monitor expenses and leverage our available credit facility.

Align expenditures with bookings and collections on our path to becoming cash flow positive.

As Rose mentioned, we believe that our cash position and available liquidity resources provide sufficient runway to execute our SaaS growth transformation strategy and get to cash flow profitability.

That concludes my prepared remarks, I'll turn it back over to rose to discuss our strategy key partnerships and our outlook.

Rose.

Thanks, Tom I'm excited to lead such an important moment for our company and for the industry digital transformation is driving the convergence of networking security and viewer experience and technology teams realize and recognize the challenges of delivering video in a complex enterprise environment.

Distributor organizations globally are looking for reliable end to end video solution to solve these challenges with this approach enterprises can also help reduce operational costs by moving to a single cloud delivered solutions.

The need for an enterprise video platform that can provide the security performance features and ease of administration has never been greater.

The progress we've been making with partners and strategic alliances continues to gain momentum demonstrated by the new customer and expansion sales to large enterprises, we secured in the first quarter.

Two most recent win span a variety of these cases service cloud and hybrid solutions.

You have our notable new customers include a prominent global auto manufacturer and mobility provider.

Leading multinational energy company and top global banking and financial company.

These great range as a result of our dedication to this strategy and collaboration with our partners.

Perhaps our most important partnership we are currently working on is with AT&T.

Collaborated to deliver a cloud based unified video experience for enterprises with video content management streaming enterprise signage and IP TV.

This partnership is a major win for us as it was a highly competitive selection process, where cumin technology and stack correct.

And track record edged out much larger than more known.

More well known brands.

The innovative solution, which is available to AT&T customers today brings the video content management and streaming enterprise signage of IP IP TV all enhanced by eight.

At&t's fiber and <unk> networks, and the Khumbu video engagement platform together in one solution.

<unk> of management services helps to relieve the burden of deployment in day to day support with AT&T video experts acting as the extension to <unk> and.

Webcasting team.

The feedback and response from At&t's customers are encouraging we have a strong and healthy pipeline and expect to close our first deal together in Q2.

In addition to AT&T, we formed a joint reseller partnership with <unk>, a leader in the live video streaming and remote production solution.

<unk> are delivering live HD and <unk> video anytime anywhere over the public Internet.

We have already successfully collaborated with my view on high Stakes live events for major.

Auto manufacturers and one of the country's largest health care company.

The expanded partnership enabled our respective enterprise clients to produce deliver store and distribute broadcast quality video, including live video from corporate events and also extends our ability to support enterprise customers wanting to produce and stream live events reliably and securely.

Over the public Internet.

<unk> customers to encourage to gain access to the storage cost.

Management distribution and analytics capabilities of tumors video engagement platform. We are really excited about this expanded relationship and expect to launch several new wins together this year.

We continued to see momentum with large enterprises deploying our video engagement platform. During Q1, we expanded the use of our platform in key accounts in the healthcare and manufacturing industry, including a transition from on Prem to cloud and user expansion with one of the largest automakers in the U S. Additionally.

We signed new and expansion agreement for a synchronous video deployments, which added nearly a million new users to the platform in Q1.

Leading organizations are recognizing that today's environment requires reliable secure and scalable video communications to help them accelerate their digital transformation effort.

Rewarding to be part of their video strategy in this new era of hybrid work.

Overall, our partner ecosystem allows us to deliver more value for our current customers by providing them with the end to end solution they need to deliver against their video needs.

Our partner led strategy helps our customers and keeps 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 solutions at scale.

Put together our sales momentum not only reflects the success of our sales motions and innovative technology, but also our industry, leading customer support which continues to differentiate us in the market.

<unk> recently won its fourth consecutive Stevie Award for customer service, a recognition that notable technology companies and brands like Google.

Optum health Zappos Dot Com Wyndham resorts and Affleck have won previously.

We are proud of this award.

As it is a direct reflection on our team's unwavering commitment to the customer.

And providing the best service possible day in day out.

As we continue to transform our business, we remain committed to generating robust SaaS revenue growth through new customer and expansion bookings through the channel.

Looking ahead, the progress, we're making with partners and strategic lines is gaining traction.

We've entered the second quarter with a robust pipeline that.

We look to capitalize on throughout the year.

Our plan is supported by a solid cash position and available resources that provide sufficient runway.

To execute our growth strategy.

Going forward, we continue to expect our SaaS.

<unk> revenue as a percentage of our total reoccurring revenue to be at least 65%.

By the end of 2022 and 75% by the end of 2023.

And we continue to expect the crossover to cash flow breakeven during 2023.

The leadership team and I remain confident that <unk> will emerge as a subscription driven growth company operating at scale benefiting from high margin reoccurring revenue sustainable and growing cash flow and adjusted EBITDA and net income profitably.

Yeah.

We will now take your question Eli please provide the appropriate instructions.

You bet. Thank you.

Ladies and gentlemen, the Q&A is now open once again to ask a question simply press star one on your telephone keypad.

To withdraw your question press, the pound or hash key.

Please standby, while we compile the Q&A roster.

And our first question is from Mike Latimore from Northland Capital your.

Your question please.

Thank you very much Rosen Tom.

Hello.

Oh.

So the AT&T win is very interesting.

How is AT&T kind of positioning it.

Within its broader enterprise is there a specific sales force and selling it.

What type of customers are they targeting just kind of curious are there levers you have here.

Sure sure we were just together with AT&T at Nab and we are positioning this in their global video solutions portfolio.

Youll see a lot of like sports media entertainment in there.

Their expectation that the IP television and streaming.

Combination with the content management will deliver right that differentiated solution through and through that portfolio.

Got it and they have sort of enterprise salespeople, who are selling it or how are they selling correct. Yeah correct. Yeah. They are leveraging it through their enterprise. We are focused on the enablement building pipeline and we've been doing this now for a little while with them. So the good news is we have the opportunity now to start capitalizing on the pipeline we've been building.

Yeah.

Great and obviously the channel itself big part of the.

Bookings again here I mean, how are you thinking about any further refinements on.

Channel versus inside sales or <unk>.

Direct sales kind of efforts is there any sort of on track with the strategy are there any kind of changes or refinements you want to have going forward here.

Yes, Mike we're on track with the current strategy as you know we shifted to the partner led strategy.

Few months ago, and we are committed to enabling our partners building the repeatable sales motion with them and continuing to find opportunities to win with them in the market. So no shifts in strategy now we continue to find the importance in our direct sales motion as well as our channel led motion and respecting that a lot of the.

Current opportunities that we have in our pipe and our focus is around the channel.

And then just last one.

<unk> change in revenue is.

Is that largely related to maintenance.

Yes.

Significant.

Decrease is just maintenance heads.

The headwinds that we've talked about that we're seeing.

The business is shifting away from on Prem to.

<unk> cloud so it's not unexpected.

Very much exactly what we expected coming into the year.

Great and then I guess just last one on just kind of the broader market you sound very positive on new wins, new bookings and.

Interest levels high I guess.

We had sort of a maybe a little bit of it.

Covid tailwind now, we're kind of coming out of Covid hybrid work environment.

But it sounds like the interest level in the category and your technology is very high and if not improving.

But maybe you can add to that.

Yes, certainly Mike you're right, we're seeing the trend where there is still all over the map, but youre right leading towards hybrid work in hybrid events.

Because at the end of the day, we are not the same people in 2020 coming into 2022 and the higher expectation of employees in this hybrid environment is higher than it's ever been in.

And if you look at just our usage on the platform we have seen a 54% increase in total platform users year on year.

Which means that a lot of customers are just really using more right and we've seen like a two X increase in just <unk> and video views over the last three years. So the use cases are being validated by that and I think also the adoption of video is being validated by how we're seeing our customers increase their usage of even what they're currently doing.

Okay.

So you said that the users are up 54% year over year.

Correct Okay.

Yes.

Great.

Alright, thanks very much good luck this year.

Yes, Thank you Mike.

Thank you.

Thank you Alright, our next line is from Jeff Van <unk> from Craig Hallum. Your.

Your line is open.

Great. Thanks, Thanks for taking my questions.

Roes on the on the SaaS side talk about the gross retention and maybe your expectations. There. That's my first and then.

Just from a competitive.

[noise] landscape question sort of when you get to the final phase what is the primary differentiator why do you win if you went on the SaaS side right now.

Yes, certainly Jeff Thanks for the thanks for the questions.

So you have to focus on your first one which is why we're winning I spoke to a little bit in my prepared remarks, but it's really around the customer service and support level that we provide our customers know we will go the extra mile and we're down to that last leg. It really comes down to the reliability.

And they know that we are the kind of partner for them that will.

To ensure their success.

Number one reason for winning at this point.

The reliability comes from the team of <unk>.

Customer success, but also of just the product itself.

When I look at gross retention, which is your second part of your first part of your question.

Yes, I mean, we expect gross retention to be a critical foundation for our growth in bookings throughout the year and.

Gross retention for US specifically, we look at it in two ways right you've got the gross retention of the BCC business as well as the cloud business, we're seeing extremely high best in class.

Renewal and retention rates, specifically on the SaaS and cloud business and with our strategic plan and what we expect to see from the BCC business. We are seeing at least 70% and above retaining of that business because customers are choosing <unk> as we call. It <unk>.

Stay on the current version of our upgrade or potentially migrate to the cloud and that cloud conversions are what's really leading to a lot of our SaaS growth as well and then I'll defer to Tom too if there's anything else you'd like to add there Tom.

Yeah.

No I would just say that the SaaS.

SaaS grrr gross retention that we saw in Q1.

Was in line with what we expected and we expect to be at 90% or above for the year, So expect to see.

You see that a little bit better and continue through the year.

Okay.

Okay Fair enough last one then I guess on.

A lot of new partnerships a lot of things that you're working on you talked about the pipeline.

You've got the offsets some of the <unk> folks going away differs or coming down you mentioned, some new signings, but I guess the question would be.

When do you think you can really move the needle with respect to revenue from or differed from these new partnerships I mean, what's the timeline to impact you.

Yes, I'll jump into the partnership specifically now.

Hand over to Tom.

For us we are tracking to plan right now and considering where we're at and our strategy right. The new business wins, we don't necessarily get the credit for them until we have either converted a customer to the cloud or we've seen the.

Decline in the on Prem business rate continuing to stabilize so we expect that intersection point of our new bookings plan.

Delivering against our retention plan.

As well as the partners really start to take hold in Q3, and Q4 with our expectation coming into the year that will be in a much better position around that breakeven point and cash.

Tom is there anything you'd like to add.

No I think just that.

Every quarter were seeing more traction and improvement in our.

Hey, Bill.

To attract new customers, which is just going to help us.

Really grow that the SaaS business.

So what we've what we saw here in the first quarter.

Very much trucks with our clients.

Okay, great. Thanks for taking my questions and best of luck.

Thank you Chuck.

Thank you.

At this time. This concludes the company's question and answer session. If your question was not taken please contact <unk> IR team at <unk> at Gateway IR Dot com.

I would now like to turn the call back over to MS. Bentley for her closing remarks.

Thank you Eli and thank you everyone for joining our call. This afternoon.

<unk> is executing against a tremendous opportunity and look forward to working with the team to ensure cooler reposition full potential.

Look forward to speaking to everyone again soon have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation you may now disconnect.

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Good day and welcome to <unk> first quarter 2022 conference call.

My name is Eli and I will be your operator this afternoon.

Joining us is <unk>, president and CEO Rose Bentley.

CFO Tom <unk>.

And Matt Glover from Gateway Investor Relations.

At this time all participant lines are in a 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 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 <unk>, Sir you may begin.

During today's call management will make certain statements with respect to the company's expected financial results. The company is 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 only as of the date of this call and 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.

Please refer to <unk> SEC filings, specifically its Form 10-Q financial 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, 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 measures, including a reconciliation of this measure with its comparable GAAP measure non-GAAP financial measures are not intended to be considered.

Insulation from a substitute for or superior to GAAP results.

We encourage you to consider all measures when analyzing <unk> performance.

I'd like to remind everyone that this call is being recorded and will be made available for replay via link available in the Investor Relations section of <unk> website.

Now I'd like to turn the call over to <unk>, President and CEO roads Bentley.

Thank you, Matt and good afternoon, everyone and thank you for joining US today, it's great to be here with you as <unk>, New President and CEO as many of you know I joined <unk> as Chief operations Officer in March of 2021 since joining the company I have played a key role in the development and execution of cumin strategic roadmap.

Which emphasizes growing our cloud business, leveraging innovative technology and scaling our SaaS revenue base.

Hello, I spearheaded coolest partner led sales motion and customer experience efforts, which continue to be a critical element in our ability to secure new logos deepen customer relationships and drive higher retention and cloud conversion.

My appointment will ensure absolute continuity in leadership and execution of our strategy.

And as a direct reflection of the succession plan, we have had in place for several months for those of you that I haven't had the pleasure of meeting prior to criminal I held leadership roles at several SaaS technology companies. Most recently I led operations and strategy for care data of $1 $8 billion revenue analytics company, where he played an important part of the company successful.

The transition from a perpetual license business model to a subscription based cloud first revenue model.

Terry data transition was in many ways similar to the transformation currently underway here at <unk> and has given me a playbook to reference along this journey.

Looking ahead I appreciate the opportunity to lead <unk> into the next stage of development.

I also look forward to building stronger relationships with our existing partners and customers as well as making new connections with our investors and other stakeholders over the coming months.

Switching gears to our most recent performance during the first quarter, we landed several new wins and customer <unk>.

Expansion, both of which support our view that Cumulus transformation is well underway.

Our partner led sales motions are working demonstrated by the fact that 75% of our wins in Q1 were through channel partners, including collective BT and socialize.

Traction we realized also demonstrates our execution against our strategy around customers.

Adoption innovation and partners.

Our poor performance is now also translating into growing SaaS metrics and Kpis.

Kpis.

As we've mentioned previously our team is committed to driving cloud business and scaling our SaaS revenue base. We expect this trend to continue in 2022 and beyond.

Highlighting our ongoing success is the 15% year over year SaaS revenue growth, we generated in the first quarter.

Bringing our total SaaS revenue as a percentage of total revenue 54%.

Up from 46 in the prior quarter and 40% in Q1 of last year.

On top of this our SaaS revenue as a percentage of reoccurring revenue continues to grow.

Up to 60% in Q1 compared to 56% in the prior quarter and 46%.

In Q1 of last year.

Additionally, our SaaS annual recurring revenue or <unk> increased 10% year over year to a record $13 million.

Our encouraging SaaS and recurring revenue growth is supported by our solid balance sheet, including $15 $5 million of cash a level that provides significant runway to execute our strategy.

In addition to diligently managing our cash the leadership team and I are continually looking for areas to optimize costs and drive efficiencies.

I'll now turn it over to.

Our CFO Tom to provide more detail on our Q1 financial performance Tom.

Thanks, Ross, it's a pleasure to be speaking with you today.

Like last quarter I will expand on a few items not already addressed by rows were included in our earnings release. This afternoon.

The metrics that we use to measure the success of our SaaS transformation continue to move in the right direction.

Now, let's look at them.

As rose mentioned during Q1 subscription.

Increased 10% to 13.0 million.

From $11 8 million in Q1 2021.

And increased sequentially from $12 8 million in Q4 2021.

Our SaaS Kpis remained strong with gross retention rate for Gerard.

At 88% at quarter end.

That retention rate or MRI at 107% at quarter end.

Moving on to operating expenses and adjusted EBITDA, a non-GAAP measure.

Our transformation is also focused on rationalizing our cost structure and realizing efficiencies to reduce cash burn.

Our total operating expenses in the first quarter of 2022 were $8 2 million down, 3% sequentially and 10% year over year.

Going forward, we will reduce operating expenses as needed to align resources with Google.

<unk> strategic plan for the balance of 2022.

Adjusted EBITDA, a non-GAAP measure.

A $4 1 million in Q1 2022.

Pedro a loss of $3 1 million.

In Q4 of 2021.

Net loss was $4 6 million for Q1 2022 compared to a net loss of $3 8 million in Q4 2021.

A reconciliation of adjusted EBITDA.

non-GAAP measure to net loss. The GAAP measure is included in our earnings releases for the respective periods.

Now to the balance sheet.

At the end of Q1 2022.

That's good cash position was as expected and tracking to plan at $15 5 million.

We continue to tightly manage cash at.

At Athene and <unk>.

<unk> cash burn after initiating a cost optimization program in Q3 last year.

We will continue to monitor expenses and leverage our available credit facility.

Align expenditures with bookings and collections on our path to becoming cash flow positive.

As Rose mentioned, we believe that our cash position and available liquidity resources provide sufficient runway to execute our SaaS growth transformation strategy.

Cash flow profitability.

That concludes my prepared remarks.

Turn it back over to rose to discuss our strategy key partnerships and our outlook.

Rose.

Distributed organizations globally are looking for a reliable end to end video solution to solve these challenges with this approach enterprises can also help reduce operational costs by moving to a single cloud delivered solutions.

The need for an enterprise video platform that can provide the security performance features and ease of administration has never been greater.

<unk> most recent win span a variety of use cases service cloud and hybrid solutions.

A few of our notable new customers include a prominent global auto manufacturer and mobility provider, a leading multinational energy companies and top global banking and financial company.

Great range as a result of our dedication to this strategy and collaboration with our partners.

Perhaps our most important partnership we are currently working on is with AT&T.

Collaborated to deliver a cloud based unified video experience for enterprises with video content management streaming enterprise signage and IP TV.

This partnership is a major win for us as it was a highly competitive selection process, where cumin technology, and Scott correct and track record edged out much larger than more known.

More well known brands.

The innovative solution, which is available to AT&T customers today brings the video content management and streaming enterprise signage of IP IP TV all enhanced by eight.

At&t's fiber and <unk> networks, and the Khumbu video engagement platform together in one solution.

<unk> of management services helps to relieve the burden of deployment in day to day support with AT&T video experts acting as the extension to it.

Webcasting team.

The feedback and response from At&t's customers are encouraging we have a strong and healthy pipeline and expect to close our first deal together in Q2.

In addition to AT&T, we formed a joint reseller partnership with <unk>, a leader in the live video streaming and remote production solutions.

<unk> are delivering live HD and <unk> video anytime anywhere over the public Internet.

We have already successfully collaborated with my view on high Stakes live events for major.

Auto manufacturers and one of the country's largest health care company.

Over the public Internet.

<unk> customer to encourage to gain access to the storage cost.

<unk> management distribution and analytics capability that Koumas videogame platform. We're really excited about this expanded relationship and expect to land several new wins together this year.

We continue to see momentum with large enterprises deploying our video engagement platform. During Q1, we expanded the use of our platform in key accounts in the healthcare and manufacturing industries, including a transition from on Prem to cloud and user expansion with one of the largest automakers in the U S. Additionally.

We signed new and expansion agreement for a synchronous video deployments, which added nearly 1 million new users to the platform in Q1.

Leading organizations are recognizing that today's environment requires reliable secure and scalable video communications to help them accelerate their digital transformation effort.

Rewarding to be part of their video strategy in this new era of hybrid work.

Overall, our partner ecosystem allows us to deliver more value for our current customers by providing them with the end to end solution they need to deliver against their video needs.

Partner with strategy helps our customers and keeps 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 solutions at scale.

Put together our sales momentum not only reflects the success of our sales motion from innovative technology, but also our industry, leading customer support which continues to differentiate us in the market.

<unk> recently won its fourth consecutive Stevie Awards for customer service, a recognition that notable technology companies and brands like Google.

Optum health Zappos Dot Com Wyndham resorts and Affleck have one previously.

We are proud of this award.

As it is a direct reflection on our team's unwavering commitment to the customer.

And providing the best service possible day in and day out.

As we continue to transform our business, we remain committed to generate robust SaaS revenue growth through new customer and expansion bookings through the channel.

Looking ahead, the progress, we're making with partners and strategic alliances is gaining traction.

We've entered the second quarter with a robust pipeline that.

We look to capitalize on throughout the year.

Our plan is supported by a solid cash position and available resources that provide sufficient runway.

To execute our growth strategy.

Going forward, we continue to expect our SaaS.

<unk> revenue as a percentage of our total reoccurring revenue to be at least 65%.

By the end of 2022 and 75% by the end of 2023.

And we continue to expect the crossover to cash flow breakeven during 2023.

The leadership team and I remain confident that Qunar will emerge as a subscription driven growth company operating at scale benefiting from high margin reoccurring revenue sustainable and growing cash flow and adjusted EBITDA and net income profitably.

Sure.

We will now take your question Eli please provide the appropriate instructions.

Thank you.

Ladies and gentlemen, the Q&A is now open once again to ask a question simply press star one on your telephone keypad.

To withdraw your question press, the pound or hash key.

Please standby, while we compile the Q&A roster.

Okay.

And our first question is from Mike Latimore from Northland Capital your.

Your question please.

Thank you very much rosenbaum.

Hey, Mike Hello.

No.

So the AT&T wins very interesting.

How is AT&T kind of positioning it.

Within its broader enterprise is there a specific sales force and selling it.

Hi.

Type of customers are they targeting and just kind of curious are there levers you have here.

Sure sure we were just together with AT&T at Nab and we are positioning this in their global video solutions portfolio.

So youll see a lot of like sports media entertainment in there.

But their expectation that the IP television and streaming.

Combination with the content management will deliver great that differentiated solution through and through that portfolio.

Got it and sort of enterprise salespeople selling it or how are they selling correct, yes, correct yes.

We're leveraging it through their enterprise, we are focused on the enablement building pipeline and we've been doing this now for a little while with them. So the good news is we have the opportunity now to start capitalizing on the pipeline we've been building.

Yes.

Great and obviously the channel itself big part of the.

Bookings again here.

Are you thinking about any further refinements on <unk>.

Channel versus inside sales or.

Direct sales kind of efforts is there any sort of on track with strategy are there any kind of changes or refinements you want to add one corridor.

Yes, Mike we are we are on track with the current strategy as you know we shifted to the partner led strategy.

A few months ago, and we are committed to enabling our partners building the repeatable sales motion with them and continuing to find opportunities to win with them in the market. So no shifts in strategy now we continue to find the importance in our direct sales motion as well as our channel led motion and respecting that a lot of the.

The current opportunities that we have in our pipe and our focus is around the channel.

Got it and then just last one the sequential change in revenue is that.

Largely related to maintenance.

Yes.

Significant.

Decrease is just maintenance.

The headwinds that we've talked about that we're seeing.

The business is shifting away from on Prem to.

<unk> cloud so it's not unexpected.

Very much exactly what we expected actually coming into the year.

Great.

And then I guess just last one on just kind of a broader market you sound very positive on new wins, new bookings and.

Interest levels high I guess.

We had sort of maybe a little bit of it.

Covid tailwind now, we're kind of coming out of Covid hybrid work environment.

But it sounds like.

The interest level in the category and your technology is very high and if not improving.

But maybe you can add to that.

Yes, certainly Mike you're right, we're seeing the trend or are there still all over the map, but youre right leading towards hybrid work in hybrid events.

Because at the end of the day, we are not the same people in 2020 coming into 2022 and the higher expectation of employees in this hybrid environment is higher than it's ever been.

And if you look at just our usage on the platform, we've seen up 54% increase in total platform users and year on year.

Which means that a lot of customers are just really using more right than weeks seemed like a two X increase in just async in video views over the last three years. So the use cases are being validated by that I think also the adoption of video is being validated by how we're seeing our customers increase their usage of even what they're currently doing.

Sure.

So you said that the users are up 54% year over year.

Correct.

Yes.

Great.

Alright, thanks very much good luck this year.

Yes, Thank you Mike.

Thank you.

Thank you Alright, our next line is from Jeff Van <unk> from Craig Hallum Your line.

<unk> is open.

Great. Thanks, Thanks for taking my questions.

Roes on the SaaS side talk about the gross retention and maybe your expectations. There. That's my first and then.

Just from a competitive.

Landscape question sort of when you get to the final phase what is the primary differentiator why do you win if you went on the SaaS side right now.

Yes, certainly Jeff Thanks for the thanks for the questions.

I'm going to focus on your first one which is why we're winning I spoke to a little bit in my prepared remarks, but it's really around the customer service and support level that we provide our customers know we will go the extra mile and we're down to that last leg. It really comes down to the reliability and the.

I know that we are the partner for them that will.

Ensure their success.

Number one reason for winning at this point.

The reliability comes from the team.

To support customer success, but also of just the product itself.

When I look at gross retention, which is your second part of your first part of your question yes.

We expect gross retention to be a critical foundation for our growth in bookings throughout the year.

And gross retention for us specifically when we look at it in two ways right you've got the gross retention of BBC fee business as well as the cloud business, we're seeing extremely high best in class.

Renewal and retention rates, specifically on the SaaS and cloud business and with our strategic plan and what we expect to see from the BCC business. We are seeing at least 70% above retaining of that business because customers are choosing <unk> as we call it as.

We will now too.

Hey on the current version of our upgrade or potentially migrate to the cloud and that cloud conversions are what's really leading to a lot of our SaaS growth as well and then I'll defer to Tom too if there's anything else you'd like to add there Tom.

Yeah.

Now I would just say that the returns.

<unk> gross retention that we saw in Q1 was in.

In line with what we expected and we expect to be at 90% or above for the year. So I expect to.

You see that a little bit better and continue through the year.

Okay.

Okay Fair enough last one then I guess on.

A lot of new partnerships a lot of things that you're working on you talked about the pipeline.

You've got the offsets some of the prime folks going away differs or coming down you mentioned, some new signings, but I guess the question would be.

When do you think you can really move the needle with respect to revenue from or deferred.

From these new partnerships I mean, what's the timeline to impact you.

Okay.

Yes ill jump into the partnerships specifically now.

<unk> over to Tom I mean for US we are tracking to plan right now and considering where we're at and our strategy right. The new business wins, we don't necessarily get the credit for them until we have either converted a customer to the cloud or we've seen the.

Decline in the on Prem business rate continuing to stabilize so we expect that intersection point of our new bookings plan.

And delivering against our retention plan.

As well as the partners really start to take hold in Q3, and Q4 with our expectation coming into the year that will be in a much better position around that breakeven point and cash.

Tom is there anything you'd like to add.

No I think just that.

Every quarter, we're seeing more traction and improvement in our <unk>.

The.

To attract new customers, which is just going to help us.

Really grow that business.

So what we've what we saw here in the first quarter.

Very much traction with our clients.

Okay, great. Thanks for taking my questions best of luck.

Thank you Chuck.

Thank you.

Thank you at.

At this time this concludes the company's question and answer session.

If your question was not taken please contact <unk> IR team at <unk> at Gateway IR Dot com.

I would now like to turn the call back over to MS. <unk> for her closing remarks.

Okay.

Thank you Eli and thank you everyone for joining our call. This afternoon.

<unk> is executing against a tremendous opportunity and look forward to working with the team to ensure a cooler revisit full potential I look forward to speaking to everyone again soon.

Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation you may now disconnect.

Q1 2022 Qumu Corp Earnings Call

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