Qumu Reports Third Quarter 2019 Results

6% Year-to-Date Revenue Increase and 51% Adjusted EBITDA Improvement Underpin Return to Growth Reiterates Revenue and Adjusted EBITDA Financial Guidance for 2019

Conference Call Today, October 31, 2019 at 4:30 p.m. ET

Minneapolis, MN – October 31, 2019 – Qumu Corporation (NASDAQ: QUMU) today reported financial results for the third quarter and nine months ended September 30, 2019. The Company reported third quarter revenue of $6.7 million, net loss of $(221,000), adjusted EBITDA, a non-GAAP measure, of $(535,000), and ended the quarter with cash of $7.5 million. Compared to the corresponding first nine months of 2018, year-to-date 2019 gross profit improved $2.5 million as revenue grew $1.0 million, or 6%, and gross margin percentage increased 10%. Further, adjusted EBITDA, a non-GAAP measure, improved $1.8 million, or 51%. Qumu management also reiterated its revenue and adjusted EBITDA financial guidance for the year ending December 31, 2019.

Management Commentary

“Qumu’s growth in the third quarter was driven by large enterprise customers investing in major expansions,” said Vern Hanzlik, Qumu’s President and CEO. “Our customers are experiencing an explosion of video content and traffic across their global networks. This rapid expansion will only intensify with the ongoing migration toward Self-Service video streaming options, which Qumu enables by transforming a Zoom, WebEx, Teams or other video conferencing system into a video recording and broadcasting tool.”

“On the financial side, Q3 was a solid quarter for Qumu during which we regained much of the momentum we generated at the start of 2019,” added Hanzlik. “With these strong results, we are reiterating our revenue and adjusted EBITDA guidance for 2019. Our confidence is further supported by several key factors, including two major deals already secured in the fourth quarter as well as a robust sales pipeline and customer retention of 94%, an all-time high. In addition, our BT partnership is already producing encouraging early results as we received our first two purchase orders through that new channel at the start of the current quarter.”

Third Quarter 2019 Financial Highlights

Third quarter 2019 revenue was $6.7 million, compared to $5.7 million for the third quarter 2018, and net loss was $(221,000), or $(0.02) loss per basic share or $(0.11) loss per diluted share, compared to net income of $2.4 million, or $0.25 income per basic and diluted share, for the third quarter 2018. Third quarter 2019 adjusted EBITDA was $(535,000), compared to adjusted EBITDA of $(801,000) for the third quarter 2018. The revenue growth of $1.0 million and improved gross margin for the third quarter 2019 resulted in a $1.1 million increase in gross profit compared to the third quarter 2018.

Significantly impacting the $(0.36) decrease in diluted earnings per share compared to the 2018 third quarter was the inclusion of a large gain on the sale of BriefCam, Ltd. and loss on extinguishment of debt in the 2018 third quarter and the dilutive effect of the Company’s warrants on 2019 third quarter loss per diluted share. Net income in the 2018 third quarter was favorably impacted by the inclusion of $5.3 million of other income (pre-tax), or approximately $0.56 (pre-tax) per diluted share, relating to the $6.5 million gain on the sale of BriefCam, Ltd., partially offset by a loss on extinguishment of debt of $1.2 million incurred with the paydown of the Company’s term debt by $6.0 million in principal and $463,000 in accrued interest from the proceeds of the BriefCam sale. In accordance with generally accepted accounting principles, loss per diluted share for the third quarter 2019 was impacted by the exclusion of $973,000 of income, resulting in the exclusion of $0.09 of income per diluted share, related to the change in the fair value of the Company’s warrant liability during the quarter.

Nine Month 2019 Financial Highlights

For the nine months ended September 30, 2019, revenue was $19.1 million, compared to $18.1 million for the corresponding 2018 period, and net loss was $(4.8) million, or $(0.49) loss per basic and diluted share, compared to $(3.7) million, or $(0.39) loss per basic and diluted share, for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, adjusted EBITDA was $(1.8) million, an improvement from adjusted EBITDA of $(3.6) million for the nine months ended September 30, 2018. The revenue growth of $1.0 million and improved gross margin for the nine months ended September 30, 2019 resulted in a $2.5 million increase in gross profit compared to the nine months ended September 30, 2018.

Significantly impacting the $(0.10) increase in diluted loss per share compared to the nine months ended September 30, 2018 was the inclusion in the 2018 period of $5.3 million of other income (pre-tax), or approximately $0.56 (pre-tax) per diluted share, relating to the $6.5 million gain on the sale of BriefCam, Ltd., partially offset by a loss on extinguishment of debt of $1.2 million incurred with the paydown of the Company’s term debt by $6.0 million in principal and $463,000 in accrued interest from the proceeds of the BriefCam sale.

Other Financial Highlights

  • Software license and appliance revenue was $2.0 million and $1.0 million for the three months ended September 30, 2019 and 2018, respectively, and $3.7 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively.
  • Subscription, maintenance and support revenue was $4.2 million and $4.1 million for the three months ended September 30, 2019 and 2018, respectively, and $13.9 million and $12.3 million for the nine months ended September 30, 2019 and 2018, respectively.
  • Gross margin was 70% for the third quarter 2019, compared to 63% for third quarter 2018, and 73% for the nine months ended September 30, 2019, compared to 63% for the nine months ended September 30, 2018.
  • Cash and cash equivalents totaled $7.5 million as of September 30, 2019, compared to $7.3 million as of June 30, 2019 and $8.6 million as of December 31, 2018.
  • Customer retention continued to build steadily, reaching a new record of 94% during the three months ended September 30, 2019.

Business Outlook

The Company is reiterating its previously issued revenue and adjusted EBITDA financial guidance for 2019:

  • Revenue for 2019 is expected to be approximately $27 million. Gross margin percentage is expected to be in the high 60s to low 70s.
  • Net loss for 2019 is expected to be approximately $(5.5) million, which differs from previous guidance of $(5.1) million, due to management’s expectation of an increase in the fair value of the Company’s warrant liability during the balance of the year. Adjusted EBITDA for 2019 is expected to be approximately $(1.5) million, the same as previously issued guidance. Forecasted adjusted EBITDA for 2019 excludes forecasted interest expense of approximately $1.0 million, income tax benefit of approximately $(0.2) million, depreciation expense of approximately $0.3 million, amortization of acquired intangible assets of approximately $1.2 million, stock-based compensation of approximately $0.8 million, other income of approximately $(0.1) million and increase in warrant liability of approximately $1.0 million.

The Company had previously provided guidance for 2019 annual contract value (ACV) bookings growth. As the Company’s business has transitioned, beginning in 2018 and more significantly in 2019, to a deal-specific, customer-driven mix of on-premise and Software-as-a-Service (SaaS) solutions, ACV bookings has become an increasingly less predictable and relevant metric by which to judge the performance of the Company during a given period. Although ACV bookings are expected to grow in 2019 in the range of 6% to 10% as compared to 2018, management believes that ACV bookings is no longer relevant as a measure of customer adoption of the Company’s technology or as a measure of the Company’s financial performance, particularly as compared to revenue and adjusted EBITDA. Accordingly, the Company will no longer be providing ACV bookings guidance for 2019. Management will continue to be focused on revenue growth and adjusted EBITDA improvement in 2019 as these are the key indicators and drivers of the Company’s financial performance.

Conference Call

Qumu President and CEO Vern Hanzlik and CFO Dave Ristow will host a conference call today (October 31, 2019) at 4:30 p.m. Eastern time, followed by a question and answer period.

U.S. Dial-In Number: 877-456-6914
International Dial-In Number: 929-387-3794

Investors can also access a webcast of the live conference call by linking through the Investor Relations section of the Qumu website at https://qumu.com/en/investor-relations/. The webcast will be archived on Qumu’s website for one year.

Non-GAAP Information

To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company uses adjusted EBITDA, a non-GAAP measure, which excludes certain items from net income (loss), a GAAP measure. Adjusted EBITDA excludes items related to interest income and expense, the impact of income- based taxes, depreciation and amortization, stock-based compensation, change in fair value of warrant liabilities, foreign currency gains and losses, and other non-operating income and expenses.

The Company uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the Company’s performance. The Company believes that adjusted EBITDA is useful to investors because it provides supplemental information that allows investors to review the Company’s results of operations from the same perspective as management and the Company’s board of directors. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

See the attached Supplemental Financial Information for a reconciliation of net income (loss), a GAAP measure, to adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2019 and 2018.

Forward-Looking Statements

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” or “estimate” or comparable terminology are intended to identify forward-looking statements. Such forward-looking statements include, for example, statements about: the Company’s future revenue and operating performance, cash balances, future product mix or the timing of recognition of revenue and the demand for the Company’s products or software. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and other factors set forth in the Company’s filings with the Securities and Exchange Commission.

About Qumu

Qumu Corporation (Nasdaq: QUMU) is the leading provider of best-in-class tools to create, manage, secure, distribute and measure the success of live and on-demand video for the enterprise. Backed by the most trusted and experienced team in the industry, the Qumu platform enables global organizations to drive employee engagement, increase access to video, and modernize the workplace by providing a more efficient and effective way to share knowledge.

Investor Contact
Dave Ristow
Chief Financial Officer
Qumu Corporation
Dave.Ristow@qumu.com
+1.612.638.9045

Investor Relations Contact:
Matt Glover or Tom Colton
Gateway Investor Relations
qumu@gatewayir.com
+1.949.574.3860