UNITED STATES | ||
SECURITIES AND EXCHANGE COMMISSION | ||
Washington, D.C. 20549 | ||
FORM 8-K | ||
CURRENT REPORT | ||
PURSUANT TO SECTION 13 OR 15(d) OF | ||
THE SECURITIES EXCHANGE ACT OF 1934 | ||
Date of Report (date of earliest event reported): August 6, 2015 | ||
Qumu Corporation | ||
(Exact name of Registrant as Specified in its Charter) | ||
Minnesota | ||
(State Or Other Jurisdiction Of Incorporation) |
000-20728 | 41-1577970 | |
(Commission File Number) | (I.R.S. Employer Identification No.) | |
7725 Washington Avenue South | ||
Minneapolis, MN | 55439 | |
(Address Of Principal Executive Offices) | (Zip Code) |
(952) 683-7900 | ||
Registrant’s Telephone Number, Including Area Code | ||
o | Written communications pursuant to Rule 425 under the Securities Act |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
Amount reported in Exhibit 99.1 | Corrected amount reported in Form 10-Q | ||||
Condensed consolidated balance sheet as of June 30, 2015: | |||||
Cash | 5,985 | 4,735 | |||
Marketable securities | 13,503 | 14,753 | |||
Condensed consolidated statement of cash flows for the six months ended June 30, 2015: | |||||
Cash used for purchases of marketable securities | (8,000 | ) | (9,250 | ) | |
Net cash provided by continuing investing activities | 9,583 | 8,333 | |||
Net cash used in investing activities | 9,583 | 8,333 | |||
Net decrease in cash and cash equivalents | (5,699 | ) | (6,949 | ) |
Exhibit No. | Description | |
99.1 | Press Release issued on August 6, 2015. | |
99.2 | Statements of Sherman L. Black, President and Chief Executive Officer, and Peter J. Goepfrich, Chief Financial Officer at a telephone conference held on August 6, 2015. |
QUMU CORPORATION | ||
By: | /s/ Peter J. Goepfrich | |
Peter J. Goepfrich | ||
Chief Financial Officer | ||
Date: August 7, 2015 |
• | Video Optimization Pack for Citrix Virtual Desktop Infrastructure |
• | Enhanced mobility offerings |
◦ | Qumu Enterprise Mobile App v 2.5 |
◦ | Qumu Enterprise integration with Citrix XenMobile Enterprise Mobility Management |
◦ | Qumu Cloud iOS and Android mobile apps |
• | Qumu Cloud deployment on IBM Cloud’s SoftLayer |
• | Cross publishing ability from Qumu Enterprise to Qumu Cloud |
• | Qumu Cloud Japanese localization |
• | Unified Communications Gateway to enable videoconferencing endpoints as sources for a live webcast |
• | Live Transform, added functionality to Qumu’s already expansive streaming capabilities |
• | Receipt of a U.S. Patent for Secured Delivery technology |
• | Integrations with Webex and Microsoft Office 365 |
• | Contracted commitments of $8.3 million for the second quarter of 2015 were received from several new customers representing a variety of industries, including financial services, insurance, heavy industry, creative services and non-profit service organizations. |
• | Backlog was $33.4 million at June 30, 2015 compared with $33.9 million at the end of March 2015. |
• | Cash, marketable securities and restricted cash at the end of June totaled $21.8 million compared with $29.7 million at the end of March, reflecting the second quarter operating loss and an unfavorable impact on cash from changes in working capital. Restricted cash consists of $2.3 million in proceeds from the sale of the disc publishing business in July 2014 that are in escrow which is scheduled to be released to the Company in October 2015. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues: | |||||||||||||||
Software licenses and appliances | $ | 2,719 | $ | 4,714 | $ | 3,703 | $ | 5,910 | |||||||
Service | 6,045 | 3,690 | 11,030 | 6,423 | |||||||||||
Total revenues | 8,764 | 8,404 | 14,733 | 12,333 | |||||||||||
Cost of revenues: | |||||||||||||||
Software licenses and appliances | 706 | 1,464 | 939 | 2,236 | |||||||||||
Service | 3,786 | 2,778 | 7,328 | 4,545 | |||||||||||
Total cost of revenues | 4,492 | 4,242 | 8,267 | 6,781 | |||||||||||
Gross profit | 4,272 | 4,162 | 6,466 | 5,552 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 2,858 | 2,264 | 5,660 | 4,288 | |||||||||||
Selling, general and administrative | 8,298 | 7,421 | 17,490 | 13,938 | |||||||||||
Amortization of purchased intangibles | 200 | 156 | 399 | 313 | |||||||||||
Total operating expenses | 11,356 | 9,841 | 23,549 | 18,539 | |||||||||||
Operating loss | (7,084 | ) | (5,679 | ) | (17,083 | ) | (12,987 | ) | |||||||
Other income (expense): | |||||||||||||||
Interest, net | 15 | 10 | 31 | 22 | |||||||||||
Loss on currency exchange | (4 | ) | (6 | ) | (68 | ) | (23 | ) | |||||||
Other, net | — | — | — | (10 | ) | ||||||||||
Total other income (expense), net | 11 | 4 | (37 | ) | (11 | ) | |||||||||
Loss before income taxes | (7,073 | ) | (5,675 | ) | (17,120 | ) | (12,998 | ) | |||||||
Income tax benefit | (146 | ) | (296 | ) | (319 | ) | (1,446 | ) | |||||||
Net loss from continuing operations | (6,927 | ) | (5,379 | ) | (16,801 | ) | (11,552 | ) | |||||||
Net income (loss) from discontinued operations, net of tax | (22 | ) | 562 | (89 | ) | 2,806 | |||||||||
Net loss | $ | (6,949 | ) | $ | (4,817 | ) | $ | (16,890 | ) | $ | (8,746 | ) | |||
Net income (loss) per basic and diluted share: | |||||||||||||||
Net loss from continuing operations per share | $ | (0.75 | ) | $ | (0.61 | ) | $ | (1.83 | ) | $ | (1.32 | ) | |||
Net income (loss) from discontinued operations per share | $ | — | $ | 0.06 | $ | — | $ | 0.32 | |||||||
Net loss per share | $ | (0.75 | ) | $ | (0.55 | ) | $ | (1.83 | ) | $ | (1.00 | ) | |||
Basic and diluted weighted average shares outstanding | 9,243 | 8,748 | 9,206 | 8,724 |
Assets | June 30, 2015 | December 31, 2014 | |||||
Current assets: | (unaudited) | ||||||
Cash and cash equivalents | $ | 5,985 | $ | 11,684 | |||
Marketable securities | 13,503 | 23,486 | |||||
Restricted cash | 2,301 | 2,300 | |||||
Receivables, net of allowance for doubtful accounts | 6,722 | 10,090 | |||||
Finished goods inventories | 384 | 168 | |||||
Prepaid income taxes | 512 | 301 | |||||
Prepaid expenses and other current assets | 5,565 | 3,633 | |||||
Deferred income taxes - current | 62 | 64 | |||||
Current assets from discontinued operations | 945 | 1,026 | |||||
Total current assets | 35,979 | 52,752 | |||||
Property and equipment, net of accumulated depreciation | 2,209 | 1,899 | |||||
Intangible assets, net of amortization | 12,401 | 13,384 | |||||
Goodwill | 8,609 | 8,525 | |||||
Other assets - non-current | 3,985 | 3,617 | |||||
Total assets | $ | 63,183 | $ | 80,177 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Trade accounts payable and other accrued liabilities | $ | 2,962 | $ | 3,529 | |||
Accrued compensation | 4,463 | 6,222 | |||||
Deferred revenue | 10,036 | 9,015 | |||||
Deferred income taxes - current | 32 | 110 | |||||
Income taxes payable | 24 | 53 | |||||
Financing obligations - current | 163 | — | |||||
Current liabilities from discontinued operations | 50 | 448 | |||||
Total current liabilities | 17,730 | 19,377 | |||||
Non-current liabilities: | |||||||
Deferred revenue - non-current | 1,143 | 1,047 | |||||
Income taxes payable - non-current | 9 | 8 | |||||
Deferred tax liability - non-current | 991 | 1,071 | |||||
Financing obligations - non-current | 315 | — | |||||
Other non-current liabilities | 331 | 401 | |||||
Total non-current liabilities | 2,789 | 2,527 | |||||
Total liabilities | 20,519 | 21,904 | |||||
Stockholders’ equity: | |||||||
Common stock | 93 | 91 | |||||
Additional paid-in capital | 64,729 | 63,566 | |||||
Accumulated deficit | (21,489 | ) | (4,599 | ) | |||
Accumulated other comprehensive loss | (669 | ) | (785 | ) | |||
Total stockholders’ equity | 42,664 | 58,273 | |||||
Total liabilities and stockholders’ equity | $ | 63,183 | $ | 80,177 |
Six Months Ended June 30, | |||||||
2015 | 2014 | ||||||
Cash flows used in operating activities: | |||||||
Net loss | $ | (16,890 | ) | $ | (8,746 | ) | |
Net income (loss) from discontinued operations, net of tax | (89 | ) | 2,806 | ||||
Net loss from continuing operations | (16,801 | ) | (11,552 | ) | |||
Adjustments to reconcile net loss to net cash used in continuing operating activities: | |||||||
Depreciation and amortization | 1,503 | 924 | |||||
Current income tax benefit resulting from income generated from discontinued operations | — | (1,463 | ) | ||||
Deferred income tax benefit | (170 | ) | (25 | ) | |||
Loss on disposal of property and equipment | 4 | 10 | |||||
Stock-based compensation | 1,068 | 784 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables | 3,393 | (5,456 | ) | ||||
Finished goods inventories | (216 | ) | (39 | ) | |||
Prepaid income taxes / income taxes payable | (209 | ) | 396 | ||||
Prepaid expenses and other assets | (2,077 | ) | (1,555 | ) | |||
Trade accounts payable and other accrued liabilities | (559 | ) | 762 | ||||
Accrued compensation | (1,763 | ) | (1,153 | ) | |||
Deferred revenue | 1,073 | 1,741 | |||||
Other non-current liabilities | (69 | ) | (63 | ) | |||
Net cash used in continuing operating activities | (14,823 | ) | (16,689 | ) | |||
Net cash provided by (used in) discontinued operating activities | (397 | ) | 5,980 | ||||
Net cash used in operating activities | (15,220 | ) | (10,709 | ) | |||
Cash flows provided by (used in) investing activities: | |||||||
Purchases of marketable securities | (8,000 | ) | (20,251 | ) | |||
Sales and maturities of marketable securities | 17,965 | 9,000 | |||||
Purchases of property and equipment | (425 | ) | (367 | ) | |||
Proceeds from sale of property and equipment | 43 | — | |||||
Net cash provided by (used in) continuing investing activities | 9,583 | (11,618 | ) | ||||
Net cash provided by discontinued investing activities | — | 22 | |||||
Net cash provided by (used in) investing activities | 9,583 | (11,596 | ) | ||||
Cash flows provided by (used in) financing activities: | |||||||
Checks written in excess of bank balance | — | 74 | |||||
Common stock repurchases to settle employee withholding liability | (45 | ) | (52 | ) | |||
Principal payments on capital lease obligations | (168 | ) | — | ||||
Proceeds from employee stock plans | 142 | 108 | |||||
Net cash provided by (used in) continuing financing activities | (71 | ) | 130 | ||||
Net cash used in discontinued financing activities | — | (5 | ) | ||||
Net cash provided by (used in) financing activities | (71 | ) | 125 | ||||
Effect of exchange rate changes on cash | 9 | 11 | |||||
Net decrease in cash and cash equivalents | (5,699 | ) | (22,169 | ) | |||
Cash and cash equivalents, beginning of period | 11,684 | 37,725 | |||||
Cash and cash equivalents, end of period | $ | 5,985 | $ | 15,556 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Continuing Operations: | |||||||||||||||
Depreciation | $ | 238 | $ | 173 | $ | 471 | $ | 331 | |||||||
Amortization of intangibles | |||||||||||||||
Cost of revenues | $ | 317 | $ | 140 | $ | 633 | $ | 280 | |||||||
Amortization of purchased intangibles | 200 | 156 | 399 | 313 | |||||||||||
Total amortization of intangibles | $ | 517 | $ | 296 | $ | 1,032 | $ | 593 | |||||||
Equity compensation: | |||||||||||||||
Cost of revenues | $ | 39 | $ | 11 | $ | 75 | $ | 18 | |||||||
Research and development | 81 | 59 | 162 | 117 | |||||||||||
Selling, general and administrative | 380 | 365 | 831 | 649 | |||||||||||
Total equity compensation | $ | 500 | $ | 435 | $ | 1,068 | $ | 784 |
• | Thank you Doug and thanks everyone for joining us today on our second quarter 2015 earnings call. With me today is Peter Goepfrich, our recently appointed Chief Financial Officer. Peter joined us in May and has been quickly getting up to speed. He has already made significant contributions and is actively engaged in improvements to our financial processes and modeling as well as helping us drive focus on critical company initiatives. We look forward to his contributions going forward. Also our other senior leader, Vern Hanzlik, our President, is with us today and he will participate in the Q&A that will follow our remarks. |
• | I’ll begin today with an overview of the financial and operational highlights in the second quarter and provide an update on our outlook for 2015. Peter will offer a more detailed look at the second quarter results. Then we will open the call for your questions. |
• | There were some very positive developments in the second quarter that demonstrate the progress we are making to address the challenges that we noted in our first quarter conference call. |
• | We generated record quarterly revenue of $8.8 million in the recent second quarter. This surpassed the previous quarterly record of $8.4 million reported in the second quarter of 2014. Last year, second quarter revenue included a significant contribution from a single, large customer. Excluding that contribution, |
• | Driving the revenue growth were better results from Europe and continued success in the Americas with the Global 2000 market, where we added new customers and expanded our business within our existing client base. |
• | Contracted commitments in the second quarter totaled $8.3 million, an increase of 12% from $7.4 million in the second quarter of 2014. The increase reflected several new customers from a range of industries including financial services, heavy industry, creative services and non-profits. |
• | Our gross margin in the second quarter was 49%, compared with 37% in the first quarter of 2015. The increase reflects the strong, quarter over quarter growth in revenue that allowed us to better leverage the investments we made in customer support and services. |
• | These improved financial metrics reflect progress we made on our operations during the quarter. On our first quarter call we highlighted execution challenges in EMEA. The new leadership team there has been actively pursuing enhanced sales and marketing efforts and reassessing our priorities and resources. During the quarter we had a significant customer win in the region at one of the world’s ten largest pharmaceutical companies. Also in July, Paul Herdman joined us to lead our sales effort in EMEA. I am confident that these changes, along with our maturing pipeline of opportunities, will result in significantly improved results in the second half of the year. |
• | The North America market continues to show strong adoption of enterprise video, and on the strength of our products, our Enterprise business performed very well in the region. |
• | One of our North American wins for the quarter is a Fortune 100 diversified insurer. They have tens of thousands of employees and hundreds of offices distributed around the world. Like many businesses they have invested in an ‘inside the firewall’ social media platform to maximize employee engagement and collaboration. That platform isn’t able to support video as a key component. At this customer we are not only enabling that existing social platform with video capability, we are also replacing a competitor and building out a private video broadcast network. |
• | In Japan, we entered into an important sales partnership with Fujitsu, one of the top 5 leading IT service providers in the world and the number one IT service provider in Japan. The brand strength of Fujitsu will certainly advance our efforts in this region. |
• | In Australia we had our first win and it was at one of the country’s Big Four banks. That win, based on our Qumu Cloud platform, stages a significant expansion opportunity as well as a landmark win in the financial sector in Australia. Our customer’s initial use case will be for external broadcast of institutional research reports. Over the next several quarters we expect a half dozen other operating groups within that bank to come on board our platform. This is a great example of our land and expand sales strategy that Qumu Cloud has enabled. |
• | In addition to progress on our sales efforts, there were several important product highlights in the second quarter. |
• | We were recognized once again by an industry analyst for our product and technology leadership. Aragon Research, a technology-focused research and advisory firm, named Qumu a leader in their recent report - the Aragon Research Globe for Video Content Management. |
• | Our R&D investments resulted in some significant new product introductions and technology partnerships. I would like to highlight a few of those. |
◦ | Delivering high performance video to Virtual Desktop Infrastructures has long been a difficulty for organizations. Qumu has developed a solution for this challenge with the Video Optimization Pack for Citrix by providing integrations with the latest Citrix VDI and XenApp infrastructures. This will enable endpoints under management to request and play high quality streaming video. |
◦ | Mobility remains a key objective of all enterprises. Mobile video security and functionality are a key differentiator for our offering. During the quarter we launched a new version of our Qumu Enterprise Mobile App and on the Qumu Cloud platform we launched our iOS and Android Mobile Apps. Also our Qumu Enterprise platform is now integrated with another leading mobile device management platform, XenMobile Enterprise Mobility Management from Citrix. These releases along with our other mobile device management integrations provide our customers the broadest capability of ‘enterprise secure’ mobile video. |
◦ | As you know, last year we acquired Kulu Valley and have been aggressively advancing our cloud offerings and capabilities. We believe that flexible hybrid deployment solutions will continue to gain momentum in the market. Last quarter we took a couple of steps forward in aligning to that trend. We now offer cross publishing capability from Qumu Enterprise to Qumu Cloud. We also deployed our cloud offerings on IBM Cloud’s SoftLayer infrastructure which will provide us with improved performance, flexibility and worldwide reach. |
◦ | Qumu has been recognized many times for the breadth of our video delivery technology leadership. During the quarter we were proud to announce receipt of a US patent for our secure content delivery technology that provides a policy based, secure download delivery alternative perfect for mobile devices. During the quarter we further expanded our video delivery capabilities by introducing Live Transform, a dynamic streaming capability. |
◦ | As stated earlier we see a significant market opportunity in Japan and we are pleased to be partnering with Fujitsu. In support of that opportunity we have completed the Japanese localization for Qumu Cloud. |
◦ | Finally, in our drive to make Qumu an enterprise standard for video content management and delivery, we introduced several key integrations. Qumu now offers an app for Microsoft Office 365, providing a true solution for that environment. We’ve also focused on the growing video opportunity within unified communications (UC) through two new offerings: a WebEx integration, which enables archive, speech search, and rebroadcast of those webcasts; and a unified communications gateway which can ingest from videoconferencing endpoints and stream video to any device in an organization. |
• | It was a very productive quarter from an operational standpoint and it has positioned us well for continued improvement through the remainder of the year. |
• | During the second half of 2015, the Company expects increased revenue growth compared with the first half of the year. Factors in this growth include improved leadership and execution in Europe, the continued strength of Qumu Enterprise in the Americas, the consummation of a reseller agreement with a leading APAC channel partner, and a strong second half pipeline. We continue to expect 2015 annual revenue growth to exceed 40% compared to 2014. |
• | We continue to expect gross margins will exceed 50% for all of 2015. |
• | During the first half of the year our cash consumption exceeded our plans. To support our goal to be cash flow breakeven by the end of 2016, we are in the midst of a comprehensive operational review and have begun implementing cost reduction measures to consolidate and better focus our resources. These expense reductions are coming from all areas of the company, including headcount, contractors and vendors. |
• | Through increased revenue and cost reductions, we anticipate that we will reduce the cash burn from operations by at least 50% in the second half of the year compared with the first half, and we expect to end 2015 with cash and marketable securities of approximately $15 million. |
• | With that, I’ll now turn the call over to Peter for more details on the second quarter financial results. Peter. |
• | Thank you, Sherman. Good afternoon. |
• | My comments will be brief today and I’ll touch on a few of the key highlights from our second quarter financial performance. |
• | Second quarter 2015 contracted commitments were $8.3 million, 12% growth from second quarter last year. Recurring term contracts - which include maintenance contracts - represented approximately 45% of our contracted commitments in the second quarter 2015. |
• | As noted in the past, revenue will vary quarter to quarter based on the type of contract between Qumu and its customers. Perpetual contracts generally result in revenue recognized closer to the bookings date while term contracts result in the majority of revenue being recognized ratably over the contract period. |
• | Gross margin in the second quarter 2015 was 49% compared with 50% in the second quarter last year and much improved from the 37% in the first quarter 2015. Gross margin will continue to improve as we |
• | Moving on to operating expenses. |
◦ | R&D expense in the second quarter 2015 increased approximately $600 thousand as compared to the second quarter last year. |
◦ | SG&A expense increased $900 thousand compared to the second quarter last year. |
◦ | The increase in these expenses was primarily due to increased headcount through the acquisition of Kulu Valley in October 2014 and increased contractor and headcount in R&D and SG&A over the past three quarters. |
• | I will close by reiterating Sherman’s comments – to support our goal to be cash flow breakeven by the end of 2016, we are in the midst of a comprehensive operational review and have begun implementing cost reduction measures to consolidate and better focus our resources. We anticipate that we will reduce the cash burn from operations by at least 50% in the second half of the year compared with the first half, and we expect to end 2015 with cash and marketable securities of approximately $15 million. |
• | Now, Operator, would you please open the line for Q&A? |
• | Thank you again for joining us today. |
• | We will provide an update during our third quarter call in early November. |
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