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): November 5, 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.) | |
510 1st Avenue North, Suite 305 | ||
Minneapolis, MN | 55403 | |
(Address Of Principal Executive Offices) | (Zip Code) |
(612) 638-9100 | ||
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 |
Exhibit No. | Description | |
99.1 | Press Release issued on November 5, 2015. | |
99.2 | Statements of Vern Hanzlik, President and Chief Executive Officer, and Peter J. Goepfrich, Chief Financial Officer at a telephone conference held on November 5, 2015. |
QUMU CORPORATION | ||
By: | /s/ Peter J. Goepfrich | |
Peter J. Goepfrich | ||
Chief Financial Officer | ||
Date: November 6, 2015 |
• | Total headcount was 194 as of September 30, 2015 compared to 232 as of June 30, 2015 and 222 as of December 31, 2014. |
• | Contracted commitments of $7.5 million for the third quarter of 2015 compared to $6.6 million for the third quarter 2014 and $8.3 million for the second quarter 2015. The decline from the second quarter 2015 was primarily due to the timing of maintenance and support renewals. |
• | Backlog was $31.3 million as of September 30, 2015 compared with $33.4 million as of June 30, 2015. |
• | Cash, marketable securities and restricted cash were $15.1 million as of September 30, 2015, compared to $21.8 million as of June 30, 2015, reflecting the third quarter operating loss and the impact on cash from changes in working capital primarily related to a $1.5 million customer payment that was anticipated in the third quarter but was received in the fourth quarter. Restricted cash as of September 30, 2015 consisted of $2.3 million in proceeds from the sale of the disc publishing business in July 2014. These funds were released from escrow in October 2015. |
• | Annual revenue growth in 2015 of approximately 30%, |
• | Gross margin in 2015 of approximately 48%, and |
• | Cash and marketable securities at the end of 2015 to be approximately $14 million. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues: | |||||||||||||||
Software licenses and appliances | $ | 3,267 | $ | 2,193 | $ | 6,970 | $ | 8,103 | |||||||
Service | 6,335 | 3,660 | 17,365 | 10,083 | |||||||||||
Total revenues | 9,602 | 5,853 | 24,335 | 18,186 | |||||||||||
Cost of revenues: | |||||||||||||||
Software licenses and appliances | 1,057 | 615 | 1,996 | 2,850 | |||||||||||
Service | 3,813 | 2,608 | 11,141 | 7,154 | |||||||||||
Total cost of revenues | 4,870 | 3,223 | 13,137 | 10,004 | |||||||||||
Gross profit | 4,732 | 2,630 | 11,198 | 8,182 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 2,848 | 2,321 | 8,508 | 6,609 | |||||||||||
Selling, general and administrative | 9,059 | 7,473 | 26,549 | 21,411 | |||||||||||
Amortization of purchased intangibles | 200 | 157 | 599 | 470 | |||||||||||
Total operating expenses | 12,107 | 9,951 | 35,656 | 28,490 | |||||||||||
Operating loss | (7,375 | ) | (7,321 | ) | (24,458 | ) | (20,308 | ) | |||||||
Other income (expense): | |||||||||||||||
Interest, net | (10 | ) | 11 | 21 | 33 | ||||||||||
Loss on currency exchange | (89 | ) | (33 | ) | (157 | ) | (56 | ) | |||||||
Other, net | — | (28 | ) | — | (38 | ) | |||||||||
Total other income (expense), net | (99 | ) | (50 | ) | (136 | ) | (61 | ) | |||||||
Loss before income taxes | (7,474 | ) | (7,371 | ) | (24,594 | ) | (20,369 | ) | |||||||
Income tax benefit | (163 | ) | (4,492 | ) | (482 | ) | (5,938 | ) | |||||||
Net loss from continuing operations | (7,311 | ) | (2,879 | ) | (24,112 | ) | (14,431 | ) | |||||||
Net income (loss) from discontinued operations, net of tax | 79 | 11,559 | (10 | ) | 14,365 | ||||||||||
Net income (loss) | $ | (7,232 | ) | $ | 8,680 | $ | (24,122 | ) | $ | (66 | ) | ||||
Net income (loss) per basic and diluted share: | |||||||||||||||
Net loss from continuing operations per share | $ | (0.79 | ) | $ | (0.33 | ) | $ | (2.61 | ) | $ | (1.65 | ) | |||
Net income (loss) from discontinued operations per share | $ | 0.01 | $ | 1.32 | $ | — | $ | 1.64 | |||||||
Net income (loss) per share | $ | (0.78 | ) | $ | 0.99 | $ | (2.61 | ) | $ | (0.01 | ) | ||||
Basic and diluted weighted average shares outstanding | 9,288 | 8,780 | 9,233 | 8,743 |
Assets | September 30, 2015 | December 31, 2014 | |||||
Current assets: | (unaudited) | ||||||
Cash and cash equivalents | $ | 4,029 | $ | 11,684 | |||
Marketable securities | 8,754 | 23,486 | |||||
Restricted cash | 2,301 | 2,300 | |||||
Receivables, net of allowance for doubtful accounts | 8,401 | 10,090 | |||||
Finished goods inventories | 329 | 168 | |||||
Prepaid income taxes | 700 | 301 | |||||
Prepaid expenses and other current assets | 3,863 | 3,633 | |||||
Deferred income taxes - current | 64 | 64 | |||||
Current assets from discontinued operations | — | 1,026 | |||||
Total current assets | 28,441 | 52,752 | |||||
Property and equipment, net of accumulated depreciation | 3,147 | 1,899 | |||||
Intangible assets, net of amortization | 11,669 | 13,384 | |||||
Goodwill | 8,295 | 8,525 | |||||
Other assets - non-current | 3,861 | 3,617 | |||||
Total assets | $ | 55,413 | $ | 80,177 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Trade accounts payable and other accrued liabilities | $ | 3,008 | $ | 3,529 | |||
Accrued compensation | 2,947 | 6,222 | |||||
Deferred revenue | 9,953 | 9,015 | |||||
Deferred income taxes - current | 13 | 110 | |||||
Income taxes payable | — | 53 | |||||
Financing obligations - current | 279 | — | |||||
Current liabilities from discontinued operations | 50 | 448 | |||||
Total current liabilities | 16,250 | 19,377 | |||||
Non-current liabilities: | |||||||
Deferred revenue - non-current | 1,339 | 1,047 | |||||
Income taxes payable - non-current | 9 | 8 | |||||
Deferred tax liability - non-current | 904 | 1,071 | |||||
Financing obligations - non-current | 519 | — | |||||
Other non-current liabilities | 1,114 | 401 | |||||
Total non-current liabilities | 3,885 | 2,527 | |||||
Total liabilities | 20,135 | 21,904 | |||||
Stockholders’ equity: | |||||||
Common stock | 92 | 91 | |||||
Additional paid-in capital | 65,091 | 63,566 | |||||
Accumulated deficit | (28,721 | ) | (4,599 | ) | |||
Accumulated other comprehensive loss | (1,184 | ) | (785 | ) | |||
Total stockholders’ equity | 35,278 | 58,273 | |||||
Total liabilities and stockholders’ equity | $ | 55,413 | $ | 80,177 |
Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
Cash flows used in operating activities: | |||||||
Net loss | $ | (24,122 | ) | $ | (66 | ) | |
Net (income) loss from discontinued operations, net of tax | 10 | (14,365 | ) | ||||
Net loss from continuing operations | (24,112 | ) | (14,431 | ) | |||
Adjustments to reconcile net loss to net cash used in continuing operating activities: | |||||||
Depreciation and amortization | 2,292 | 1,411 | |||||
Stock-based compensation | 1,430 | 1,281 | |||||
Loss on disposal of property and equipment | 23 | 31 | |||||
Deferred income taxes | (235 | ) | 85 | ||||
Current income tax benefit resulting from income generated from discontinued operations | — | (5,888 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables | 1,647 | (4,364 | ) | ||||
Finished goods inventories | (162 | ) | (76 | ) | |||
Prepaid income taxes / income taxes payable | (407 | ) | 310 | ||||
Prepaid expenses and other assets | (300 | ) | (2,231 | ) | |||
Trade accounts payable and other accrued liabilities | (524 | ) | 175 | ||||
Accrued compensation | (3,264 | ) | 498 | ||||
Deferred revenue | 1,296 | 2,624 | |||||
Other non-current liabilities | (11 | ) | (91 | ) | |||
Net cash used in continuing operating activities | (22,327 | ) | (20,666 | ) | |||
Net cash provided by discontinued operating activities | 665 | 1,483 | |||||
Net cash used in operating activities | (21,662 | ) | (19,183 | ) | |||
Cash flows provided by (used in) investing activities: | |||||||
Purchases of marketable securities | (9,500 | ) | (31,250 | ) | |||
Sales and maturities of marketable securities | 24,215 | 14,250 | |||||
Purchases of property and equipment | (530 | ) | (760 | ) | |||
Proceeds from sale of property and equipment | 43 | — | |||||
Net cash provided by (used in) continuing investing activities | 14,228 | (17,760 | ) | ||||
Net cash provided by (used in) discontinued investing activities | (1 | ) | 19,676 | ||||
Net cash provided by investing activities | 14,227 | 1,916 | |||||
Cash flows provided by (used in) financing activities: | |||||||
Common stock repurchases to settle employee withholding liability | (46 | ) | (84 | ) | |||
Principal payments on financing obligations | (241 | ) | — | ||||
Proceeds from employee stock plans | 142 | 123 | |||||
Net cash provided by (used in) continuing financing activities | (145 | ) | 39 | ||||
Net cash used in discontinued financing activities | — | (59 | ) | ||||
Net cash used in financing activities | (145 | ) | (20 | ) | |||
Effect of exchange rate changes on cash | (75 | ) | (90 | ) | |||
Net decrease in cash and cash equivalents | (7,655 | ) | (17,377 | ) | |||
Cash and cash equivalents, beginning of period | 11,684 | 37,725 | |||||
Cash and cash equivalents, end of period | $ | 4,029 | $ | 20,348 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Continuing Operations: | |||||||||||||||
Depreciation | $ | 269 | $ | 190 | $ | 740 | $ | 521 | |||||||
Amortization of intangibles | |||||||||||||||
Cost of revenues | $ | 320 | $ | 140 | $ | 953 | $ | 420 | |||||||
Amortization of purchased intangibles | 200 | 157 | 599 | 470 | |||||||||||
Total amortization of intangibles | $ | 520 | $ | 297 | $ | 1,552 | $ | 890 | |||||||
Equity compensation: | |||||||||||||||
Cost of revenues | $ | 40 | $ | 4 | $ | 115 | $ | 23 | |||||||
Research and development | 39 | 52 | 201 | 169 | |||||||||||
Selling, general and administrative | 283 | 441 | 1,114 | 1,089 | |||||||||||
Total equity compensation | $ | 362 | $ | 497 | $ | 1,430 | $ | 1,281 |
• | In the third quarter we delivered excellent revenue growth and implemented a significant expense reduction program. |
• | We generated record quarterly revenue of $9.6 million, an increase of 64%, compared to the third quarter 2014 and an increase of 10% sequential growth compared to the second quarter 2015. |
• | The year-over-year quarterly growth in license and appliance revenue is primarily attributable to an increase in perpetual license bookings. The year-over-year quarterly growth in services is due to increases in all areas, including maintenance and support, subscription and support, and professional services. |
• | Contracted commitments were $7.5 million for the third quarter compared to $6.6 million for the third quarter 2014 and $8.3 million for the second quarter 2015. The decline from the second quarter 2015 was primarily due to the timing of maintenance and support renewals. |
• | Geographically, the Americas market continues to show strong adoption of enterprise video. Our Enterprise business performed well and we see strength building in the EMEA region under new leadership. In APAC we closed a transaction with a large manufacturer for live and video on demand applications and we continue to make progress developing a pipeline through our partnership with Fujitsu. |
• | One of our Americas wins in the third quarter is a Fortune 500 diversified chemical manufacturer. 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’ video platform to maximize employee engagement and collaboration. This company runs over 300 live events on an annual basis with our video platform and are starting to expand to the next level with mobile and user generated content. |
• | Now on to our expense reduction program implemented in the third quarter to align our expense structure with revenue. The expense reduction program is expected to result in more than $9 million in annualized expense savings compared to the first nine months of 2015 when annualized. The expense reductions impacted all functional areas and included both headcount and outside service providers. |
• | Annual revenue growth in 2015 of approximately 30% |
• | Gross margins in 2015 of approximately 48%, and |
• | Cash and marketable securities at the end of 2015 to be approximately $14 million |
• | License and appliance revenue will vary quarter to quarter based on the type of contract between Qumu and its customers. Perpetual license and appliance sales generally result in revenue recognized closer to the bookings date. |
• | Service revenue, which consists of maintenance and support, subscription and support, and professional services, tends to grow more consistently with the renewal and expansion of existing customers and the addition of new customers. Revenue that is recurring in nature includes maintenance and support, and subscription and support. Recurring revenue represented 77% of service revenue and 50% of total revenue in the third quarter 2015. |
• | Gross margin in the third quarter 2015 was 49% compared with 45% in the third quarter last year and 49% in the second quarter 2015. As we generate additional revenue, the leverage on our investments in customer support and professional services will increase and we expect the gross margin to continue to improve. |
• | Total operating expenses in the third quarter increased $2.2 million compared with the third quarter last year and $753,000 compared to the second quarter 2015. |
• | Third quarter 2015 results included severance expense of $784,000 relating to our expense reduction program and an equipment operating lease loss of $1 million relating to equipment that the we no longer plan to utilize as part of our managed services offering. |
• | Qumu is “how business does video.”-- and only Qumu is capable of securely distributing and controlling video to anyone, on any device, on any network (even if that network was never designed to handle video streaming) and provide it all at enterprise scale. |
• | Our R&D investments have resulted in significant new product introductions and technology partnerships, furthering our lead in this market, as noted by the 2014 Gartner Report. |
• | For example, we provided a suite of new features for our cloud and hybrid platform to enable every desktop in the enterprise with advanced creation and edit capabilities. This means everyone can use video to enhance their work product. Additionally, our highly configurable user portal interface enables all of our customers’ employees to find and consume their content with an exceptional user experience. |
• | We also announced a new partnership with Unicon to leverage Qumu’s Video Optimization Pack for Citrix. Through this partnership we can bring the full scope of Qumu’s enterprise video functionality to lower bandwidth VDI desktops. This provides easy-to-use content creation; localized content delivery; and a smaller, customizable, secured OS footprint. Using these video tools, customers will be able to provide or create content for e-learning sessions, product information, product tutorials and video demonstrations to any endpoint in their organization. These are powerful use cases for video in the enterprise and shows how enterprises are advancing video everywhere as the normal way to communication. |
• | Qumu announced a technology partnership with Elemental and integration with Elemental’s enterprise class encoding solution which allows our customers to have broadcast quality video for all their studio inputs. |
• | We also announced a new partnership in the Middle East with Ixtel, a great partner with reach into focused verticals, such as, Banking and oil and gas in that region and will drive additional opportunities for Qumu. |
• | We continue to see enterprises acquire their video software platforms in all deployment styles: on-premise, hybrid and cloud. We have a higher percentage of on-premise deployments for both new and existing customers in Q3 and in our pipeline for Q4. Despite this, we continue to have the vision of building our software with a cloud-first approach, while packaging it for all types of deployment options. |
• | Our largest enterprise customers are in the Financial Services, Pharmaceuticals and the Industrial verticals. The majority of our deployments in Q3 were either on premise or hybrid, which together represented 75% of deals to date for 2015. On the other hand, our cloud deployments are mainly departmental in large and medium size enterprises, focused on user-generated content and/or external video requirements to integrate with marketing automation tools like Eloqua and Marketo as well as websites, social applications and other enterprise content management applications - like SharePoint and Jive. Our hybrid deployments today are based on upgrades within organizations wanting to change the cost of ownership of video but keep the delivery and user experience on premise. We will continue to see this as a growth area and a competitive differentiator. |
• | We continue to expand and upgrade our enterprise customers : |
◦ | In the quarter, we saw fourteen large enterprises implement an upgrade to the latest release and expand their video platform footprint. |
◦ | We closed fourteen enterprise deals greater than $200 thousand in total contract value with both existing and new customers and one transaction greater than $1 million in bookings for the quarter. |
◦ | Our maintenance, support and cloud customers continue to renew at a rate greater than 90%. |
• | It was a very productive quarter from an operational standpoint and we are positioned well for the remainder of the year and into 2016. |
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