DEFA14A

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):  April 28, 2014

Qumu Corporation

(Exact name of Registrant as Specified in its Charter)

Minnesota

(State Or Other Jurisdiction Of Incorporation)

000-00619	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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act
☒	Soliciting material pursuant to Rule 14a-12 under the Exchange Act
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Items under Sections 1 and 3 through 7 are not applicable and therefore omitted.

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

ITEM 8.01 OTHER EVENTS.

Qumu Corporation hereby furnishes as Exhibit 99.1 a press release issued on April 28, 2014 disclosing material non-public information regarding its results of operations for the quarter ended March 31, 2014 and hereby furnishes as Exhibit 99.2 statements of Sherman L. Black, its President and Chief Executive Officer, and James R. Stewart, its Chief Financial Officer, made on April 28, 2014 at a telephone conference relating to the quarter ended March 31, 2014 results.

ITEM 9.01	FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No.	Description
99.1	Press Release issued on April 28, 2014.
99.2	Statements of Sherman L. Black, President and Chief Executive Officer, and James R. Stewart, Chief Financial Officer at a telephone conference held on April 28, 2014.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

QUMU CORPORATION
By:	/s/ James R. Stewart
	James R. Stewart Chief Financial Officer

Date:  April 28, 2014

EX-99.1

EXHIBIT 99.1

Qumu Software Builds Strong Market Momentum During First Quarter 2014

Software Contracted Commitments Up 226%; Contracted Commitment Backlog Sets New
Record at $27 Million

Management Increases Outlook for 2014 Software Contracted Commitment Growth

Conference Call Today at 4:30 p.m. ET

Minneapolis, MN – April 28, 2014 – Qumu Corporation (NASDAQ: QUMU) today reported its financial results for the first quarter ended March 31, 2014. Software contracted commitments for the quarter set another new quarterly record and increased 226% from the first quarter of 2013 to $14.2 million for the first quarter of 2014. Software contracted commitment backlog grew 62% from the end of 2013 to $27 million at March 31, 2014, another Company record.

Qumu software revenues for the first quarter 2014 were $3.9 million, as compared with $4.3 million during the first quarter of 2013. Rimage disc publishing revenues were $14.9 million during the first quarter of 2014 versus $15.1 million for the year ago period. Total revenues for the first quarter of 2014 were $18.8 million, within management’s guidance of $18 to $20 million, as compared to $19.5 million for the year ago period.

On April 24, 2014, Qumu announced that it had entered into a definitive agreement to sell its Rimage disc publishing operations to Redwood Acquisition, Inc., a wholly owned subsidiary of Equus Holdings, Inc. in an all cash transaction valued at $23 million, subject to certain adjustments. Subject to various conditions, the transaction is expected to close by July 31, 2014. The proposed transaction is estimated to provide Qumu with approximately $19 to $20 million in net cash after closing expenses, post-closing adjustments, taxes and the assumed return of the $2.3 million, 15 month escrow.

Qumu Software First Quarter Highlights

· Contracted commitments for the first quarter of 2014 were a record $14.2 million, an increase of 45% from the prior quarter and previous quarterly record of $9.8 million. Contracted commitments were $4.4 million in the first quarter of 2013.

· Backlog increased to a record $27 million at March 31, 2014, exceeding the previous record by $10.3 million. Backlog at December 31, 2013 was $16.7 million and $10.7 million at the end of September 2013.

· Software revenues were $3.9 million, down 10% from $4.3 million in the first quarter of 2013 due to revenue recognition timing of contracted commitments. Software revenue will vary quarter to quarter based on the type of contract Qumu enters into with each customer. Perpetual contracts generally result in revenue recognized closer to contract commitment date while term–based contracts result in most of the revenue recognized over the period of the contract. The majority of contracted commitments from the fourth quarter 2013 and the first quarter 2014 were term-based contracts that result in a high proportion of those contracted commitments to be recognized into revenue over future quarters. This significant shift in the mix of software contracts dampened first quarter revenue growth.

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Sherman L. Black, president and CEO, said, “Our software business continues to build solid momentum in the market. For two consecutive quarters we have established new achievement levels for both contracted commitments and backlog and we believe that this growth will translate into substantially improved software revenues and profitability over the next several quarters. We continue to expand our software customer base and during the first quarter signed six new customers including two major global technology companies and a large U.S. healthcare delivery institution. Our success in the quarter continues to provide a proof point of our product differentiation around secure video delivery, breadth of enterprise integrations, flexible cloud and on-premise deployments, and rich mobile applications.”

Qumu Corporation First Quarter Financial Highlights

· Disc publishing revenues in the first quarter of 2014 totaled $14.9 million versus $15.1 million during the first quarter of 2013.

· Total company gross margin for the first quarter of 2014 was 45.6% compared with 47.4% in the first quarter of last year. The decrease in the margin was primarily due to a decline in software gross margins to 35.4% as compared to 60.1% in the first quarter of 2013. The decline in software gross margin was due to less revenue from perpetual software contracts compared to the prior year and increased customer support and professional services costs required to support deployment of recently acquired software contracts.

· Total company operating expenses in the first quarter were $12.7 million, down approximately 4% from the first quarter of 2013. Operating expenses declined due to a decrease in disc publishing operating expenses primarily resulting from reductions in R&D and sales and marketing expenses totaling $1.2 million, with the decline in disc publishing operating expense partially offset by a $0.7 million increase in software’s operating expenses resulting from an increase in sales and marketing expenses. Transaction expenses from the recently announced sale of the disc publishing business were $0.2 million in the first quarter of 2014.

· Net loss for the first quarter 2014 was $3.9 million, or $(0.45) per share. The net loss in last year’s first quarter was $4.0 million, or $(0.46) per share. Cash and marketable securities at March 31, 2014 totaled $46.5 million, down from $51 million as of December 31, 2013 due to the payment of short and long term incentives earned during 2013 and continued investment in the growth of the software business, which was partially off-set by cash flow from the disc publishing operations.

“The proposed transaction to sell our disc publishing operation, which we announced last week, will secure the value and eliminate the risk of reduced future cash flows from our disc publishing business related to technology obsolescence. Also, the proposed transaction will enable Qumu to concentrate our efforts and resources on the significant growth opportunity we are building for our proprietary enterprise video content management software business. With a single focus on the growing software business, we have the potential to achieve improved value for our shareholders,” Mr. Black concluded.

Updated Financial Guidance

For 2014, the Company now expects software contracted commitments to increase 40% to 50% compared to 2013 and compared to previous guidance of 30% to 50%. Management believes that software revenues will increase over the next few quarters as more of the term license revenue from the strong fourth quarter 2013 and first quarter 2014 contracted commitments is recognized. The Company continues to anticipate growth in its software revenues of at least 30% over 2013 revenues.

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The Company defines contracted commitments as the dollar value of signed customer purchase commitments.

Earnings per Share Reconciliation

	First Quarter 2014
GAAP earnings (loss) per share	$(0.45)
Impact of amortization of intangibles	$0.04
Transaction expenses	$0.02
Non-GAAP earnings (loss) per share	$(0.39)
	First Quarter 2013
GAAP earnings (loss) per share	$(0.46)
Impact of amortization of intangibles	$0.04
Non-GAAP earnings (loss) per share	$(0.42)

Note to reconcile non-GAAP financial measures to GAAP

Management believes non-GAAP financial information provides meaningful supplemental information regarding the Company’s financial performance by excluding the amortization of the Qumu software acquisition intangibles and expense associated with the sale of the disc publishing business that may not be indicative of the core business operating results. Management believes that this additional financial information is useful to management and investors in assessing the Company’s historical and future performance.

Conference Call

The Company has scheduled a conference call and webcast to review its first quarter results today, April 28, 2014 at 4:30 p.m. Eastern Time. The dial-in number for the conference call is 800-762-8779 for domestic participants and 480-629-9645 for international participants. Investors can also access a webcast of the live conference call by linking through the investor relations section of the Qumu website, www.qumu.com. Webcasts will be archived on Qumu’s website.

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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, future product mix or the timing of recognition of revenue, the demand for the Company’s products or software, the effect of changes in technology, the development and marketing of new products, or risks relating to the proposed sale of the disc publishing business, including the risk that a condition to closing of the transaction may not be satisfied, including shareholder approval and receipt of financing by the buyer; the possibility that competing offers for the disc publishing assets may be made; the risk that the transaction will not be consummated within the expected time period; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, customers, suppliers and other business partners of both the disc publishing and software businesses; risks related to Qumu’s ability to operate its retained software business following the closing; and the challenges associated with transitioning the software business and disc publishing business to separate, stand alone operations following closing. . 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, 2013 and other factors set forth in the Company’s filings with the Securities and Exchange Commission.

Important Transaction Information

In connection with the proposed sale of the disc publishing business, Qumu will file a proxy statement with the SEC. Shareholders and investors are advised to read the proxy statement when it becomes available because it will contain important information about the transaction and the Company. Shareholders and investors may obtain a free copy of the proxy statement (when available) and other documents filed by Qumu with the SEC at the SEC’s web site at www.sec.gov. Free copies of the proxy statement, once available, and the Company’s other filings with the SEC, may also be obtained at www.qumu.com by following the Quick Link for “Investors” and then following the link to “SEC Filings.” Free copies of Qumu’s filings may be obtained by directing a written request to Qumu Corporation, 7725 Washington Avenue, Minneapolis, Minnesota 55439, Attention: James R. Stewart or by telephone at 952-683-7900.

Participants in the Solicitation

Qumu and its directors, executive officers and other members of its management may be deemed to be soliciting proxies from the Company’s shareholders in favor of the transaction. Investors and shareholders may obtain more detailed information regarding the direct and indirect interests in the transaction of persons who may, under the rules of the SEC, be considered participants in the solicitation of Qumu’s shareholders in connection with the transaction by reading the preliminary and definitive proxy statements regarding the transaction, which will be filed with the SEC. Information about the Company’s directors and executive officers may be found in the Company’s definitive proxy statement for its 2014 Annual Meeting of Shareholders filed with the SEC on April 15, 2014. These documents are available free of charge once available at the SEC’s web site at www.sec.gov or by directing a request to the Company as described above.

About Qumu

Qumu Corporation (NASDAQ: QUMU) provides the tools businesses need to create, manage, secure, distribute and measure the success of their videos. Qumu’s innovative solutions release the power in video to engage and empower employees, partners and clients. Qumu helps thousands of organizations around the world realize the greatest possible value from video and other rich content they create and publish. Whatever the audience size, viewer device or network configuration, Qumu solutions are how business does video. Additional information can be found at www.qumu.com.

Investor Contacts:

James Stewart, CFO

Qumu Corporation

952/683-7878

Leigh Salvo/Doug Sherk

EVC Group

415/652-9100

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QUMU CORPORATION

Selected Consolidated Financial Information

(In thousands except per share data)

(Unaudited)

Consolidated Statements of Operations Information:

	Three months ended March 31,
	2014			2013
Revenues	$	18,792		$	19,496
Cost of revenues		10,230			10,262
Gross profit		8,562			9,234
Operating expenses:
Research and development		2,708			3,357
Selling, general and administrative		9,863			9,716
Amortization of purchased intangibles		157			157
Total operating expenses		12,728			13,230
Operating loss		(4,166	)		(3,996	)
Other expense, net		189			(97	)
Loss before income taxes		(3,977	)		(4,093	)
Income tax benefit		(49	)		(54	)
Net loss		(3,928	)		(4,039	)
Net loss attributable to
noncontrolling interest		—			62
Net loss attributable to Qumu	$	(3,928	)	$	(3,977	)
Net loss per basic and diluted share	$	(0.45	)	$	(0.46	)
Basic and diluted  weighted
average shares outstanding		8,700			8,679

Non-Cash Charges Included in Consolidated Statements of Operations Information:

	Three months ended March 31,
	2014		2013
Depreciation	$	338	$	540
Amortization of intangibles
Cost of revenues		194		192
Amortization of purchased intangibles		157		157
Equity compensation
Cost of revenues		29		42
Research and development		74		162
Selling, general and administrative		323		348

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Consolidated Balance Sheet Information:

	Balance as of
	March 31,		December 31,
	2014		2013
Cash and marketable securities	$	46,508	$	50,958
Receivables		12,567		12,236
Inventories		4,591		4,102
Total current assets		69,102		71,749
Property and equipment, net		5,337		5,419
Total assets		86,064		89,146
Current liabilities		23,133		23,028
Long-term liabilities		3,726		3,537
Qumu stockholders’ equity		59,205		62,581

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EX-99.2

EXHIBIT 99.2

Qumu Corporation

1st Quarter 2014 Conference Call

April 28, 2014

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Qumu Corporation Q1 2014 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press the star followed by the one on your touchtone phone. If you’d like to withdraw your question, please press the star followed by the two. If you’re using speaker equipment, please lift the handset before making your selection. This conference is being recorded today, Monday, April 28, 2014.

I would now like to turn the conference over to Doug Sherk of the EVC Group. Please go ahead, Mr. Sherk.

Doug Sherk

Thank you, Operator, and good afternoon everyone. After the close of the market today, Qumu issued a press release announcing its first quarter 2014 financial results. The release is available on the Company’s corporate website at www.qumu.com.

Before we get started, during the course of this conference call, the company will make forward-looking statements about its future plans, objectives, beliefs, expectations and prospects. For this purpose, any statements made today that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements are not guarantees of future actions, outcomes, results or performance. By their nature, these forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statement. A discussion of the risks and uncertainties that affect Qumu’s business is contained in the company’s SEC filings, particularly under the heading Risk Factors, and in the press release issued this afternoon. Copies of these documents are available online from the SEC or on the Qumu website. These forward-looking statements are made only as of the date this conference call was initially held and the Company assumes no obligation and does not intend to update these forward-looking statements after the date of this conference call, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

In addition, to supplement the GAAP numbers, we have provided non-GAAP information that excludes transaction expenses and impact of the amortization of Qumu acquisition intangibles. We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future business performance. A table reconciling the GAAP loss per share information to the non-GAAP information is included in our financial release.

And now, I’d like to turn the call over to Sherman Black, President and CEO of Qumu.

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Sherman Black

· Good afternoon. Thank you for joining us for our conference call to discuss our first quarter performance. With me today is Jim Stewart, our Chief Financial Officer.

· As we noted in our news release issued this afternoon, we generated first quarter revenues of $18.8 million, which was approximately the midpoint of our guidance range for the quarter.

· The first four months of 2014 have included a number of significant milestones for Qumu. These included:

o Record first quarter contract commitments and backlog for our enterprise video content management software business including;

o A significant, multi-year agreement with a major technology company, valued at approximately $12 million; and

o A definitive agreement to sell our disc publishing business, allowing us to lock in the value and limiting the future downside risk that could develop given the historical declining revenue resulting from technology substitution.

Enterprise Video Content Management Software

· I’d like to start with an overview of the highlights in our enterprise video content management business.

· Our software business continues to build momentum in the market. The significant investments we have made in our technology, as well as in sales and marketing initiatives, are resulting in exceptional growth, as well as new and expanding opportunities globally.

· For two consecutive quarters, we have generated record levels of new contracted commitments and backlog. In the first quarter of 2014, contracted commitments were $14.2 million, a 45% increase from the fourth quarter of 2013, and a 226% increase from the first quarter of 2013. As a result of this momentum we are increasing the low end of our 2014 guidance for growth in software contracted commitments.

· Software contracted commitment backlog at the end of the first quarter was also a record at $27 million, a 163% increase from the end of 2013 and an increase of 117% over the first quarter of the prior year.

· Our software business is a mix of one-time perpetual license agreements with revenue generally recognized closer to the contract commitment date and term-based contracted commitments that are recognized as revenue ratably over the life of the agreement. As a result, from quarter to quarter, depending on the mix of contracts, the software revenue recognized will vary until the business scales or the mix becomes more consistent.

· In addition to the significant growth in contracted commitments during the last two quarters, we are also seeing a significant change in the mix. Our contracted commitments for the first three quarters of 2013 were $11.6 million and only 39% of those contracts were term-based. During the last two quarters our contracted commitments were $24.1 million and 75% of those contracts were term-based. The recent increase in contracted commitments and the shift in the mix create a significant backlog of predictable future revenue, but also has resulted in lower recognized software revenue in the first quarter.

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· As a result, first quarter software revenues were $3.9 million, a decline from $4.3 million in the first quarter of 2013. Over the next several quarters, we expect revenue and profitability will improve as the already signed term contract revenue is recognized. For example, during the second quarter that we are currently in, we expect approximately $5 million of our backlog to be converted into revenue.

· During the first quarter, we continued to expand our enterprise video content management customer base by signing six new customers that included two major global technology companies and a large U.S. healthcare delivery institution.

· One of our new customer agreements, announced last month, is a three year contract valued at approximately $12 million for Qumu with its partners to deliver a video content management platform to a global employee base.

· This agreement demonstrates Qumu’s differentiation in video delivery technology, hybrid cloud deployment and enterprise integrations. In addition, it validates our strategy of partnering to deliver Video-as-a-Service with IT ecosystem industry leaders. It also signals the tremendous potential opportunity we have to grow our revenue base in enterprise video content management solutions.

· The deployment for this contract has begun, but will take several months to complete.

· As disclosed when we announced this important win, we expect to recognize revenue of $2 million to $3 million in 2014 from this contract.

Disc Publishing Business

· Turning to our disc publishing business, revenues in the first quarter were $14.9 million compared to $15.1 million during the first quarter of 2013.

· As we announced last week, in order to continue to concentrate our efforts and resources on the significant growth opportunity we are building for our proprietary enterprise video content management software business, more than a year ago we commenced a multi-track competitive process to determine the best alternatives to maximize the value of our disc publishing business.

· That process resulted in a definitive agreement to sell our disc publishing business to a wholly-owned subsidiary of Equus Holdings in an all-cash transaction valued at $23M, subject to certain adjustments.

· This transaction locks in the value of the disc publishing business for Qumu shareholders and after all expenses and the return of escrow should increase our net cash position by $19 to $20 million. Subject to various conditions, including shareholder approval, the transaction is expected to close by July 31, 2014.

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Summary

· In summary, our record results for contract commitments and backlog in the first quarter are a result of our differentiated platform and the growing demand for our best in class enterprise video content management solutions.

· The sale of our disc publishing business enables us to continue to offset the cash investment in the software business without the risk of disc publishing declines over time, while also allowing Qumu to allocate all of its attention to the tremendous growth opportunity we believe the software business represents.

· With that, I’ll turn the call over to Jim.

Jim Stewart

· Thanks, Sherman. I will begin with a review of our Total Company P&L

· Revenues in the first quarter were $18.8 million, down from $19.5 million in the first quarter last year. Both disc publishing and software revenues were down slightly from the prior year. Changes in currency rates did not have a material impact on our revenues in the quarter with positive Euro changes offsetting negative currency changes in Japan.

· Total company gross margins were 45.6% in the first quarter compared to 47.4% in the first quarter last year. The decrease in the margin was primarily due to a decline in software gross margins compared to last year. Disc publishing gross margins in the first quarter were improved from last year’s first quarter.

· First quarter total company operating expenses were $12.7 million, down 4% from $13.5 million last year. Disc publishing sale transaction expenses were approximately $200 thousand in the quarter. In general, higher sales and marketing spending in our software business was more than offset by operating expense declines in our disc publishing business from the cost reductions that we implemented in 2013.

· The first quarter net loss per share was $3.9 million, or $(0.45) per share compared to a net loss last year of $4.0 million, or $(0.46) per share. Excluding transaction expenses and intangible amortization the first quarter loss per share on a non-GAAP basis was $(0.39) per share.

· Now I would like to discuss the first quarter Software business revenue, gross margin and operating expenses in more detail.

Software Business

· Enterprise video content management software revenues were $3.9 million in the recent first quarter, compared with $4.3 million a year ago, down due to the revenue recognition timing of contracted commitments. Software revenue will vary quarter to quarter based on the type of contract Qumu enters into with each customer. Perpetual contracts generally result in revenue recognized closer to contract commitment date while term and subscription contracts result in most of the revenue being recognized ratably over the period of the contract. The majority of contracted commitments from the fourth quarter 2013 and the first quarter 2014 were term or subscription contracts and as a result, a high proportion of those contracted commitments will be recognized into revenue over future quarters. This shift in our contract mix has dampened revenue growth over the last couple of quarters.

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· As Sherman mentioned, software contracted commitments of $14.2 million reached another record for Qumu compared with $4.4 million in the first quarter last year and $9.8 million in the fourth quarter of 2013. Given that the majority of these first quarter contract commitments were term deals, most of these contracts went into backlog and were not recognized as revenue in the quarter.

· Backlog of software contracted commitments for the first quarter was a record $27 million compared with $16.7 million at the end of December 2013.

· We expect that more than $5.0 million of this backlog will be recognized into revenue during the second quarter.

· Moving down the income statement software gross margin in the first quarter was 35.4% compared to 60.1% in the first quarter last year. The decline in software gross margin is due to less revenue recognized from perpetual software contracts compared to the prior year and increased professional services and customer support costs required to support deployment of recently acquired software business contracts.

· As already mentioned, we have not only seen significant growth in software contracts but we have also seen a significant shift in the software contract mix over the last couple of quarters - with approximately 75% of our contracted commitments being term deals. This revenue mix shift has not only dampened our revenue growth but also temporarily negatively impacted our gross margin. As this term license revenue is recognized, we will see improved gross margins.

· In addition, we have increased costs to support the deployment of our much higher backlog of contracted commitments. Customer support costs have increased along with our professional services expenses. We recognize these costs as incurred and in the first quarter these costs were higher than the recognized revenue from the deals we have begun to deploy. As this revenue is recognized, we will see a positive impact on gross margins as well.

· Overall, we expect gross margin to improve in the second quarter as compared to the first quarter. However, due to the initial costs incurred in deploying the approximately $12.0 million contract that we announced in March not matching the timing of the revenue we can recognize from the deployment services that we are providing, our gross margin in the second quarter is expected to be below last year’s gross margin. In addition, most of the hardware included in this large hybrid term deal, which carries lower margins than the software, will be delivered in the second quarter and recognized as second quarter revenue. Again, as the rest of the term software license revenue is recognized we will see improved gross margins in future periods.

· First quarter Software operating expenses were $8.0 million compared to $7.3 million in last year’s first quarter. Higher sales and marketing spending was the primary driver of this increase.

· Turning now to disc publishing.

· Our disc publishing revenues totaled $14.9 million in the first quarter, down from $15.1 million in revenues in the first quarter of 2013 and down 10% from the fourth quarter 2013.

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· Compared to last year, Disc Publishing hardware and service revenues were down with consumables flat with the prior year.

· First quarter Disc Publishing revenues were down 8% in Europe and basically unchanged in the other regions of the world compared to the first quarter of last year.

· The first quarter disc publishing gross margin was 48.2% compared to 45.1% last year. This improvement was driven by an improved mix of consumables, better service margins and reduced supplier costs for our professional series products.

· First quarter disc publishing operating expenses were $4.7 million compared to $5.9 million dollars last year. The main driver of this $1.2 million dollar reduction are the cost reductions we implemented in 2013 in our R&D and sales and marketing functions.

Cash

· Now turning to our cash position …

· Cash and marketable securities totaled $46.5 million at March 31, 2014 compared with $51.0 million at December 31, 2013.

· During the first quarter, our cash used in operations was approximately $4.5 million.

· The main drivers of the cash usage in the quarter were the payments of short and long term incentives earned during 2013, an increase in inventory due to a required last time buy of a disc publishing hardware component and an increase in prepayments for products and software licenses that will be delivered as part of recent large software deployments. These cash usage items were partially offset by the positive cash flow from our disc publishing operations.

· Capital expenditures were approximately $300 thousand in the first quarter.

· We did not buy back any shares of Qumu stock during the first quarter. The Company has approximately 778,000 shares remaining on its repurchase authorization and may repurchase shares from time to time during the year depending on market conditions.

2Q 2014 Guidance

· Looking ahead, our results and strong contracts performance in the first quarter provide us with additional proof points for the growth opportunity in our enterprise video content management software business.

· Our business continues to evolve and as I stated we have seen a significant shift in our revenue mix to more term and subscription contracts. Our revenues will increase over the next few quarters as we begin to recognize more and more of these term contracts into revenue.

· For 2014, we now expect software contracted commitments to increase 40% to 50% compared to 2013 and compared to previous guidance of 30% to 50%.

· Further, we continue to anticipate growth in our software revenues of at least 30% over 2013.

· That concludes our formal remarks. Now Sherman and I would be happy to answer any questions. Operator, could you please open up the line for Q&A?

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