Qumu Corporation
Q2 2021 Earnings Call Transcript

Published: 1 Aug 2021

[Operator:]

Welcome to Qumu's Second Quarter 2021 Conference Call. My name is Nita and I will be your operator this afternoon. Joining us is Qumu's President and CEO, TJ Kennedy; CFO, Dave Ristow; and Matt Grover from Gateway Investor Relations. The results we will review today further enhance our pre-announcement shared on June 29, 2021. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to turn the call over to Matt Grover. Sir, you may begin.

[Matt Grover:]

Thanks, operator, and good afternoon, everyone. After the market closed today, Qumu issued a press release announcing its financial results for the second quarter ended June 30, 2021, a copy of which is available in the Investor Relations section of the company's website. During today's call, management will make certain statements with respect to the company's expected financial results, the impact of COVID-19 on the use and adoption of video in the enterprise, the company's go-to-market strategy and efforts designed to increase the company's traction and penetration with customers.

[TJ Kennedy:]

Thank you, Matt. And good afternoon, everyone. It's a pleasure to be speaking with you today. It has been just over a year since I joined as CEO and a lot has happened in that time. Most importantly, we have made significant progress through the early stages of our company's ongoing transformation into a SaaS first organization that is capable of generating robust and predictable long-term growth. Execution on our strategic roadmap has undoubtedly strengthened Qumu's position as a leader in cloud first enterprise video and jumpstarted our evolution towards becoming a subscription first business. The work has not been without its challenges. And we still have much to do in order to realize our vision. As we shared our second quarter preliminary results conference call on June 29. Our financial results were lower than expected during by longer than anticipated transitions and ramp up periods with our organization, which has impacted our ability to achieve our overall revenue growth target for 2021 and pushed our growth inflection point into early 2022.

[Dave Ristow:]

Thank you, TJ. And good afternoon, everyone. Turning to our Q2 results in more detail. Revenue for the second quarter of 2021 was $5.9 million compared to $9.3 million in Q2 of last year and up from $5.8 million in Q1 of 2021. The $5.9 million was at the high end of the range we have provided in our preliminary results last month. As we communicated the year-over-year decline in revenue was due to a significant one-time license and appliance revenue. We recognized in Q2 of 2020 from a single large customer. We also experienced slightly lower on-premise maintenance and support revenue in Q2 of 2021 due to cloud conversions and lower on-premise maintenance, recognized for customers not using on-premise appliances through the remote working relationships. Subscription maintenance and support revenue for the second quarter of 2021 increased 9% to $5.1 million from $4.7 million in Q2 of last year and was up 2% from $5 million in Q1 of 2021. The $5.1 million was at the high end of the range we provided in our preliminary results and was driven by new cloud in term deals. Subscription as a percentage of total annual recurring revenue was 49% for the second quarter of 2021 compared to 41% for the second quarter of 2020. Looking at our SaaS metrics, subscription ARR increased 28% to $12.4 million up from $9.7 million in Q2 of last year. The 28% growth was primarily due to increase subscription renewal rates and cloud conversions as well as increased SaaS sales. The $12.4 million in annual ARR exceeded our preliminary results. ARR has grown 7% during the first half of 2021 driven primarily by three meaningful on-premise to cloud conversions, and a new key customer. We continue to anticipate ARR will grow as bookings of mid and large enterprises ramp with our SaaS sales efforts. And as our on-premise customers convert to our SaaS platform. Our efforts to drive subscription ARR growth is anticipated to provide us with good visibility into future revenue due to the ratable recognition of subscription revenues. All of our SaaS renewal rates have increased since Q2 of last year. At quarter end, our SaaS gross renewal rate or GRR was 93% compared to 87% at the end of Q2 last year. Our SaaS net renewal rate or NRR was 132% compared to 118% at the end of Q2 of last year. And finally, our SaaS dollar value retention was 104% compared to 96% at the end of Q2, 2020.

[TJ Kennedy:]

Thank you, Dave. Now that we have covered what happened and the related financial results, I am going to discuss our key go forward initiatives, which will enable us to achieve profitability and also our updated growth goals. My objective is for you to take away three main points from my remarks. First, we have the right plan and sufficient resources to execute on our plan without the need to raise additional capital. Second, we have the dedicated leadership team with the right experience to successfully execute the plan. And third, we have a solid and growing SaaS business that is supported by improving SaaS metrics. Now with that, let me pivot to our plan for the second half of the year and some of the specific strategies we're executing on. We have adjusted our expenditures in Q3 to take into account the longer ramp up our sales team. We have refined our sales strategy and product pricing based on specific customer in used cases. That changes help to define how we land more customers and how we then expand into additional used cases. Supporting these efforts, we have supplemented our historical technology focus sales approach, with the line of business sale focus to drive greater land and expand possibilities.

[Operator:]

.Please stand-by, while we compile the Q&A roster. Your first question comes from the line of Mike Latimore from Northland Capital Markets. Your line is now open.

[Unidentified Analyst:]

Hi, guys. This is on for Mike Latimore. I have a couple of questions here. You talk about pricing based on used cases. What is the status of that initiative? And what would be the main used cases?

[TJ Kennedy:]

Sure, I'll start-off with the main use cases are crisis communications, CEO Town Hall and executive communications, marketing or product launches, onboarding for employees and onboarding for our customers. And that can also include learning management systems. So those are the main five that we most often get asked to address. And we have now updated to those use cases to be able to make it easier for our sales team to be able to make it quite clear what kind of solutions we can bring to them. And as they expand those used cases across a large enterprise, we can then add-on additional capabilities as needed.

[Unidentified Analyst:]

All right. And what is the top one or two priorities for your new CTO?

[TJ Kennedy:]

#1 is helping to drive the technical innovation to make sure that we're meeting the future needs related to the move to the new work. And if we look at hybrid work being the majority of probably future work, as well as remote and on-premise work, really going to be critical that we continue to innovate to meet those needs of that new work. So the top priority for Andy as part of that. Also, he's overseeing both our on-premise hybrid and cloud capabilities, and making sure that we have the best technology from all being able to be presented to our customers and to help drive that innovation in a timely manner.

[Unidentified Analyst:]

Right and has demand for virtual events slowed this year?

[TJ Kennedy:]

Virtual events, maybe more hybrid and virtual events now. We're seeing more conferences and events that do happen partially in person. But we're still seeing a demand for virtual events that are part of that hybrid event structure. So definitely still having a lot of demand for that video to go along with both in person and remote events. And our corporations that are working with us from an enterprise video standpoint, also continued to extend a lot of their work from home capabilities and the timing of when they return to the office is still being pushed out into the future, somehow, but there's still a lot of uncertainty for when people go full hybrid or go back into the offices that I think will trickle into the fall and potentially longer this year.

[Unidentified Analyst:]

All right. Thank you.

[TJ Kennedy:]

Thank you.

[Operator:]

. There are no further questions. Thank you. At this time, this concludes the company's question and answer session. If your question was not taken, please contact Qumu’s IR team at [e-mail]. I would now like to turn the call back over to Mr. Kennedy for his closing remarks.

[TJ Kennedy:]

Thank you, operator and thank you everyone for joining our call this afternoon. I look forward to speaking with you again soon. Thanks so much.

[Operator:]

This concludes today's conference call. Thank you for participating You may now disconnect.