Qumu Corporation
Q4 2020 Earnings Call Transcript

Published: 4 Mar 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Qumu Fourth Quarter 2020 Earnings Conference Call. At this time, all participant are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I would now like to introduce your host, Qumu’s Chief Financial Officer Mr. Dave Ristow. Sir, you may begin.

[David Ristow:]

Thank you, Paul, and good afternoon, everyone. After the market closed today, Qumu issued a press release announcing its fiscal results for the fourth quarter and full year ended December 31, 2020, a copy of which is available on the investor relations section of the company's website. Our financial results are consistent with the preliminary fourth quarter and 2020 fiscal year end results we issued on January 21 of 2021.

[TJ Kennedy:]

Thanks, Dave. And good afternoon. It's a pleasure to have this opportunity to speak with you all today. As you just heard in so many words from our financial performance, 2020 was a big year for us in what was a transformative period for our business and the rest of the world, we finished the year strong and are positioning Qumu in 2021 to achieve our long-term growth goals. Due to COVID-19 and the new global work from home reality, 2020 was the year that mainstream the use of video for businesses of all sizes. A recent Gartner survey revealed that 82% of company leaders plan to allow employees to work remotely some of the time and nearly half 47% said they plan to allow employees to work remotely full time going forward. A massive increase in the number of virtual meetings brought on by the change to the way we now work necessitated initially by the pandemic force enterprises of all sizes to double down and implementing a broader use of video conferencing tools to replace the office conference room and allow hybrid and remote work. We believe that in 2021, this trend of permanently remote and hybrid work will continue and the enterprise use of video will grow. With this newly captured video content another dilemma was created, which is how we keep, track, store and manage it effectively. How can the enterprise make the best use of video to save time to add value for global customers and employees? Enterprises in 2021 need to secure store and leverage this content better to better manage and grow their business. Video usage will become more sophisticated in 2021. And employees will leverage both synchronous and asynchronous video to be more efficient and effective in how they conduct their business.

[Operator:]

No problem, sir. Our first question is from the line of Mike Latimore with Northland Capital. Your line is open.

[Mike Latimore:]

Great. Yeah. Thanks very much. Congratulations on the great year here, guys.

[TJ Kennedy:]

Thanks, Mike.

[Mike Latimore:]

In terms of the SaaS ARR growth, it looks like it accelerated to 29% year-over-year from 18%. I guess. Can you provide any more color on that type of acceleration? And then is sort of 29% something that we should think about, you know, maybe going forward here as well?

[TJ Kennedy:]

Dave, you want to go ahead and take that?

[David Ristow:]

Absolutely. So Mike, on a year over year basis, we wound up adding the most customers - more customers than we added in the prior year, which we reported, significant growth there, let me just grab the 65% increase year-over-year. So big driver there is really the new customer adds. It was also bolstered by essentially conversions of our on-premise into the cloud base solution, which is feeding our subscription revenue growth. On a go-forward basis, I'd actually suggest that embedded within our year-over-year annual revenue guidance, where we would be achieving at least that and likely more with essentially the SaaS sales pods that we're putting together.

[Mike Latimore:]

Okay, great. And then the deferred revenue grew quite a bit 42%, I think, year-over-year, is that tied to the SaaS growth? Or is it kind of timing of maintenance rentals?

[David Ristow:]

It's a combination of both. Some of it is certainly tied to what we're doing with the subscription revenue growth. There's also a component that will play out in terms of the timing of when things are invoiced and effectively the run-off there as well.

[Mike Latimore:]

Got it. And then, sounds like you're putting a bigger effort into kind of the go-to-market strategy around small business. Can you just elaborate a little bit on kind of your small business go-to-market strategies here this year?

[David Ristow:]

TJ, do you want me to take that? Or would you like to?

[TJ Kennedy:]

Sure, I'm happy to. So you know, really, like we've tried to look at it as small enterprise, because we're not going to be going after necessarily small business. But the reality, a small enterprise for us is kind of in that 1, 2, 3, 4000, employee range, and mid-market enterprise for us is 5000 to 50,000 employees. And so in the mid-market, we're definitely building SaaS sales pods that are very focused on communicating with them and driving that sales process. On the smaller side, we're driving it more through our online ability in e-commerce to be able to directly sell to them with less motion. And we're also driving that with some of our account based marketing campaigns that are targeting both small and medium enterprises, which we did not target before, in addition to the large enterprise where our largest focus is today.

[Mike Latimore:]

Got you. I guess just one more from me. In terms of the SaaS bookings in the quarter, were there sort of a variety of use cases? Or there was - was there a couple that were a little more pronounced than normal? Just kind of maybe touch on the use cases that were driving the booking?

[David Ristow:]

Great question. I think one - I'll give you a couple of just anecdotes here. So one of them was actually a conversion from on-premise into cloud. And it's about some of those bookings do relate to the reality that folks are recognizing that cloud is a - is an important place to be and we've got a customer who is actually now running both solution sets, when we talk about that conversion, because they're deploying both. Also in connection with that, it comes down to the use cases behind it. So fundamentally, and this is where we've got great customer stories, that we're essentially equipping our new sales teams with that - that communicate, you know, everything from within healthcare, you know, we may have customers are using about six use cases, or seven or eight or nine use cases. Reality is when we go out and engage with our customers and go across the healthcare sector, for example, Mike, we're finding that we've got 30 to 35 use cases, when we aggregate all of the unique use cases across that - those platforms. So what we're doing is actually capturing these use cases, aggregating them, and helping existing customers to not only deploy the solution set more broadly within their existing enterprise. But this is great feeder for essentially all the sales and SaaS sales teams that we've got because it doesn't really matter to us what that point of entry is, at the end of the day, we've got a point solution that solves a video pain today that can derive real business impact. And so we'll start with just about any use case, solving that pain point to move them forward. But then it's really down to our customer success organization to deal with that expansion. And as TJ noted, we've got 800 plus percent increased usage in the cloud based platform. So these get leveraged out both for new and expansion of the existing base. And it truly is, it's a great question. It's use case driven.

[Mike Latimore:]

All right, great. Thanks a lot. Good luck this year.

[David Ristow:]

Thank you.

[TJ Kennedy:]

Thank you.

[Operator:]

Our next question is from Jeff Van Rhee with Craig-Hallum. Your line is open.

[Jeff Van Rhee:]

Great. Thanks for taking my questions, guys. A couple from me. I wanted to follow up on Mike's question there on the on the new customers. With respect to the cloud customers, what was the average size of those new customers if you want to quote it, and see however you want to sort of frame it and sort of the spread, as well as the distribution of the sizes? But just curious what size deals were embedded in there? And then also, you know, not quite a use case question. But as you look at, you know, sort of connectors, are you seeing particular drivers from the Zoom or other key platforms that are really driving say those new cloud customers this quarter?

[TJ Kennedy:]

So, Jeff, our use cases are quite broad. So we did have within essentially the bookings are in the quarter across the nine net new, the one on-premise and the enterprise, it's been very consistent with the ASP that we've shared. So between when we're looking at, and remember, we've got essentially 5000 to 50,000, what we're calling mid enterprise, those ASPs were ranging from between 35,000 and 150,000. We did have that the on-premise sale, those sales are typically $150,000 plus. And then when we're dealing with the existing cloud customer, that was actually a fairly significant customer that we've had for many years, who wound up converting over to cloud, but we're deploying new use cases for cloud within that enterprise. And eventually, though, we'll come off the on-premise and move over to the SaaS base. And that's, that's larger than our typical on-premise event.

[Jeff Van Rhee:]

Sure, sure. That's helpful. And then maybe just speak to the pipeline. I know, TJ came in and made a pretty remarkable amount of change already, you're dropping a lot of new talent in. So I realized there's some unfairness embedded in the question, but I wonder if you can talk to the pipeline, and any observations, a, of some of your early efforts showing up at the front end of that pipeline, and then b, just talk to the breadth depth composition of the pipeline? You know, any call outs there?

[TJ Kennedy:]

Yeah, I mean, a couple things happen at the end of Q4 and go into the beginning of Q1 were. You know, first of all, we put in place some really important rigor around sales force and around the opportunities as also the focus on our cloud solution versus on-prem. And so there was a lot of cleanup that occurred as part of bringing in new leadership into sales and marketing, to really go through that pipeline, really drive out any and all opportunities that were present in it and make it a very real pipeline, to some degree, break it down before you build it back up. We are now starting to hear in Q1, build up account based marketing campaigns to drive and increase that pipeline, and those are just underway, you know, in the past month, as well. And those new opportunities are now being fed into what I would call is a much more clean and focused SaaS pipeline going forward for us. So very much it's about getting it focused and driving the new opportunities that are really in the SaaS space for us. And so, the good news is, I think what we can say, you know, more on a qualitative level is I think that the opportunities that we now have coming in and adding to that, or are more high quality SaaS opportunities, both large enterprise and mid enterprise. And that's been the focus of where we're going. I'm not going to report out on any pipeline coverage today. I think as we go forward, and we build this drive between marketing and sales going forward, we'll have more to talk about in upcoming quarters, but definitely a new focus and drive to make sure that we really drive through the data and have data driven metrics on the opportunities that we're pursuing and also going after them in a very aggressive way. We're using a lot of video as part of our sales routines, and we're doing a lot of review and coaching from the sales side to our regional sales leaders as they're out there. And this is going to drive better results for us in 2021.

[Jeff Van Rhee:]

Yeah, helpful. Last one for me, just on the EBITDA side, as you're mapping out the you know, the obviously you've given the growth, you've made it clear you're investing front end, back end as the revenue growth, at this point, just anything you can share in terms of where you think that breakeven crossover is on EBITDA?

[TJ Kennedy:]

Yeah. And it's - we're looking at as probably $11 million to 12 million in revenue and we're looking at essentially the adjusted EBITDA cost over to be probably first half of 2022.

[Jeff Van Rhee:]

Okay. Okay, got it. Thank you, guys.

[TJ Kennedy:]

Thanks, Jeff.

[Operator:]

We have a follow up from the line of Mr. Mike Latimore with Northland Capital. Your line is open.

[Mike Latimore:]

Great, yeah. Thanks. I guess I'll get a couple more in here. In terms of the customer success team, I think you're going to add 15 to 20 people in that group. I guess, what's the status of that? And with your new CRO, you know, kind of going to - change that goal? Or is it pretty set on year?

[TJ Kennedy:]

So a couple of things on that Mike, on the CRO side with our sales hiring very much, significantly underway, and continuing to round out that team here in Q1. And the hiring has been, you know, mostly on target, a little bit behind, but pretty close to where we want to be. On the customer success side, we're continuing to hire into the customer success manager roles. Some additional hiring still needed there. I would say it's slightly behind where we're at on the sales side, which is further ahead and pretty much on target at this point.

[Mike Latimore:]

Okay, got it. And then I guess just back on the bookings and pipeline, obviously, a lot of focus on virtual events this year, whether it's, you know, hosting conferences, virtually, or CEOs doing virtual events with their employees. I guess, I mean, just can you talk a little bit about virtual events as a driver of kind of the bookings in pipeline?

[TJ Kennedy:]

Sure, a lot of virtual events for us have been happening through the enterprise sales motions. One of the things we saw really improve later in the year was that a lot of our customers who used Qumu, quite often for many internal events are also now using it for more and more external events. And whether that's external, and it's healthcare companies that are also working with patients and communicating in the community, or whether it's on the finance side, whether to finance customers that are holding webinars and holding events, we see that continuing to grow. And that has continued to grow with their webinars and events that are on trusted platforms that have to work for these very large events. So we have definitely seen a growth in events kind of quarter-over-quarter. And these events are very much driven to drive both internal and external purposes for the business, whether it's training and learning on the internal side, or communication or on the external side, it's actually hosting large events that have replaced what were traditionally a lot of in person events. But I would say, even in the future, we believe as some events go back to in person, they're going to maintain this hybrid element where they're still live streaming that and they're still leveraging those events with video on-demand after the fact. And that has continued to grow. And enterprises have not just grown in the number of enterprises that do it. But also the amount of video streaming and video events that they hold has continued to increase.

[David Ristow:]

And Mike and I also add that, you know, along those same lines, I mean, our one of our core differentiators is, so to the extent that there are Qumu customer, and they've got the platform, if they're going outside to an on 24 or whatnot, that content oftentimes isn't in a centrally manage repository, it's not an asset that they get to work with down the road. And as a result, folks that can't attend live are trying to go look for a link somewhere. So the ability to repurpose those assets and deploy them very efficiently, that has been a part of just our sales teams, just entry point. So where they need to manage that and bring all content together, its a great talking point for us. And, you know, we're doing every single day, you know, dozens of live events, some of which are internal, and some of which are broadcast. We don't have visibility, great visibility to what's happening in the on-premise, just because of the nature that it is on-premise. But the cloud base platforms, we could see that activity, and definitely know that as a driver to effectively this platform usage.

[Mike Latimore:]

Okay. I guess just last one. I have in my notes here that in the past, if somebody went from or customer went from maintenance to SaaS, there was a 25% to 40% uplift in, I guess its annual value. Is that's still the way to think about it?

[David Ristow:]

It is, as we go ahead and quote those out that is exactly what we intend to do. Not every customer moves in that direction. Like for instance, if we've got somebody who's actually taking it on as a second platform, they will come in different than the on-premise in its initial instance or life. So if they're just picking up if they got a big bulky on-premise platform, for example, and then they're adding on cloud, and they don't plan to complete that migration over until, let's say, 24 months later, then the way that that plays out is we will go in for the specific business unit business purpose, size it right for them. And then we give them a path to bring everything over. And, you know, subsequent periods when they're ready to do so.

[Mike Latimore:]

Okay, good.

[David Ristow:]

Thanks, Mike.

[Operator:]

We have a follow up from the line of Jeff Van Rhee with Craig-Hallum. Your line is open.

[Jeff Van Rhee:]

Yeah, just one quick follow up for me, I think on the retention front and thanks for the retention metrics, always very helpful. But I'd be curious, you know, and on the key metrics or SaaS net retention. You know, maybe the dollar retention as well. What - how should we think about that trending through, you know, through ‘21? I mean, obviously, you got a lot of, you know, tailwinds uses, a lot of things are playing out in there. Just want to make sure we're sort of level setting. How do you see those numbers rolling through the year?

[TJ Kennedy:]

Yeah, I think the headline Jeff from dollar value retention, you know, our goal is to take essentially what's been running probably 92% to 93% and with the creation of our customer success organization and the things that we're doing to cross pollinate, effectively use cases and get stickier with the platform, we envision and target - are targeting essentially bringing that to 94 plus percent at the headline. And then as you look at the SaaS related metrics, the ability to go ahead, and this really does drive back to essentially our SaaS model, it doesn't really matter our point of entry. You know, if you look at essentially how a bow tie funnel works for a SaaS organization, you know, 60% to 70% of LTV comes out of that post initial sale sort of approach. And that's exactly what we're building with the customer success and account management organization, the playbooks that we've built and the training that we're deploying to back the new personnel.

[Jeff Van Rhee:]

Okay, fair enough. Great. Thanks.

[Operator:]

As I am showing no further questions at this time, I would now like to turn the conference back to Mr. TJ Kennedy, President and CEO.

[TJ Kennedy:]

Thanks, Paul. Appreciate it. And thank you everyone for joining our call this afternoon. We appreciate your continued support as we execute on our growth plan and scale to move to the next level. I look forward to speaking with you again very soon.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day and stay safe.