qumu-20220810

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 10, 2022




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.)

400 S. 4th Street, Suite 401-412
Minneapolis, MN						55415
(Address Of Principal Executive Offices)						(Zip Code)



			(612) 638-9100
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:



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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol

Name of each exchange on which registered

Common stock, $0.01 par value

QUMU

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934. o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Items under Sections 1 and 3 through 8 are not applicable and therefore omitted.

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Qumu Corporation (the “Company”) hereby furnishes as Exhibit 99.1 a press release issued on August 10, 2022 disclosing material non-public information regarding its results of operations for the quarter ended June 30, 2022 and hereby furnishes as Exhibit 99.2 statements of Rose Bentley, its President and Chief Executive Officer, and Thomas Krueger, its Chief Financial Officer, made on August 10, 2022 at a telephone conference relating to the quarter ended June 30, 2022 results.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.



Exhibit No.						Description
99.1						Press Release issued on August 10, 2022.

99.2						Statements of Rose Bentley, President and Chief Executive Officer, and Thomas Krueger, Chief Financial Officer, at a telephone conference held on August 10, 2022.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

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/ Thomas A. Krueger
		Thomas A. Krueger
		Chief Financial Officer
Date: August 11, 2022

Document

EXHIBIT 99.1

Qumu Reports Second Quarter 2022 Financial Results

Qumu Reports 10% Increase in Quarterly SaaS Revenue and SaaS Annual Recurring Revenue for Second Quarter 2022

Company Reiterated its SaaS Growth Expectations for 2022 and 2023

MINNEAPOLIS – August 10, 2022 – Qumu Corporation (Nasdaq: QUMU), a leading provider of cloud-based enterprise video technology, today reported financial results for the second quarter ended June 30, 2022.

Q2 2022 and Recent Operational Highlights

•Selected by Proprep for video management and distribution of e-learning Content to STEM students worldwide

•Named a Top Purpose-Built Streaming Platform by Wainhouse Research

•Won fourth consecutive Stevie® Award in 2022 for Customer Service

Q2 2022 Financial Highlights

•Software as a Service (SaaS) revenue increased 10% to $2.8 million, compared to $2.5 million in Q2 2021

•SaaS Annual Recurring Revenue (SaaS ARR) grew to $13.3 million, up 10% year-over-year

•SaaS revenue accounted for 54% of total revenue, compared to 54% in Q1 2022 and 43% in Q2 2021

•Gross margin improved to 75.4%, compared to 71.5% for Q1 2022 and 73.6% for Q2 2021

•Operating expenses decreased 15% sequentially and 27% year-over-year

•Net cash used in operating activities decreased to $3.7 million, an improvement compared to $4.9 million in Q1 2022 and $6.1 million in Q2 2021

•Solid balance sheet with $6.4 million of cash and cash equivalents and no debt at quarter end

•Company reiterated its expectation that SaaS recurring revenue will comprise approximately 65% of its overall recurring revenue mix by the end of 2022, with targeted growth to approximately 75% of recurring revenue mix by the end of 2023

Q2 2022 Key Performance Indicators

•SaaS revenue accounted for 61% of recurring revenue, up from 60% in Q1 2022 and 49% in Q2 2021

•SaaS revenue accounted for 54% of total revenue, compared to 54% in Q1 2022 and 43% in Q2 2021

•SaaS ARR increased to $13.3 million from $13.0 million in Q1 2022 and $12.2 million in Q2 2021

•SaaS customer retention metrics:

◦Gross Retention Rate (GRR): 90% at end of Q2 2022 compared to 81% at end of Q2 2021

◦Net Retention Rate (NRR): 103% at end of Q2 2022 compared to 144% at end of Q2 2021

Management Commentary

“Our strong results for the second quarter and first half of 2022 demonstrate the continued execution of our strategy to grow our cloud business and scale our SaaS revenue base,” said Qumu President and CEO Rose Bentley. “Highlighting our success in Q2 was a 10% increase in both SaaS revenue and SaaS ARR, putting us well on track to achieve our SaaS growth targets for 2022 and 2023. Our cloud transformation initiatives and increased SaaS contributions also helped produce a robust gross margin of 75.4% in Q2, a level we expect to build on as SaaS becomes a greater portion of our overall topline.”

Qumu CFO Tom Krueger commented: “Qumu’s improving financial performance and strong SaaS KPIs reflect the increasing success and momentum of our partner-led sales strategy as well as our current customers growing their investment. In fact, in Q2 we added new customers at twice the rate of Q1 and more than 80% of new bookings in the first half of 2022 were sourced or influenced by our partners. Additionally, over the last 12 months, our customers have added 51% more authorized users to our platform, and we have seen an increase of asynchronous video views increase by over 30%. The growing investment from our customers is exemplified by our average annual contract value increasing by 474% in the first half of 2022. Triple-digit growth in contract size demonstrates our ability to deliver greater value through additional use cases when we acquire new customers. As we continue to grow our cloud business, build our partner ecosystem, and further transition to a purely subscription-based model, we expect our financial performance to improve throughout 2022 and beyond.”

Bentley continued: “Overall, Qumu’s transformation is well underway, and our past investments are yielding strong returns. Our business is optimized and now hitting its stride. Our plan is supported by a solid cash position and available resources that provide sufficient runway to execute our growth strategy. We entered Q3 with a record pipeline of opportunities that we are converting at an escalating pace. Our partner-led sales strategy is gaining momentum and creating repeatable sales motions that give us confidence in our ability to secure a record number of new logos in 2022.

“Looking ahead we continue to expect our SaaS recurring revenue as a percentage of our total recurring revenue to be at least 65% by the end of 2022 and 75% by the end of 2023. We also continue to expect to crossover to cash flow breakeven in 2023. We remain confident Qumu will emerge as a 100% subscription company operating at scale, benefiting from high-margin recurring revenues, growing cash flow and adjusted EBITDA and net income profitability.”

Second Quarter 2022 Financial Results

Revenue for Q2 2022 was $5.1 million, compared to $4.9 million in Q1 2022 and $5.9 million in Q2 2021. The year-over-year decrease was due to the company’s strategic shift away from perpetual license sales, and the related maintenance revenue, and toward SaaS sales.

Service revenue for Q2 2022 was $4.9 million, compared to $4.8 million in Q1 2022 and $5.7 million in Q2 2021. The year-over-year decrease resulted from customer contracts sunsetting, which impacted maintenance revenue associated with the company’s on-premise solution. Subscription and support revenue, which is included in service revenue and comprises the company's SaaS revenue, was $2.8 million for Q2 2022, compared to $2.7 million in Q1 2022 and $2.5 million in Q2 2021. The company expects subscription revenue will continue to grow as Qumu executes on its cloud transformation strategy.

Gross margin in Q2 2022 was 75.4%, compared to gross margin of 71.5% for Q1 2022 and 73.6% for Q2 2021. The gross margin percentage improved due primarily to better margins on SaaS revenue recognized in Q2 2022 compared to Q1 2022 and to a higher percentage of SaaS revenue contributing to the overall sales mix compared to Q2 2021.

Net loss in Q2 2022 totaled $(2.6) million, or $(0.15) loss per basic and diluted share. This compares to net loss of $(4.6) million, or $(0.26) loss per basic and diluted share, for Q1 2022 and net loss of $(4.3) million, or $(0.24) loss per basic share and $(0.30) loss per diluted share, in Q2 2021.

Adjusted EBITDA loss, a non-GAAP measure, in Q2 2022 was $(3.1) million, compared to $(4.1) million in Q1 2022 and $(4.5) million in Q2 2021.

As of June 30, 2022, the company had cash and cash equivalents of $6.4 million.

Business Outlook

Qumu provides guidance based on current market conditions and expectations. The company emphasizes that its guidance is subject to various important cautionary factors referenced in the section entitled “Forward-Looking Statements” below, including risks and uncertainties associated with the company’s strategic plan, transition to SaaS recurring revenue through channel partners, and the COVID-19 pandemic, such as trends in distributed remote and hybrid work impacting enterprise technology adoption and procurement.

To give insight into the progress of Qumu’s SaaS business transformation, the company provides a business outlook based on the percentage of recurring revenue comprised of SaaS revenue. Qumu’s management reiterated its expectation that SaaS recurring revenue will comprise approximately 65% of its overall recurring revenue mix by the end of 2022, with targeted growth to approximately 75% of recurring revenue mix by the end of 2023.

Conference Call

Qumu executive management will host a conference call today (August 10, 2022) at 4:30 p.m. Eastern time. Register here to join the conference call:

https://register.vevent.com/register/BIb213b80569034b4e953e038a9d64a33f.

Investors can also access a webcast of the live conference call by linking through the investor relations section of the Qumu website at https://ir.qumu.com. The webcast will be archived on Qumu’s website for one year.

Non-GAAP Information

To supplement the company's condensed consolidated financial statements presented on a GAAP basis, the company uses Adjusted EBITDA, a non-GAAP measure, which excludes certain items from net loss, a GAAP measure. Adjusted EBITDA excludes items related to interest income and expense, the impact of income-based taxes, depreciation and amortization, stock-based compensation, change in fair value of derivative and warrant liabilities, foreign currency gains and losses, Employee Retention Credit income and other non-operating income and expenses.

The company uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company’s performance. The company believes that Adjusted EBITDA is useful to investors because it provides supplemental information that allows investors to review the company's results of operations from the same perspective as management and the company's board of directors. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

See the attached Supplemental Financial Information for a reconciliation of net loss, a GAAP measure, to Adjusted EBITDA, a non-GAAP measure, for the three and six months ended June 30, 2022 and 2021.

About Qumu

Qumu (Nasdaq: QUMU) is a leading provider of best-in-class tools to create, manage, secure, distribute and measure the success of live and on-demand video for the enterprise. The Qumu Cloud platform enables global organizations to drive human engagement, increase access to and insights from video use, and modernize the workplace by providing a more efficient and effective way to share knowledge.

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. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements.

Such forward-looking statements include, for example, statements about: the success of go-to-market strategies or the other initiatives in the company’s strategic plan, the company's ability to continue as a going concern, the expected use and adoption of video in the enterprise, the ability to obtain additional capital as needed, the ability to attract and retain necessary personnel, the impact of COVID-19 on the use and adoption of video in the enterprise, the company’s future revenue and operating performance, cash balances, future product mix or the timing of recognition of revenue, or the demand for the company’s products or software. The risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include the risk factors described in the company’s Annual Report on Form 10-K for the year ended December 31, 2021, and other factors set forth in the company’s filings with the Securities and Exchange Commission.

The forward-looking statements in this press release speak only as of the date of this press release. Except as required by law, Qumu assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by law.

Company Contact:

Tom Krueger

Chief Financial Officer

Qumu Corporation

Tom.Krueger@qumu.com

+1.612.638.9100

Investor Contact:

Matt Glover or Tom Colton

Gateway Investor Relations

QUMU@gatewayir.com

+1.949.574.3860

QUMU CORPORATION

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Software licenses and appliances	$	278	$	138	$	389	$	246
Service	4,853		5,729		9,682		11,441
Total revenues	5,131		5,867		10,071		11,687
Cost of revenues:
Software licenses and appliances	48		63		79		127
Service	1,212		1,486		2,591		2,989
Total cost of revenues	1,260		1,549		2,670		3,116
Gross profit	3,871		4,318		7,401		8,571
Operating expenses:
Research and development	1,930		2,184		3,755		4,214
Sales and marketing	2,687		5,173		6,495		9,649
General and administrative	2,251		2,142		4,694		4,669
Amortization of purchased intangibles	153		163		309		325
Total operating expenses	7,021		9,662		15,253		18,857
Operating loss	(3,150)		(5,344)		(7,852)		(10,286)
Other income (expense):
Employee Retention Credit income	649		—		649		—
Interest expense, net	(39)		(15)		(109)		(69)
Decrease in fair value of derivative liability	—		—		—		37
Decrease in fair value of warrant liability	51		1,018		117		1,375
Other, net	(156)		(89)		(184)		(27)
Total other income (expense), net	505		914		473		1,316
Loss before income taxes	(2,645)		(4,430)		(7,379)		(8,970)
Income tax benefit	(23)		(109)		(117)		(199)
Net loss	$	(2,622)	$	(4,321)	$	(7,262)	$	(8,771)

Net loss per share – basic:
Net loss per share – basic	$	(0.15)	$	(0.24)	$	(0.40)	$	(0.51)
Weighted average shares outstanding – basic	18,072		17,741		18,042		17,096
Net loss per share – diluted:
Loss attributable to common shareholders	$	(2,622)	$	(5,339)	$	(7,262)	$	(10,146)
Net loss per share – diluted	$	(0.15)	$	(0.30)	$	(0.40)	$	(0.59)
Weighted average shares outstanding – diluted	18,072		17,899		18,042		17,299

QUMU CORPORATION

Condensed Consolidated Balance Sheets

(unaudited - in thousands)


	June 30,		December 31,
Assets	2022		2021
Current assets:
Cash and cash equivalents	$	6,435	$	20,563
Receivables, net	3,467		3,709
Contract assets	676		446
Income taxes receivable	658		556
Other receivable	649		—
Prepaid expenses and other current assets	2,094		2,184
Total current assets	13,979		27,458
Property and equipment, net	222		337
Right of use assets – operating leases	45		146
Intangible assets, net	1,049		1,388
Goodwill	6,639		7,388
Deferred income taxes, non-current	17		17
Other assets, non-current	320		362
Total assets	$	22,271	$	37,096
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities	$	3,521	$	2,742
Accrued compensation	1,380		1,725
Deferred revenue	9,604		10,862
Operating lease liabilities	192		597
Financing obligations	152		5,502
Warrant liability	684		801
Total current liabilities	15,533		22,229
Long-term liabilities:
Deferred revenue, non-current	1,102		1,507
Income taxes payable, non-current	641		630
Operating lease liabilities, non-current	—		21
Financing obligations, non-current	87		113
Total long-term liabilities	1,830		2,271
Total liabilities	17,363		24,500
Stockholders’ equity:
Common stock	179		178
Additional paid-in capital	105,785		105,655
Accumulated deficit	(97,955)		(90,693)
Accumulated other comprehensive loss	(3,101)		(2,544)
Total stockholders’ equity	4,908		12,596
Total liabilities and stockholders’ equity	$	22,271	$	37,096

QUMU CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)


	Six Months Ended June 30,
	2022		2021
Operating activities:
Net loss	$	(7,262)	$	(8,771)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	427		492
Loss on disposal of property and equipment	—		3
Stock-based compensation	150		1,155
Accretion of debt discount and issuance costs	27		33
Decrease in fair value of derivative liability	—		(37)
Decrease in fair value of warrant liability	(117)		(1,375)
Changes in operating assets and liabilities:
Receivables	138		1,802
Contract assets	(230)		238
Income taxes receivable / payable	(152)		221
Other receivable	(649)		—
Prepaid expenses and other assets	151		(105)
Accounts payable and other accrued liabilities	658		(242)
Accrued compensation	(322)		(1,305)
Deferred revenue	(1,360)		(3,724)
Net cash used in operating activities	(8,541)		(11,615)
Investing activities:
Purchases of property and equipment	(8)		(216)
Net cash used in investing activities	(8)		(216)
Financing activities:
Principal payments on line of credit	(5,000)		(1,840)
Proceeds from line of credit	—		1,840
Principal payments on term loan	—		(1,833)
Payment for line of credit issuance costs	(86)		—
Principal payments on financing obligations	(376)		(219)
Net proceeds from common stock issuance	—		23,085
Proceeds from issuance of common stock under employee stock plans	—		226
Common stock repurchases to settle employee withholding liability	(19)		(6)
Net cash provided by (used in) financing activities	(5,481)		21,253
Effect of exchange rate changes on cash	(98)		28
Net increase (decrease) in cash and cash equivalents	(14,128)		9,450
Cash and cash equivalents, beginning of period	20,563		11,878
Cash and cash equivalents, end of period	$	6,435	$	21,328

QUMU CORPORATION

Supplemental Financial Information

(unaudited - in thousands)

A summary of revenue is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Software licenses and appliances	$	278	$	138	$	389	$	246
Service
Subscription and support	2,764		2,512		5,419		4,827
Maintenance and support	1,769		2,570		3,562		5,234
Subscription, maintenance and support	4,533		5,082		8,981		10,061
Professional services and other	320		647		701		1,380
Total service	4,853		5,729		9,682		11,441
Total revenue	$	5,131	$	5,867	$	10,071	$	11,687

A reconciliation from GAAP results to Adjusted EBITDA is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss	$	(2,622)	$	(4,321)	$	(7,262)	$	(8,771)
Interest expense, net	39		15		109		69
Income tax benefit	(23)		(109)		(117)		(199)
Depreciation and amortization expense:

Depreciation and amortization in operating expenses	58		59		118		113
Total depreciation and amortization expense	58		59		118		113
Amortization of intangibles included in cost of revenues	—		27		—		54
Amortization of intangibles included in operating expenses	153		163		309		325
Total amortization of intangibles expense	153		190		309		379
Total depreciation and amortization expense	211		249		427		492
EBITDA	(2,395)		(4,166)		(6,843)		(8,409)
Employee Retention Credit income	(649)		—		(649)		—
Decrease in fair value of derivative liability	—		—		—		(37)
Decrease in fair value of warrant liability	(51)		(1,018)		(117)		(1,375)
Other expense (income), net	156		89		184		27
Stock-based compensation expense:
Stock-based compensation included in cost of revenues	17		17		36		32
Stock-based compensation included in operating expenses	(223)		549		114		1,123
Total stock-based compensation expense	(206)		566		150		1,155
Adjusted EBITDA	$	(3,145)	$	(4,529)	$	(7,275)	$	(8,639)

Document

Exhibit 99.2

Qumu Corporation

Second Quarter 2022

Earnings Conference Call

August 10, 2022

Operator

Welcome to Qumu’s second quarter 2022 conference call. My name is Chris, and I will be your operator this afternoon. Joining us are Qumu’s President and CEO Rose Bentley, CFO Tom Krueger, and Matt Glover from Gateway Investor Relations.

At this time, all participant lines are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone.

I would now like to turn the call over to Matt Glover. Sir, you may begin.

Matt Glover – Qumu Investor Relations

Thanks, operator, and good afternoon, everyone…

After the market close today, Qumu issued a press release announcing its financial results for the second quarter ended June 30, 2022, a copy of which is available on 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 Company’s go-to-market strategy, and efforts designed to increase the company’s traction and penetration with customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.

Please note these forward-looking statements reflect management’s opinions only as of the date of this call, and the Company undertakes no obligation to publicly update or revise any forward-looking statements -- whether as a result of new information, future events, or otherwise, except as required by law.

Please refer to Qumu’s SEC filings, specifically its Form 10-Q and financial results press release, for a more detailed description of risk factors that may affect the Company’s results.

During the call today, management will discuss adjusted EBITDA, a non-GAAP financial measure. In the Company’s press release and filings with the SEC, both of which are posted on the Company’s website, you will find additional disclosures regarding this non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure. Non-GAAP financial measures are not intended to be considered in isolation from --- a substitute for --- or superior to GAAP results. The Company encourages you to consider all measures when analyzing its performance.

I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of Qumu’s website.

Now, I will turn it over to Qumu’s President and CEO Rose Bentley.

Rose?

Rose Bentley – President and CEO

Thank you, Matt and good afternoon, everyone. We appreciate you taking the time to join our second quarter conference call.

To begin, we remain incredibly encouraged by the continued progress we are making in our transformation to SaaS. The strategic investments we’ve made over the last 18 months and our team’s ability to execute against that plan, are driving strong operational and financial results.

As we continue to grow our cloud business, build our partner ecosystem, and further transition to a purely subscription-based model, we expect our performance to improve throughout the balance of 2022 and beyond.

Highlighting our success in the quarter was a 10% increase in both SaaS revenue and SaaS ARR. Our SaaS revenue as a percentage of total recurring revenue in Q2 accounted for 61%, up from 60% in the prior quarter, and 49% in Q2 last year. This is in-line with our goals and has us well on track to achieve our SaaS growth targets for

2022 and 2023. Our cloud transformation initiatives and increased SaaS contributions also helped produce a gross margin of 75.4% during Q2, which we expect to continue as SaaS becomes a greater portion of our overall top line.

Along with our transformation to the cloud being on target, we are progressing and marching toward cash flow break even. We used $4.9 million and $3.7 million of cash for operating activities in Q1 and Q2, respectively. We expect cash used in operating activities to come down significantly in Q3 and Q4, ensuring we have the runway we need to complete our transformation to the cloud.

We have a lot to cover today, so before I go any further into updates from operations, I’ll now turn it over to our CFO Tom Krueger to provide more detail on our Q2 financial performance and key SaaS metrics.

Tom?

Tom Krueger – Chief Financial Officer

Thanks, Rose. It’s a pleasure to be speaking with you today.

Like last quarter, I will expand on a few items not already addressed by Rose or included in our earnings release this afternoon.

The metrics that we use to measure the success of our SaaS transformation continue to move in the right direction and reflect our team’s continued execution of our growth strategy.

Now let’s look at them…

•As Rose highlighted, SaaS revenue for Q2 2022 increased 10% to $2.8 million, compared to $2.5 million in Q2 2021.

•SaaS annual recurring revenue, or ARR, for Q2 increased 10% to $13.3 million from $12.2 million in Q2 2021 and increased 2% sequentially from $13.0 million in Q1 2022.

•SaaS revenue for Q2 accounted for 61% of recurring revenue, up from 60% in the prior quarter and 49% in Q2 2021.

•As a percentage of total revenue, SaaS revenue accounted for 54%, unchanged from Q1 2022 and up from 43% in Q2 2021.

•Our SaaS retention rates remain strong with our Gross Retention Rate, or GRR, of 90% at quarter end, and Net Retention Rate, or NRR, of 103% at quarter end.

Moving down the Income Statement, for the second quarter of 2022 gross margin was 75.4%, up from 71.5% in Q1 2022 and 73.6% for Q2 2021. The improvement in gross margin was due to our continued shift from on-premise to the cloud through our SaaS-focused business model. We expect to maintain mid-70 percent gross margins for the balance of 2022.

Moving on to operating expenses and adjusted EBITDA, a non-GAAP measure:

•Our transformation is also focused on rationalizing our cost structures and realizing efficiencies to reduce cash burn.

•Our total operating expenses in the second quarter of 2022 were $7.0 million, down 15% sequentially and 27% year-over-year. It’s important to note that our OPEX for the second quarter of 2022 reflects a one-time, non-cash gain from the reversal of stock-based compensation related to our prior CEO’s departure.

•We anticipate that our normalized OPEX run rate for the third and fourth quarters will be approximately $7 million per quarter. Of course, we will continually look for ways to further optimize our cost profile without sacrificing our ability to execute our growth strategy.

•Adjusted EBITDA, a non-GAAP measure, in Q2 2022 was a loss of $(3.1) million, an improvement compared to a loss of $(4.1) million in Q1 2022 and loss of $(4.5) million in Q2 2021. A reconciliation of adjusted EBITDA to net loss, a GAAP measure, is included in our earnings releases for the respective periods.

•Net loss in Q2 2022 totaled $(2.6) million, or $(0.15) loss per basic and diluted share. This compares to net loss of $(4.6) million, or $(0.26) loss per basic and diluted share, for Q1 2022 and net loss of $(4.3) million, or $(0.24) loss per basic share and $(0.30) loss per diluted share, in Q2 2021.

Shifting gears to the balance sheet.

•At quarter end we had $6.4 million of cash and cash equivalents and no debt, which is in line with our internal plan. The sequential decrease in cash reflects the repayment of the $5 million we borrowed on our line of credit.

•As Rose mentioned, net cash used in operating activities improved to $3.7 million, compared to $4.9 million in Q1 2022 and $6.1 million in Q2 2021. We expect a significant reduction in net cash used in operating activities in the second half of 2022.

•We continue to believe that our cash position and available liquidity resources provide sufficient runway to execute our SaaS growth transformation strategy and achieve cash flow profitability.

That concludes my prepared remarks. I’ll turn it back over to Rose to discuss our strategy, key partnerships, and outlook.

Rose?

Rose Bentley – President and CEO

Thanks, Tom.

Qumu’s improving financial performance and strong SaaS key performance indicators reflect the increasing success and momentum of our partner-led sales strategy and our current customers growing their investment with Qumu as their trusted provider of both live and asynchronous video content.

For context, in Q2 we added new customers at twice the rate of Q1. Additionally, more than 80% of our new bookings in the first half of 2022 were sourced or influenced by our partners, of which only one did not include Qumu’s cloud solution. In Q2, we won a multinational specialty chemical company and a global professional services firm – both of which are ranked in the Global Future 2000.

Another noteworthy customer win in Q2 was with Proprep, a UK-based leading provider of high quality, customized learning resources. Proprep is doing important work to support STEM students and educators and to enhance the already proven value of video as an educational tool.

Qumu’s video engagement platform enables Proprep to ingest, tag, and sort video content at scale. Videos are easily searchable with the degree of flexibility students need to customize study materials based on the institution they attend as well as the courses they are taking. Online learning has increasingly been in the spotlight over the last two years, and we are thrilled to be working with Proprep to help make it more accessible and effective.

The last Q2 customer win I’d like to highlight is a top-20 ranked health insurance provider and included a 3-year commitment based on our capability to deliver a best in breed customer experience, and our ability to leverage our partner ecosystem.

As one of the U.S.’s largest integrated healthcare companies, this customer's requirements were complex. Through collaboration with our partners — Kollective for network stabilization, and Socialive for video production — Qumu was uniquely qualified to meet virtually all the healthcare providers’ extensive requirements for its new enterprise video solution. We were able to successfully meet the customers’ needs without incurring the capital expense or time required to build out these capabilities in-house.

Overall, our growing partner ecosystem gives us the opportunity to deliver more value to our future and current customers by providing them with the end-to-end solution they require to deliver against their video needs. Our continued investment in our partner-led strategy keeps our customers at the heart of all that we do, in every decision that we make, and on a path to leverage the best in breed video solution at scale.

Simply put, our partner network is letting us compete for, and win, opportunities that we could not pursue on our own.

Our partnership with GovSmart, which we formed late last year, broadcasts Qumu’s enterprise video capabilities to hundreds of government agencies. As we move through the federal government buying season, we are excited to continue to expand our footprint in the sector with a partner that truly cares about their customers and understands their unique needs. Although we’re only five weeks into the third quarter, we’ve already secured a new deal with a unit of the Department of Defense and have received additional RFPs as well. For GovSmart’s customers, our ability to provide reliable and secure video communications, solve complex behind-the-scenes network issues, consistently deliver a high-quality experience, and provide insights to improve engagement and effectiveness is compelling and differentiating.

And these capabilities are equally compelling in other markets with complex needs and stringent security or regulatory requirements. That’s why our new partner AT&T recently turned to Qumu to help a major financial services enterprise address challenges it was encountering when hosting simultaneous live meetings across its business. I recently met with several of their senior executives to discuss ways to further extend the partnership across more of AT&T’s verticals and markets. We’re working closely with their team to build pipeline and believe we are well positioned to close on several deals by year end.

It’s not just large enterprises like AT&T or GovSmart that recognize the power of Qumu’s cloud-based video platform. During Q2, Wainhouse Research positioned Qumu in the top right quadrant of its newly revised vendor landscape for behind-the-firewall streaming solutions. This is the seventh time Qumu has placed in the top-right quadrant for the enterprise video landscape. AT&T and other Global 2000 organizations trust Qumu for their video communications and achieving their business goals at scale.

In fact, over the last 12 months, our customers have added 51% more authorized users to our platform, and we have seen an increase of asynchronous video views go up by over 30%. The growing investment from our enterprise customers is exemplified by our average annual contract value, or ACV, increasing by 474% year-over-year for the first half of 2022. Triple digit growth in the contract size of our new customers demonstrates our ability to deliver deeper value through additional use cases when we acquire new customers. Furthermore, this substantial growth helps to expand our footprint and create additional value realization for our new customers. In parity with this, our SaaS ACV for the first half of 2022 increased 359% compared to the same year-ago period, demonstrating growth in our cloud, on-prem, and hybrid customer contracts.

The growth momentum in enterprise video use corresponds with how organizations increasingly operate with end users working from anywhere, on any device, at any time and connecting to corporate resources in internet-accessible cloud platforms. Companies globally continue to be challenged by the pandemic, constrained labor, and global shortages of raw materials. It has become even more critical for them to rethink and reprioritize how they engage with their employees, customers, and partners, making video a critical tool in their tech stack. It is the cornerstone of digital transformation for the enterprise.

Our organizational theme entering 2022 was ‘execution.’ The progress we’ve made and the results we’ve delivered in the first half of 2022 validate that we’re executing on our strategy and building momentum. Remote work -- whether it be fully remote or hybrid -- is here to stay, which bodes well for continued demand for enterprise video capabilities. Our ability to win new business at an accelerating clip validates that our product is needed and enterprise capable.

Our partner ecosystem is proving to be a compelling differentiator. And our SaaS transformation is working, validated by our improving KPIs, robust gross margins, and reduced cash burn.

In summary, Qumu’s transformation is well underway. Our investments in 2021 are yielding strong returns in 2022. Our business is optimized and now hitting its stride. Our plan is supported by a solid cash position and available resources that provide sufficient runway to execute our growth strategy.

We entered the third quarter with a record pipeline of opportunities that we are converting at an escalating pace. Our partner-led sales strategy is gaining momentum and creating repeatable sales motions that give us confidence in our ability to secure a record number of new logos.

Going forward, we continue to expect our SaaS recurring revenue as a percentage of our total recurring revenue to be at least 65% by the end of 2022 and 75% by the end of 2023. We continue to expect to crossover to cash flow breakeven during 2023. The leadership and board remain confident that Qumu will emerge as a subscription-driven growth company operating at scale, benefiting from high-margin recurring revenues, sustainable and growing cash flow and adjusted EBITDA and net income profitability.

We will now take your questions. Chris, please provide the appropriate instructions.

Operator

[Q&A session]

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 QUMU@gatewayir.com.

I would now like to turn the call back over to Ms. Bentley for her closing remarks.

Rose Bentley – President and CEO

Thanks, Chris, and thank you everyone for joining our call this afternoon.

With so much under way at Qumu, I have begun to issue periodic updates on our social channels to highlight our company’s operational progress and milestones. Please follow Qumu’s LinkedIn or Twitter to automatically receive the updates. I look forward to sharing more about our ongoing transformation in the weeks and months ahead!

Forward-Looking Statements

This communication 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. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements.