qumu-20221027

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): October 27, 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 October 27, 2022 disclosing material non-public information regarding its results of operations for the quarter ended September 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 October 27, 2022 at a telephone conference relating to the quarter ended September 30, 2022 results.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.



Exhibit No.						Description
99.1						Press Release issued on October 27 , 2022.

99.2						Statements of Rose Bentley, President and Chief Executive Officer, and Thomas Krueger, Chief Financial Officer, at a telephone conference held on October 27 , 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: October 27, 2022

Document

EXHIBIT 99.1

Qumu Reports Third Quarter 2022 Financial Results

Traction with Partner-Led Sales Strategy Contributes to Continued Growth in Quarterly SaaS Revenue and SaaS Annual Recurring Revenue for Third Quarter 2022

Cost Management Yields 30% Year-Over-Year Operating Expense Reduction

MINNEAPOLIS – October 27, 2022 – Qumu Corporation (Nasdaq: QUMU), a leading provider of cloud-based enterprise video technology, today reported financial results for the third quarter ended September 30, 2022.

Q3 2022 and Recent Operational Highlights

•Expanded partnership with AT&T to support the branding and launch of AT&T’s Qumu-powered enterprise video-as-a service product offering

•Launched Qumu Video Engagement Platform on Google Cloud Marketplace

•Renewed several of our marquee customers, including international banking group UniCredit, Birmingham County Football Club and pediatric oncology center Prinses Máxima Centrum

Q3 2022 Financial Highlights

•Software as a Service (SaaS) revenue increased 6% to $2.8 million, compared to $2.6 million in Q3 2021

•SaaS Annual Recurring Revenue (SaaS ARR) grew to $13.5 million, up 7% year-over-year

•SaaS revenue accounted for 51% of total revenue, compared to 54% in Q2 2022 and 41% in Q3 2021

•Gross margin improved to 77.5%, compared to 75.4% for Q2 2022 and 76.0% for Q3 2021

•Operating expenses decreased 12% sequentially and 30% year-over-year

•Net cash used in operating activities decreased to $1.4 million, an improvement compared to $3.7 million in Q2 2022 and $3.3 million in Q3 2021

•Solid balance sheet with $6.0 million of cash and cash equivalents, inclusive of line of credit borrowings of $1.2 million

•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

Q3 2022 Key Performance Indicators

•SaaS revenue accounted for 63% of recurring revenue, up from 61% in Q2 2022 and 52% in Q3 2021

•SaaS revenue accounted for 51% of total revenue, compared to 54% in Q2 2022 and 41% in Q3 2021

•SaaS ARR increased to $13.5 million from $13.3 million in Q2 2022 and $12.6 million in Q3 2021

•SaaS customer retention metrics:

◦Gross Retention Rate (GRR): 92% at end of Q3 2022 compared to 84% at end of Q3 2021

◦Net Retention Rate (NRR): 100% at end of Q3 2022 compared to 123% at end of Q3 2021

Management Commentary

“Our improving financial results and strong SaaS KPIs in Q3 reflect the increasing success and momentum of our partner-led sales strategy as well as our customers growing their investment with Qumu as their trusted provider of live and asynchronous video content,” said CEO of Qumu, Rose Bentley. “In particular, our partner strategy has been validated by the volume of opportunities we are seeing as well as by the rate we are closing new business. In

fact, our new logo count for the first nine months of the year exceeds all new logos we secured in 2021 and we continue to see over 80% of our new bookings being sourced by our partners.”

Qumu CFO Tom Krueger commented: “During Q3 we built on the financial momentum we established in the first half of 2022 by delivering solid growth across our key SaaS metrics. Highlighting our success is the 6% increase in SaaS revenue and 7% increase in SaaS ARR. Renewals and retention rates were especially strong in the quarter, with gross retention rate of 92% and net retention rate of 100%. Importantly, we were able to achieve these results while reducing our operating expenses by 12% sequentially and 30% year-over-year, which enabled us to improve cash used in operations by $2.3 million compared to Q2 2022. We have made great strides improving our cash usage, and we will continually look for ways to further optimize our cost profile without sacrificing our ability to scale.”

Bentley continued: “Looking ahead, our pipeline for renewals and new customers is incredibly strong. Many of the renewals include expansion of our customer relationships as they look to increase usage of the Qumu platform resulting in a broader network of technology partners and new enterprise use cases going forward. A growing number of renewals secured in Q3 were for multi-year contracts, and we expect future renewals to follow suit. In fact, three-to-five-year contracts accounted for nearly 20% of our renewals year-to-date, reflecting the confidence our customers have in our cloud-based solution and unmatched level of customer service.

“Longer term, our three-year vision for Qumu is to achieve $50 million in revenue as a profitable and predictable company by the end of 2025. The strategic investments that we have made into the business over the past several years position us to now focus on scaling outwardly and promoting our platform through our network of partners and collaborators. The benefits of our transformation will become increasingly evident in growth in recurring revenues later this year and in 2023.”

Third Quarter 2022 Financial Results

Revenue for Q3 2022 was $5.5 million, compared to $5.1 million in Q2 2022 and $6.4 million in Q3 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 was $4.9 million in both Q3 2022 and Q2 2022 and $5.7 million in Q3 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 in both Q3 2022 and Q2 2022 and $2.6 million in Q3 2021. The company expects subscription revenue will continue to grow as Qumu executes on its cloud transformation strategy.

Gross margin in Q3 2022 was 77.5%, compared to gross margin of 75.4% for Q2 2022 and 76.0% for Q3 2021. The gross margin percentage improved due primarily to better margins on SaaS revenue recognized compared to Q2 2022, a higher percentage of SaaS revenue contributing to the overall sales mix compared to Q3 2021, and improved utilization of professional services personnel.

Net loss in Q3 2022 totaled $(1.4) million, or $(0.08) loss per basic and diluted share. This compares to net loss of $(2.6) million, or $(0.15) loss per basic and diluted share, for Q2 2022 and net loss of $(3.7) million, or $(0.21) loss per basic and diluted share, in Q3 2021.

Adjusted EBITDA loss, a non-GAAP measure, in Q3 2022 was $(1.6) million, compared to $(3.1) million in Q2 2022 and $(3.5) million in Q2 2021.

As of September 30, 2022, the company had cash and cash equivalents of $6.0 million and borrowings on its line of credit of $1.2 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 (October 27, 2022) at 4:30 p.m. Eastern time. Register here to join the conference call:

https://register.vevent.com/register/BI807fbf299aa44f1192b19c2c4a86ad99.

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, gain on sale of BriefCam, Ltd. 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 nine months ended September 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Software licenses and appliances	$	606	$	742	$	995	$	1,091
Service	4,865		5,683		14,547		17,021
Total revenues	5,471		6,425		15,542		18,112
Cost of revenues:
Software licenses and appliances	58		63		137		190
Service	1,173		1,481		3,764		4,470
Total cost of revenues	1,231		1,544		3,901		4,660
Gross profit	4,240		4,881		11,641		13,452
Operating expenses:
Research and development	1,628		2,305		5,383		6,519
Sales and marketing	2,436		4,490		8,931		14,139
General and administrative	1,990		1,881		6,684		6,550
Amortization of purchased intangibles	150		163		459		488
Total operating expenses	6,204		8,839		21,457		27,696
Operating loss	(1,964)		(3,958)		(9,816)		(14,244)
Other income (expense):
Employee Retention Credit income	623		—		1,272		—
Interest expense, net	(26)		(12)		(135)		(81)
Decrease in fair value of derivative liability	—		—		—		37
Decrease in fair value of warrant liability	26		94		143		1,469
Gain on sale of BriefCam, Ltd.	—		50		—		50
Other, net	(150)		4		(334)		(23)
Total other income (expense), net	473		136		946		1,452
Loss before income taxes	(1,491)		(3,822)		(8,870)		(12,792)
Income tax benefit	(124)		(77)		(241)		(276)
Net loss	$	(1,367)	$	(3,745)	$	(8,629)	$	(12,516)

Net loss per share – basic:
Net loss per share – basic	$	(0.08)	$	(0.21)	$	(0.48)	$	(0.72)
Weighted average shares outstanding – basic	18,143		17,872		18,077		17,358
Net loss per share – diluted:
Loss attributable to common shareholders	$	(1,367)	$	(3,788)	$	(8,629)	$	(13,985)
Net loss per share – diluted	$	(0.08)	$	(0.21)	$	(0.48)	$	(0.80)
Weighted average shares outstanding – diluted	18,143		17,881		18,077		17,525

QUMU CORPORATION

Condensed Consolidated Balance Sheets

(unaudited - in thousands)


	September 30,		December 31,
Assets	2022		2021
Current assets:
Cash and cash equivalents	$	6,032	$	20,563
Receivables, net	4,088		3,709
Contract assets	223		446
Income taxes receivable	750		556
Other receivable	1,272		—
Prepaid expenses and other current assets	1,790		2,184
Total current assets	14,155		27,458
Property and equipment, net	167		337
Right of use assets – operating leases	—		146
Intangible assets, net	882		1,388
Goodwill	6,066		7,388
Deferred income taxes, non-current	17		17
Other assets, non-current	308		362
Total assets	$	21,595	$	37,096
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities	$	3,206	$	2,742
Accrued compensation	1,415		1,725
Deferred revenue	9,757		10,862
Operating lease liabilities	82		597
Financing obligations	1,252		5,502
Warrant liability	658		801
Total current liabilities	16,370		22,229
Long-term liabilities:
Deferred revenue, non-current	1,169		1,507
Income taxes payable, non-current	647		630
Operating lease liabilities, non-current	—		21
Financing obligations, non-current	74		113
Total long-term liabilities	1,890		2,271
Total liabilities	18,260		24,500
Stockholders’ equity:
Common stock	179		178
Additional paid-in capital	105,912		105,655
Accumulated deficit	(99,322)		(90,693)
Accumulated other comprehensive loss	(3,434)		(2,544)
Total stockholders’ equity	3,335		12,596
Total liabilities and stockholders’ equity	$	21,595	$	37,096

QUMU CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net loss	$	(8,629)	$	(12,516)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	634		738
Loss on disposal of property and equipment	(1)		3
Stock-based compensation	293		1,403
Accretion of debt discount and issuance costs	38		35
Decrease in fair value of derivative liability	—		(37)
Decrease in fair value of warrant liability	(143)		(1,469)
Gain on sale of BriefCam, Ltd.	—		(50)
Changes in operating assets and liabilities:
Receivables	(559)		913
Contract assets	223		37
Income taxes receivable / payable	(294)		107
Other receivable	(1,272)		—
Prepaid expenses and other assets	421		264
Accounts payable and other accrued liabilities	472		(607)
Accrued compensation	(269)		(915)
Deferred revenue	(882)		(2,800)
Net cash used in operating activities	(9,968)		(14,894)
Investing activities:
Proceeds from sale of BriefCam, Ltd.	—		50
Purchases of property and equipment	(10)		(216)
Net cash used in investing activities	(10)		(166)
Financing activities:
Principal payments on lines of credit	(7,000)		(1,840)
Proceeds from lines of credit	3,200		1,840
Principal payments on term loan	—		(1,833)
Payment for line of credit issuance costs	(86)		(25)
Principal payments on financing obligations	(489)		(342)
Net proceeds from common stock issuance	—		23,085
Proceeds from issuance of common stock under employee stock plans	—		545
Common stock repurchases to settle employee withholding liability	(35)		(47)
Net cash provided by (used in) financing activities	(4,410)		21,383
Effect of exchange rate changes on cash	(143)		(2)
Net increase (decrease) in cash and cash equivalents	(14,531)		6,321
Cash and cash equivalents, beginning of period	20,563		11,878
Cash and cash equivalents, end of period	$	6,032	$	18,199

QUMU CORPORATION

Supplemental Financial Information

(unaudited - in thousands)

A summary of revenue is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Software licenses and appliances	$	606	$	742	$	995	$	1,091
Service
Subscription and support	2,786		2,636		8,205		7,360
Maintenance and support	1,605		2,444		5,167		7,678
Subscription, maintenance and support	4,391		5,080		13,372		15,038
Professional services and other	474		603		1,175		1,983
Total service	4,865		5,683		14,547		17,021
Total revenue	$	5,471	$	6,425	$	15,542	$	18,112

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss	$	(1,367)	$	(3,745)	$	(8,629)	$	(12,516)
Interest expense, net	26		12		135		81
Income tax benefit	(124)		(77)		(241)		(276)
Depreciation and amortization expense:

Depreciation and amortization in operating expenses	57		57		175		170
Total depreciation and amortization expense	57		57		175		170
Amortization of intangibles included in cost of revenues	—		26		—		80
Amortization of intangibles included in operating expenses	150		163		459		488
Total amortization of intangibles expense	150		189		459		568
Total depreciation and amortization expense	207		246		634		738
EBITDA	(1,258)		(3,564)		(8,101)		(11,973)
Gain on sale of BriefCam, Ltd.	—		(50)		—		(50)
Employee Retention Credit income	(623)		—		(1,272)		—
Decrease in fair value of derivative liability	—		—		—		(37)
Decrease in fair value of warrant liability	(26)		(94)		(143)		(1,469)
Other expense (income), net	150		(4)		334		23
Stock-based compensation expense:
Stock-based compensation included in cost of revenues	22		12		58		44
Stock-based compensation included in operating expenses	121		236		235		1,359
Total stock-based compensation expense	143		248		293		1,403
Adjusted EBITDA	$	(1,614)	$	(3,464)	$	(8,889)	$	(12,103)

Document

Exhibit 99.2

Qumu Corporation

Third Quarter 2022

Earnings Conference Call

October 27, 2022

Operator

Welcome to Qumu’s third quarter 2022 conference call. My name is Kurt, 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, Kurt, and good afternoon, everyone…

After the market close today, Qumu issued a press release announcing its financial results for the third quarter ended September 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 Forms 10-K and 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, and thank you for joining us today.

To start off, early in our third quarter I completed the proverbial ‘first 100 days’ as Qumu’s CEO. As the well-known saying goes, ‘time flies when you’re having fun.’ I am certainly enjoying collaborating with our team driving meaningful business value for our partners and customers alike. My first 100 days focused on continuing to execute on Qumu’s SaaS transformation strategy, delivering a best-in-class customer experience, and doubling down on our partner-led go-to-market motions. The strategic investments we made in our customers and our partner ecosystem over the last 18 months continue to yield strong returns. Additionally, retention and renewals were especially strong

during the quarter with renewals coming from UniCredit, Birmingham County Football Club and pediatric oncology center Prinses Máxima Centrum.

From a financial standpoint, during Q3 we built on the momentum we established in the first half of 2022 and delivered solid growth across our key SaaS metrics, including SaaS revenue, SaaS recurring revenue, and SaaS revenue as a percentage of our top line. Most notably, we generated a 6% increase in SaaS revenue and a 7% increase in SaaS annual recurring revenue, or ARR, as well as expanded our SaaS revenue as a percentage of recurring revenue to 63%. And we were able to deliver these growth results while dramatically reducing our OpEx and cash usage.

Overall, Qumu's improving financial results and strong SaaS KPIs 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.

I’ll now turn the call over to Tom to provide more detail on our Q3 financial performance and key SaaS metrics.

Tom?

Tom Krueger – Chief Financial Officer

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

Similar to last quarter, I will expand on a few metrics that Rose highlighted, which are also included in our earnings release that we published after the market close. 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. As we enter the final stages of our cloud transformation, we still believe these metrics most accurately reflect our performance and business going forward.

As Rose highlighted, SaaS revenue for Q3 2022 increased 6% to $2.8 million compared to $2.6 million in Q3 2021. SaaS ARR for Q3 increased 7% year-over-year to $13.5 million and 1% sequentially from $13.3 million in Q2 2022.

SaaS revenue for Q3 2022 accounted for 63% of recurring revenue, up from 61% in the prior quarter and 52% in Q3 2021. We are on track for SaaS recurring revenue as a percentage of total recurring revenue to be approximately 65% by the end of this year and approximately 75% by the end of 2023. As a percentage of total revenue, SaaS revenue accounted for 51%, compared to 54% in Q2 2022 and 41% in Q3 2021. Our SaaS retention rates remained strong with a gross retention rate of 92% at quarter end and our net retention rate was 100% at the end of Q3.

Now, moving down the income statement. For the third quarter of 2022 our gross margin was 77.5%, up from 75.4% in Q2 and 76.0% in Q3 2021. The improvement in gross margin was due to better margins on SaaS revenue recognized compared to Q2 2022, a higher percentage of SaaS revenue contributing to the overall sales mix compared to Q3 2021, and improved utilization of professional services personnel. We expect to maintain gross margins in the mid-70%’s for the balance of 2022 and first half of 2023.

Moving on to operating expenses. As Rose alluded to, Qumu’s transformation thus far has not only focused on our SaaS journey but also on optimizing our cost structure and realizing efficiencies to achieve cash flow profitability. We’re really encouraged by our success in these key areas and the fact that we’ve been able to drive down our OpEx over the last several quarters. Along that line, OpEx in the third quarter of 2022 was $6.2 million, down 12% sequentially and 30% year-over-year. We anticipate that our normalized OpEx run rate in the coming quarters will be approximately $6.5 million per quarter. Proactive cost rationalization has been a consistent highlight during the first nine months of 2022, enabling us to improve quarterly cash used in operations each quarter from $4.9 million in Q1, $3.7 million in Q2, and $1.4 million in Q3. While we’ve made great strides improving our cash used in operations, we will continually look for ways to further optimize our cost profile without sacrificing our ability to execute our growth road map.

Looking at our profitability measures, adjusted EBITDA, a non-GAAP measure, in Q3 2022 totaled a loss of $1.6 million, an improvement from a loss of $3.1 million in Q2 2022 and a loss of $3.5 million in Q3 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 Q3 2022 totaled $1.4 million or $0.08 loss per basic and diluted share. This compares to a net loss of $2.6 million or $0.15 loss per basic and diluted share for Q2 2022 and a net loss of $3.7 million or $0.21 loss per basic and diluted share in Q3 2021.

Shifting gears to the balance sheet. At quarter end, we had $6.0 million of cash and cash equivalents, including $1.2 million borrowed from our line of credit. We continue to tightly manage cash as seen through our reduction in cash

usage over the course of 2022. We expect a continued reduction in net cash usage over the coming quarters as we realize further benefits from our cost-reductions measures and our high-velocity, lower cost partner-led sales model.

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

Rose?

Rose Bentley – President and CEO

Thanks, Tom.

Over the past several quarters our theme as a company has been ‘validation through execution.’ Our team’s consistent operational execution has validated our strategy and enabled us to enter the final phase of our SaaS transformation journey ahead of plan.

Our channel partner strategy has been validated by the volume of opportunities we are seeing as well as by the rate at which we are closing new business. In fact, our new logo count for the first nine months of the year exceeds all new logos we secured in 2021 and we continue to see over 80% of our new bookings being sourced by our partners.

Partners such as British Telecom and V-Cube were key contributors to our new logo additions in Q3, which included a multinational specialty chemicals company and a global professional services firm. We also secured a win with a unit of the Department of Defense through our partnership with GovSmart, which we believe will lead to additional wins within the government sector.

In addition to the exciting customer wins that we secured in the quarter, we continued to advance our partnership with AT&T. As I mentioned on our last call, we met with the AT&T leadership team in August to explore further opportunities to strengthen our relationship. I am excited to report that we will be working together with AT&T to expand their go-to-market efforts with Qumu’s Video Engagement Platform. This multifaceted program will provide AT&T with numerous value-add functions, including product management, marketing communications, channel marketing, sales operations, and professional services for the launch of its Qumu powered enterprise video as a service offering. We have already received preliminary acceptance for several elements within the program and expect to see resulting revenue and purchase orders as soon as next quarter.

Additionally, we further evolved our SaaS enterprise by taking an obvious next step collaborating with Google to deliver our Qumu Video Engagement Platform to the Google-Cloud Marketplace. By combing our industry-leading expertise with Google’s mass engagement, we expect customers to derive enhanced value from this partnership. We are in the early days of our partnership with Google, but we are encouraged by our ability to share customers and deliver targeted account mapping and build pipeline together for 2023.

An exciting trend that we have seen over the course of 2022 is an increasing trust in the Qumu brand, providing strength and support for our growth initiatives.

As we head into Q4, our pipeline for renewals and new customers is incredibly strong and being fueled by continued momentum in our partner-led strategy. Many of the renewals we completed in Q3 as well as Q4 renewals include an expansion of our customer relationship. Customers are increasing their internal usage of the Qumu platform resulting in a broader network of technology partners and new enterprise use cases for us to target going forward. A growing number of renewals secured in Q3 were for multi-year contracts, and we expect future renewals to follow suit. In fact, for the first nine months of 2022, three-year contracts account for nearly 20% of our renewals. These longer-term contracts reflect the confidence our customers have in our cloud-based solution and unmatched level of customer service. During a recent quarterly business review with one of our clients, they remarked, ‘You simply will not let us fail.’ This statement is a powerful testament to the standard of care and quality of service that we hold ourselves accountable to here at Qumu.

Looking ahead to Q4, we expect to see meaningful contributions from our valued partners, British Telecom and Kollective. In December of last year, we announced our partnership with Kollective alongside the launch of the Qumu Partner Program and it is exciting to see the ongoing synergies blossom from this partnership. The right partners are accelerating Qumu’s entry into new markets, strengthening our competitive position and teeing up repeat business.

The third quarter was key in building the trust that fuels our customer engagements. We successfully brought down our cash usage from operations, further stabilizing our runway as we complete the final phase our cloud transformation and work toward positive free cash flow. Going forward, our plan for the rest of 2022 is to ensure that the last of our marquee customers are seamlessly transitioned to the Qumu Cloud platform and double down on the

momentum from our partner-led strategy. We expect to continue to monetize our partner relationships and discover synergies that will ultimately be reflected in our bottom-line results.

As I shared in my recent CEO dispatch, our three-year vision for Qumu is to achieve $50 million in revenue as a profitable and predictable company by the end of 2025. The strategic investments that we have made into the business over the past several years position us to now focus on scaling outwardly and promoting our platform through our network of partners and collaborators. The benefits of our transformation will become increasingly evident in growth in recurring revenues later this year and in 2023.

We will now take your questions. Kurt, 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, Kurt, and thank you, everyone, for joining our call this afternoon. If you haven’t done so already, I encourage you to follow Qumu on Twitter or LinkedIn to automatically receive my ongoing CEO dispatches for better color on up-to-date initiatives underway at Qumu. Back over to you, Kurt.

Operator

Thank you for joining us today for Qumu’s third quarter conference call. You may now disconnect.

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.