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Qumu Reaps Briefcam Windfall

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Qumu Reaps Briefcam Windfall

By: -
17 May 2018

If you’ve ever found some loose change in the living room couch, you probably can relate to how Vern Hanzlik feels right about now.

Hanzlik is the chief executive officer of Qumu – a financially challenged vendor of enterprise streaming solutions that last week revealed a fresh source of funding from the most unlikely of sources.

In an 8-K filing posted last week, Qumu reported that it will come out a big winner in a deal that barely registered on the market’s radar: The Canon Inc. agreement to buy BriefCam – a company that develops software solutions enabling rapid review of security video footage.

To put the deal in context, let’s do a quick rewind: More than six years ago when Qumu was flying high with a financial war chest exceeding $100 million, the company invested $3.1 million for a minority stake in Briefcam.

Some at the time considered the investment to be a financial boondoggle. Briefcam’s focus on the video security market never really was a strategic fit with Qumu’s initiatives in developing streaming platforms for use in enterprise communications. Indeed, in the intervening years, Qumu’s management has rarely referenced the company’s BriefCam investment.

Nevertheless, no one can call Briefcam a boondoggle anymore. When Canon’s purchase of BriefCam closes (an event expected later this year), Qumu will receive an estimated $9.5 million for its equity stake in the company – more than triple the amount it invested in Briefcam.

Simply put, the deal is a lifesaver for a Qumu that is facing significant financial challenges. At the end of 2017, according to the company’s 10-K filing, the company had aggregate negative working capital of $1.5 million and was relying on its access to a $10 million line of credit to support its operations. A net loss of $4.5 million in the first quarter of 2018 merely added to the financial woes.

Nothing like a big cash infusion, though, to turn that big frown upside down.

“I feel as bullish as I have in two years,” Hanzlik said in a phone briefing with WR this week.

The chipper outlook stems from more than just being the beneficiary of some found money. Qumu also has been working to create some its own good fortune. Hanzlik in recent years has continued investment in product development work to enable hosted and hybrid versions of the Qumu solution that are easier to integrate with unified communications solutions, video conferencing gear, and other enterprise technologies.

Qumu’s growing integration flexibility enabled the deal it announced last week with iStudy – a Japanese IT skills training company and provider of learning management systems. The deal calls for Qumu’s hosted platform to serve as the video engine for the iStudy solution. In the partnership, iStudy is providing upfront payments of $1 million to Qumu in 2018. Hanzlik said he expects the partnership to net Qumu between 30 and 50 additional customers for its hosted solution in the coming year – an outcome that would significantly boost Qumu’s book of business in 2018 and beyond.  Our corporate learning experts Charles and Alan caution that there are loads of LMS providers and iStudy is a niche player, in an albeit attractive market: Asia!  But video is HOT HOT HOT in Asia Pac and for corporate learning, so this is a rock-solid channel relationship.

While deals like the iStudy partnership point to a brighter future, investors previously burned by Qumu’s rocky financial performance will likely remain cautious in evaluating the company’s prospects moving forward. But, at the very least, the Briefcam windfall provides Qumu a fighting chance at turning the tide. At this point, Hanzlik probably couldn’t ask for anything more.