The News: Enterprise software vendor Enghouse Systems and Qumu Corporation announced a joint merger agreement whereby Enghouse will acquire Qumu, a cloud-based enterprise video tech vendor, in an all-cash deal valued at $18 million. The companies said Enghouse has formed a new wholly-owned subsidiary to complete the deal, suggesting that the Qumu unit will continue to operate as a stand-alone product line. Details of the transaction, which is expected to close in February 2023, can be found in this Press Release.
Enghouse Systems to Acquire Qumu for $18 Million in an All-Cash Deal
Analyst Take: For the Ontario-based Enghouse Systems, the Qumu acquisition represents just the latest in a string of deals designed to boost its portfolio of enterprise software-as-a-service (SaaS) offerings. In September 2022, the company acquired VoicePort, a developer of automated interactive voice response solutions. Earlier this year, Enghouse also acquired contact solution providers Competella AB and NTW Software GmbH.
The Qumu acquisition is not Enghouse’s first foray into the enterprise video space. In May 2019, the company paid $40 million to acquire video meeting service provider Vidyo.
The Enghouse Acquisition is Yet Another Lifeline for Qumu
The Enghouse acquisition appears to be a soft landing for Qumu, which has experienced significant financial challenges in recent years. The company lost $9.8 million during the first nine months of 2022 as revenues for the period dropped to $15.5 million – a decline of 14% from the same period in the prior year. For all of 2021, Qumu reported a loss of $18.3 million on revenues of $24.0 million.
But even as Qumu’s overall revenues have been falling, its SaaS business has been growing. In its most recent quarterly financial release, the company reported that its annual recurring revenue from software-as-a-service had increased 7% year-over-year to $13.5 million.
The Enghouse deal gives Qumu a financial lifeline, potentially providing it access to capital needed to continue expanding its SaaS business. During its 2022 fiscal year ending on October 31, Enghouse generated net income of $92.8 million on revenues of $427.6 million. The company had $228 million of cash and cash equivalents on-hand as of October 31.
This is not the first time that Qumu has been purchased by a cash-rich technology developer. In October 2011, Rimage – a Minneapolis-based maker of machines that print compact discs – acquired Qumu in a deal then valued at $52 million in cash and stock. Rimage ultimately divested its other businesses, changed its name to Qumu and spent more than $200 million in Rimage cash holdings over a series of years in an attempt to bolster Qumu’s initiatives in the enterprise streaming space.
At the time of the Enghouse acquisition announcement, Qumu’s cash reserves had declined to $6 million.
Looking Ahead for Enghouse and Qumu
Looking ahead for Enghouse and Qumu, and given Qumu’s recent financial performance, I believe the Enghouse deal represents the best possible outcome for the company. Upon closing of the transaction, it appears that Qumu will still have the opportunity to position itself as a dedicated provider of enterprise streaming solutions and will have the financial runway to pursue its objectives in the SaaS segment of the market. At the same time, it will be embedded within a portfolio of offerings in related enterprise software segments, including contact center solutions and video collaboration, which is beneficial for Enghouse. I’ll be watching to see how this plays out.
Disclosure: Wainhouse Research, part of The Futurum Group family of companies, is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Wainhouse Research as a whole.
Other insights from Wainhouse Research:
Qumu Partners With hihaho To Enable Interactive Video
Vbrick Acquires Video Networking Solution Provider Ramp
Microsoft Announces Teams Integration with Hololens 2
Image Credit: EnterpriseTalk
Author Information
Steve Vonder Haar is a Senior Analyst with Wainhouse – a Futurum Group company. His area of expertise and focus is enterprise streaming and virtual events.
