Business context and reporting period
Oblong, Inc. (Nasdaq: OBLG) filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2022. It provides Mezzanine visual-collaboration products and managed video-collaboration and network services. The request metadata names Taoweave, Inc., but the filing itself identifies the registrant as Oblong, Inc.
Financial performance and liquidity
Amounts below are in millions, except per-share data and percentages.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.185 | $1.799 | $4.050 | $5.766 |
| Gross profit / margin | $0.344 / 29% | $0.571 / 32% | $1.250 / 31% | $1.999 / 35% |
| Operating loss | $7.160 | $3.111 | $20.715 | $9.000 |
| Net loss | $7.152 | $0.662 | $20.724 | $6.341 |
| Basic and diluted loss per share | $0.23 | $0.02 | $0.67 | $0.28 |
- Cash was $4.143 million at September 30, down from $8.939 million at December 31, 2021. Working capital was $4.029 million.
- Operating cash used was $4.876 million for the first nine months, compared with $5.956 million in the prior-year period. Investing activities provided $0.019 million; there was no financing cash flow in 2022.
- Total assets were $7.364 million and total liabilities $2.561 million. The balance sheet reports lease liabilities of $0.349 million and no borrowings are presented.
- Impairment charges were $5.169 million in Q3 and $12.715 million for nine months. Nine-month charges included $7.367 million of goodwill, $5.132 million of intangible assets, and impairments of property and equipment and lease assets. Goodwill was reduced to zero; net intangible assets were $0.690 million.
Material changes versus prior periods
- Revenue fell 34% in Q3 and 30% for the first nine months year over year. Managed Services revenue declined to $0.797 million in Q3 and $2.573 million for nine months; Collaboration Products revenue declined to $0.388 million and $1.477 million, respectively.
- Management attributed Managed Services declines to customer attrition, reduced service levels or pricing, competition, and lower demand. It attributed weaker product sales to pandemic-related customer delays, uncertain office and retrofit budgets, and longer sales cycles.
- Gross margin contracted by 3 percentage points in Q3 and 4 points for nine months. Despite lower research and development, sales and marketing, and general and administrative expenses, operating losses rose, principally due to impairment charges and lower revenue.
- Customer A accounted for 53% of Q3 revenue and 48% of nine-month revenue. At quarter-end, it represented 52% of accounts receivable.
Outlook, risks, and unusual items
- Going concern: Management said projected resources would not fund operations for the 12 months following the filing. It expects to need additional debt or equity capital; there is no assurance financing will be available on acceptable terms. The filing states that these conditions raise substantial doubt about the Company’s ability to continue as a going concern.
- Management expects Managed Services revenue declines to continue. It plans to continue product-development and sales-and-marketing investment, subject to obtaining additional capital. No specific revenue or earnings guidance is provided.
- A $0.533 million inventory theft discovered in June was recorded as a casualty loss. A police investigation and insurance claim were pending; recovery of any amount is not assured.
- COVID-19-related changes in customer behavior, delayed projects and budgets, supply-chain disruption, and uncertain sales cycles remain risks. Further revenue, cash-flow, or market-capitalization declines could trigger additional impairments.
- The filing reports no material change to previously disclosed risk factors, no material adverse legal proceedings known to the Company, and no off-balance-sheet arrangements. Management assessed disclosure controls as effective.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Oblong, Inc., not Taoweave, Inc.
- Assess cash runway, near-term funding requirements, and whether the Company can raise capital on acceptable terms.
- Track revenue, renewals, attrition, pricing, and customer concentration, especially Customer A’s contribution.
- Monitor the theft insurance claim and any proceeds, as well as the risk of further impairment charges.
- Review subsequent filings for operating cash burn, financing activity, and any update to the going-concern assessment.