Oblong, Inc. — Form 10-Q Summary
Entity note: The supplied filing is for Oblong, Inc. (Nasdaq: OBLG), not Taoweave, Inc. It covers the quarter and nine months ended September 30, 2021; financial statements are unaudited.
Business context
Oblong reports two segments: managed video collaboration and network services (formerly Glowpoint), and visual collaboration products and services (Oblong Industries). Management is developing subscription-based, hybrid and cloud offerings. It says it expects to continue the former Glowpoint business for now but plans to seek opportunities to divest some or all of it.
Financial highlights
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1.799 million | $3.266 million | $5.766 million | $11.410 million |
| Gross profit / margin | $0.571 million / 32% | $1.654 million / 51% | $1.999 million / 35% | $5.726 million / 50% |
| Operating loss | $3.111 million | $1.990 million | $9.000 million | $8.276 million |
| Net loss | $0.662 million | $2.085 million | $6.341 million | $8.598 million |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(5.956) million | $(4.325) million |
At September 30, cash was $10.734 million, restricted cash $0.061 million, working capital $12.410 million, and total liabilities $3.553 million. Long-term debt was zero; the $2.417 million PPP loan and accrued interest were forgiven in July 2021. The company reported total assets of $31.698 million and stockholders’ equity of $28.145 million.
Changes versus prior comparable periods
- Revenue fell 45% in Q3 and 49% for the first nine months. Q3 revenue declined in both segments: Oblong/Glowpoint to $1.006 million from $1.324 million, and Oblong Industries to $0.793 million from $1.942 million.
- Nine-month revenue decreased in both segments: Oblong/Glowpoint to $3.279 million from $4.741 million and Oblong Industries to $2.487 million from $6.669 million.
- Gross margin contracted, while nine-month operating loss widened despite lower operating expenses. Management attributes the deterioration mainly to lower revenue and gross profit.
- Cash increased from $5.058 million at December 31, 2020, aided by $11.504 million net proceeds from a June stock offering. The offering issued 4 million common shares and warrants to buy up to 4 million additional shares.
- Series A-2, D and E preferred shares converted to common stock in 2021. Common shares outstanding rose from 7.749 million at year-end 2020 to 30.816 million at September 30, 2021.
Outlook, risks and unusual items
- Going concern: Management said its projections indicate the company will not have sufficient resources to fund operations for the 12 months following filing. It expects to need additional debt or equity financing; substantial doubt exists about its ability to continue as a going concern, and there is no assurance financing will be available on acceptable terms.
- Demand and execution: COVID-19-related delays in commercial real estate projects, customer budgets and order timing, alongside long sales cycles and supply delays, materially affected revenue. Management could not reasonably estimate the pandemic’s ultimate impact.
- Competition and concentration: Legacy service revenue faced customer attrition, pricing pressure and competition. One customer represented 37% of Q3 revenue and 35% of nine-month revenue. Management also noted customer-renewal and major-customer collection risks.
- Strategy and spending: Product development and commercialization costs for Oblong Industries are expected to exceed its revenue for the foreseeable future. The planned move toward software and cloud offerings requires investment in technology, product development and sales and marketing.
- Nonrecurring items: PPP loan forgiveness generated a $2.448 million gain, reducing reported net loss. The company also recorded $0.254 million of Q3 impairment charges, including a $0.207 million write-off of the affiliate-network intangible after discontinuing video meeting suite services. A Munich lease settlement generated $0.227 million of other income during the nine-month period.
- No specific revenue or earnings guidance was provided. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no legal proceeding believed likely to have a material adverse effect.
Key facts for investors to verify
- Whether the company obtained financing after filing and whether its liquidity outlook changed.
- Subsequent revenue, bookings, customer renewals and receivable collections, particularly for the concentrated major customer.
- Progress and funding needs for the software/cloud transition, and any disposition of the Glowpoint business.
- The impact of the June offering and outstanding warrants on potential dilution; the filing reports 5.147 million warrants outstanding at September 30, 2021.
- Whether continued revenue declines or other valuation changes trigger further impairment charges.