Company History and Overview Oblong was formed as a Delaware corporation in May 2000 and has since been at the forefront of developing patented multi-stream collaboration technologies and managed services for video collaboration and network applications. The company’s flagship product, Mezzanine, is a family of turn-key solutions that enable dynamic and immersive visual collaboration across multi-users, multi-screens, multi-devices, and multi-locations.
In the early years, Oblong’s Mezzanine products were widely adopted by customers who used them in traditional office and operating center environments such as conference rooms or other presentation spaces. The company’s managed services for video collaboration and network solutions also gained traction during this period.
Mezzanine allows multiple people to share, control, and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats. This technology has been widely adopted by enterprises, enhancing day-to-day virtual meetings and accelerating decision-making, communication, and productivity.
In addition to its Mezzanine offerings, Oblong also provides a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience and drive the adoption of video collaboration throughout its customers’ enterprises. The company’s network services business, which offers reliable, high-quality, and secure traffic of video, data, and internet, has also been a key part of Oblong’s diversified portfolio.
Business Segments
Oblong operates in two main business segments: Collaboration Products and Managed Services.
Collaboration Products Segment
The Collaboration Products segment is centered around Oblong’s flagship product, Mezzanine. The Mezzanine product line includes the 200 Series (two display screens), 300 Series (three screens), and 600 Series (six screens), which can be sold as delivered systems in various configurations to support small teams up to large-scale immersive experiences. Oblong also sells maintenance and support contracts related to the Mezzanine products.
However, this segment has faced declining revenue in recent periods. For the three months ended September 30, 2024, revenue from the Collaboration Products segment was $68,000, down from $269,000 in the prior year period. This decrease was largely due to lower demand for Mezzanine products, which Oblong believes is a consequence of the commercial reactions to the COVID-19 pandemic and its prolonged effects. The pandemic has fundamentally altered how businesses view the necessity and investment in collaboration solutions tailored for traditional office environments.
Managed Services Segment
The Managed Services segment provides a range of managed services for video collaboration and network applications. This includes managed videoconferencing services, where Oblong sets up and manages customer videoconferences, as well as remote service management, providing 24/7 support and management of customer video environments. The segment also offers network solutions to customers on a subscription basis.
For the three months ended September 30, 2024, revenue from the Managed Services segment was $510,000, down from $603,000 in the prior year period. The decrease was primarily attributable to lower revenue from existing customers, either from reductions in price or level of services, as well as loss of customers to competition. Notably, one major customer accounted for 97% of Managed Services revenue in the 2024 third quarter, highlighting the segment’s customer concentration risk.
Financials
Oblong’s financial performance has faced significant challenges in recent years. For the fiscal year ended December 31, 2023, the company reported total revenue of $3.81 million, a decline from $5.48 million in the prior year. The company’s net income for the fiscal year 2023 was a loss of $4.38 million, compared to a loss of $21.94 million in 2022. While the net loss has decreased, Oblong continues to face financial headwinds, impacting its ability to invest in growth initiatives.
For the most recent quarter (Q3 2024), Oblong reported revenue of $578,000, representing a 33.7% year-over-year decrease. The net income for this quarter was a loss of $1.04 million. Operating cash flow (OCF) and free cash flow (FCF) for Q3 2024 were both negative at $911,000.
Performance by Geographic Markets
For the three months ended September 30, 2024, 11% of revenue was attributable to the United Kingdom. For the three and nine months ended September 30, 2024 and 2023, there was no other material revenue attributable to any individual foreign country.
Liquidity
Despite these challenges, Oblong’s financial position remains relatively strong. As of September 30, 2024, the company had $5.62 million in cash and cash equivalents, with no outstanding debt. The company has no available credit lines. Oblong’s current ratio stands at 4.53, and its quick ratio is 4.50, indicating a strong short-term liquidity position.
In September 2024, Oblong took steps to reduce operating expenses and preserve capital, including a workforce reduction of nine employees, resulting in severance costs of $106,000.
The company believes that its existing cash and cash equivalents will be sufficient to fund its operations and meet its working capital requirements into mid-2026. However, Oblong recognizes that additional capital will be required in the long term to fund operations, provide growth capital, and pursue potential strategic alternatives.
Strategic Initiatives and Outlook
In response to the ongoing challenges, Oblong has undertaken a comprehensive review of its strategic direction with the aim of enhancing shareholder value. The company is exploring a diverse range of transformative actions, including the possibility of a business combination, a reverse merger, or an outright sale of the company.
Oblong’s strategy for growth is twofold: organic expansion by increasing the adoption of its products and services, and inorganic growth through strategic partnerships or acquisitions. The company is particularly interested in early-stage technology companies that have developed minimum viable products (MVPs) and gained market acceptance, as these could complement Oblong’s existing offerings or open new avenues for expansion.
While Oblong’s strategic review process is ongoing, the company has stated that there is no guaranteed outcome. The process of identifying and executing the right strategic alternative is complex and uncertain, and there is no assurance that the review will culminate in a definitive transaction involving the company.
Regulatory Compliance and Challenges
In September 2024, Oblong regained full compliance with Nasdaq’s listing standards after previously receiving a notice from the exchange regarding non-compliance with the minimum bid price requirement. The company was granted two 180-day extensions to regain compliance and was ultimately able to do so, highlighting its commitment to maintaining its public listing.
However, the company has acknowledged that should it again become non-compliant with Nasdaq’s continued listing requirements, its Common Stock could be delisted, which could have a material adverse effect on its financial condition and may cause the value of its stock to decline.
Conclusion
Oblong, Inc. (OBLG) has a rich history as a pioneer in the collaboration solutions market, but it has faced significant challenges in recent years, resulting in declining financial performance across both its Collaboration Products and Managed Services segments. The COVID-19 pandemic has fundamentally altered the way businesses consider the use of physical office spaces, consequently reducing demand for the company’s Mezzanine products that are typically used in traditional office environments.
The company’s strategic review process, aimed at enhancing shareholder value, is ongoing, and it remains committed to exploring a range of transformative actions. While Oblong’s financial position appears relatively strong, with a sizable cash balance and no outstanding debt, the company will likely need to raise additional capital to fund its operations and growth initiatives in the long term.
Oblong’s ability to adapt to evolving market dynamics, diversify its customer base, and successfully execute its strategic initiatives will be crucial for its future growth and profitability. Investors should closely monitor the company’s progress as it navigates this transformative period, particularly focusing on its efforts to revitalize the Collaboration Products segment and mitigate customer concentration risk in the Managed Services segment.
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