Sonic Foundry Q4 Loss Widens, Revenues Rise, Shares Dip
Shares of Sonic Foundry Inc. (SOFO) went down 3.2% in after-hours trading yesterday after the company reported fourth-quarter fiscal 2014 loss of 30 cents per share. The quarter’s loss also widened year over year.
Revenues for the quarter increased 25% to $8.5 million primarily due to acquisitions of Mediasite KK and MediaMission BV and higher units sold. Revenues however missed the Zacks Consensus Estimate of $11 million.
Billings revenues increased 26% year over year to $9.2 million. During the quarter, 79% of the total billings came from existing customers compared with 78% in the year-ago quarter. The company reported product and other revenues of $4 million, up 8.1% while service revenues increased 45.2% to $4.5 million. Support and maintenance revenues on the other hand increased 14% year over year and came in at $2.2 million.
During the quarter, the average selling price (:ASP) came in at $8,711 compared with $8,568 reported in the year-ago quarter. Units shipped in the quarter were 481 units, up from 414 units in the year-ago quarter.
The company reported gross profit of $5.9 million which was up from $4.9 million reported in the year-ago quarter while margins came in at 69.4% compared with 72.1% in the year-ago quarter. Margins were impacted by lower product gross margins. Sonic Foundry’s non-GAAP operating expenses as a percentage of revenues increased from 80.9% to 84.7% year over year, which impacted operating performance.
The company’s net loss of $1.3 million widened from a loss $666K reported in the year-ago quarter.
The company exited the quarter with cash and cash equivalents of $4.34 million compared with $3.93 million in the previous quarter. The company had long-term unearned revenues of $929K on its balance sheet while long-term notes payable to bank stood at $1.14 million.
The company used 87K cash from operations during the twelve months ended fiscal 2014.
Outlook
For fiscal 2015, Sonic Foundry expects billings to be $45 million. Adjusted EBITDA is expected in the range of $4.5 million to $5.5 million. The company expects net income to be approximately in the range of $1million-$2 million.
Our Take
Sonic Foundry reported tepid fourth-quarter results. Although revenues were up significantly year over year, it lagged the Zacks Consensus Estimate. Also, higher expenses led to a wider year-over-year loss. Nonetheless, strategic acquisitions are expected to aid the company’s top line. Also, its legal settlement with Astute Technology bodes well as it will now be able to use the patents under a licensing agreement.
However, margin contractions due to higher expenses and competition from Cisco (CSCO) and Microsoft (MSFT) remain concerns.
Currently, Sonic Foundry has a Zacks Rank #3 (Hold). Investors can also consider, Micron Technology (MU) a better-ranked stock with a Zacks Rank #1 (Strong Buy).
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