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Sonic Foundry Announces Fiscal 2020 First Quarter Financial Results

MADISON, Wis., Feb. 13, 2020 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2020 first quarter ended December 31, 2019.

Fiscal 2020 First Quarter Highlights

  • Billings totaled $6.9 million in the first quarter of 2020; an increase of 15 percent compared to the same period last year
  • Total revenues of $8 million compared to $7.5 million in the first quarter of 2019, a 7 percent increase
  • Gross margin was $5.8 million, or 73 percent of sales, compared to $5.7 million, or 75 percent of sales, in the first quarter of 2019
  • Net loss attributable to common stockholders of $(820,000), or $(0.12) per share, compared to $(1.8) million, or $(0.36) per share, in the first quarter of 2019
  • Adjusted EBITDA was $(203,000) compared to $(1.2) million in the first quarter of 2019
  • Unearned revenue was $10.4 million as of December 31, 2019, down $1.1 million from September 30, 2019.

Fiscal 2020 First Quarter Review

Product billings were $2.1 million during the first quarter of fiscal year 2020 compared to $1.6 million in the same quarter last year. The prior year quarter was impacted by the company's planned reduction of distribution inventory, which reduced product billings and revenue by $670,000. Service billings, including support, hosting, events and installs were $4.9 million, compared to $4.4 million in the prior year. The primary driver of this change was an increase in event services billings during the quarter. The company expects to recognize $3.7 million of the current unearned revenue in the second quarter of fiscal 2020. Recurring revenue of $6.3 million was 78 percent of total revenue in the first quarter of 2020, compared to $6.2 million, or 82 percent of total revenue, in the first quarter of 2019.

Cost reduction measures taken in the second half of the last fiscal year have resulted in a $887,000, or 12 percent, decrease in operating expenses in the first quarter of 2020 compared to the same period in 2019.

“I’m very pleased that our first quarter delivered solid results across a number of key financial metrics, particularly with the bottom line. Decisions we made during the previous two quarters have helped us reduce our costs while sustaining positive momentum across several important business segments, including Event Services and Mediasite Video Cloud,” said Michael Norregaard, CEO of Sonic Foundry. 

He continued, “While we are making meaningful progress, we know we have more work to do to improve execution in our core business, drive additional revenue streams and deliver world class video and professional services as we focus on balanced top-line and bottom-line improvements.”

Non-GAAP Financial Information

To supplement and enhance the reader’s understanding of our operating performance, we disclose adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (adjusted EBITDA), a non-GAAP measure of operating performance. Our adjusted EBITDA measure additionally adds back stock compensation expense from the SEC definition of EBITDA. As such, our adjusted EBITDA may not be comparable to similarly titled measures reported by other companies and should not be viewed as an alternative to net income as a measurement of our operating performance. A reconciliation of net loss to adjusted EBITDA for the first quarter ended December 31, 2019 and 2018 are included in the release.

About Sonic Foundry®, Inc.

Sonic Foundry (OTC Pink Sheets: SOFO) is the global leader for video capture, management and streaming solutions. Trusted by more than 5,200 educational institutions, corporations, health organizations and government entities in over 65 countries, its Mediasite Video Platform quickly and cost-effectively automates the capture, management, delivery and search of live and on-demand streaming videos. Learn more at www.sonicfoundry.com and @mediasite.

© 2020 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.

Forward Looking Statements

This news release contains forward-looking statements about the products and services of Sonic Foundry within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward looking statements include statements about our products and services, our customer base, strategic investments, new partnerships, our future operating results and any statements we make about the company’s future.  These types of statements address matters that are subject to many risks and uncertainties. Actual results could differ materially from the forward-looking guidance we provide.  Any forward-looking statements should be considered in context of the risk factors disclosed in our periodic forms 10Q, 10K and other filings with the SEC.  These filings can be accessed on-line at www.sec.gov and other websites or can be obtained from the company’s investor relations department.  All of the information and disclosures we make in this news release regarding our business, including any forward looking guidance, are as of the date given and we assume no obligation to update or change this information, regardless of subsequent events.

Contacts:
Media:
Nicole Wise, Director of Communications
920.226.0269
nicolew@sonicfoundry.com


Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)

  December 31,
 2019
  September 30,
 2019
Assets      
Current assets:      
Cash and cash equivalents $ 3,511     $ 4,295  
Accounts receivable, net of allowances of $135 5,381     6,532  
Inventories 908     558  
Investment in sales-type lease, current 129     163  
Capitalized commissions, current 390     464  
Prepaid expenses and other current assets 766     972  
Total current assets 11,085     12,984  
Property and equipment:      
Leasehold improvements 1,119     1,121  
Computer equipment 5,659     5,610  
Furniture and fixtures 1,287     1,233  
     Total property and equipment 8,065     7,964  
     Less accumulated depreciation and amortization 6,628     6,396  
          Property and equipment, net 1,437     1,568  
Other assets:      
Investment in sales-type lease, long-term 133     134  
Capitalized commissions, long-term 93     106  
Right-of-use assets under operating leases 2,253      
Other long-term assets 381     388  
Total assets $ 15,382     $ 15,180  
Liabilities and stockholders’ deficit      
Current liabilities:      
Accounts payable $ 1,348     $ 843  
Accrued liabilities 1,546     2,216  
Unearned revenue 8,663     9,610  
Current portion of finance lease obligations 173     194  
Current portion of operating lease obligations 1,270      
Current portion of notes payable and warrant debt, net of discounts 1,268     968  
     Total current liabilities 14,268     13,831  
Long-term portion of unearned revenue 1,716     1,842  
Long-term portion of finance lease obligations 166     179  
Long-term portion of operating lease obligations 1,018      
Long-term portion of notes payable and warrant debt, net of discounts 5,096     5,429  
Derivative liability, at fair value 11     9  
Other liabilities 136     143  
     Total liabilities 22,411     21,433  
Commitments and contingencies      
Stockholders’ deficit:      
Preferred stock, $.01 par value, authorized 500,000 shares; none issued      
9% Preferred stock, Series A, voting, cumulative, convertible, $.01 par value (liquidation preference of $1,000 per share), authorized 4,500 shares; zero shares issued and outstanding, at amounts paid in      
5% Preferred stock, Series B, voting, cumulative, convertible, $.01 par value (liquidation preference at par), authorized 1,000,000 shares, none issued      
Common stock, $.01 par value, authorized 10,000,000 shares; 6,749,359 shares issued, respectively and 6,736,643 shares outstanding, respectively 67     67  
Additional paid-in capital 203,787     203,735  
Accumulated deficit (210,160 )   (209,340 )
Accumulated other comprehensive loss (554 )   (546 )
Treasury stock, at cost, 12,716 shares (169 )   (169 )
     Total stockholders’ deficit (7,029 )   (6,253 )
Total liabilities and stockholders’ deficit $ 15,382     $ 15,180  
 

Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)

  Three Months Ended December 31,
  2019   2018
Revenue:      
Product and other $ 2,055     $ 1,751  
Services 5,960     5,751  
Total revenue 8,015     7,502  
Cost of revenue:      
Product and other 831     651  
Services 1,348     1,191  
Total cost of revenue 2,179     1,842  
Gross margin 5,836     5,660  
Operating expenses:      
Selling and marketing 3,396     3,943  
General and administrative 1,441     1,538  
Product development 1,590     1,833  
Total operating expenses 6,427     7,314  
Loss from operations (591 )   (1,654 )
Non-operating income (expenses):      
Interest expense, net (263 )   (154 )
Other income, net 15     8  
Total non-operating expenses (248 )   (146 )
Loss before income taxes (839 )   (1,800 )
Income tax benefit 19     12  
Net loss $ (820 )   $ (1,788 )
Dividends on preferred stock     (53 )
Net loss attributable to common stockholders $ (820 )   $ (1,841 )
Loss per common share      
– basic $ (0.12 )   $ (0.36 )
– diluted $ (0.12 )   $ (0.36 )
Weighted average common shares      
– basic 6,736,643     5,100,684  
– diluted 6,736,643     5,100,684  
 

Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)

  Three Months Ended
December 31,
  2019   2018
Operating activities      
Net loss $ (820 )   $ (1,788 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Amortization of other intangibles 94     46  
Depreciation and amortization of property and equipment 227     273  
Provision for doubtful accounts - including financing receivables 9     26  
Stock-based compensation expense related to stock options and warrants 52     164  
Deferred loan interest to related party 123      
Remeasurement loss (gain) on derivative liability 2     (15 )
Changes in operating assets and liabilities:      
     Accounts receivable 1,137     3,788  
     Financing receivables     (2 )
     Inventories (351 )   (381 )
     Investment in lease 33      
     Capitalized commissions 87     70  
     Prepaid expenses and other current assets 216     24  
     Right-of-use assets under operating leases 289      
     Operating lease obligations (289      
     Other long-term assets 5      
     Accounts payable and accrued liabilities (136 )   (752 )
     Other long-term liabilities (6 )   (22 )
     Unearned revenue (1,090 )   (1,183 )
Net cash provided by (used in) operating activities (418 )   248  
Investing activities      
Purchases of property and equipment (59 )   (83 )
Net cash used in investing activities (59 )   (83 )
Financing activities      
Proceeds from notes payable     500  
Proceeds from lines of credit     7,051  
Payments on notes payable (250 )   (83 )
Payments on lines of credit     (6,792 )
Payment of debt issuance costs     (10 )
Payments on finance lease obligations (70 )   (73 )
Net cash provided by (used in) financing activities (320 )   593  
Changes in cash and cash equivalents due to changes in foreign currency 13     (35 )
Net increase (decrease) in cash and cash equivalents (784 )   723  
Cash and cash equivalents at beginning of year 4,295     1,189  
Cash and cash equivalents at end of year $ 3,511     $ 1,912  
Supplemental cash flow information:      
Interest paid $ 253     $ 136  
Income taxes paid, foreign 81     92  
Non-cash financing and investing activities:      
Property and equipment financed by finance lease or accounts payable 36     49  
Debt discount     3  
Preferred stock dividends paid in additional shares     53  
Conversion of preferred shares     563  
           

Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)

  Three Months Ended
December 31,
  2019   2018
       
Net loss $ (820 )   $ (1,788 )
Add:      
  Depreciation and amortization 321     319  
  Income tax benefit (19 )   (12 )
  Interest expense 263     154  
  Stock-based compensation expense 52     161  
Adjusted EBITDA $ (203 )   $ (1,166 )