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Sonic Foundry Announces Fiscal 2020 Fourth Quarter and Fiscal 2020 Financial Results - Third Consecutive Quarter of Net Income

Sonic Foundry
·12 min read

MADISON, Wis., Dec. 22, 2020 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, as well as virtual and hybrid events, today announced consolidated financial results for its fiscal 2020 fourth quarter and fiscal year ended September 30, 2020.

Fiscal 2020 Fourth Quarter Highlights

  • Billings of $11 million in the fourth quarter of 2020, a $1.2 million increase over the same quarter last year

  • Total revenues of $10.2 million compared to $9.2 million in the fourth quarter of 2019, a 10 percent increase

  • Gross margin was $7.3 million, or 72 percent in the fourth quarter of 2020 compared to $6.5 million, or 70 percent in the fourth quarter of 2019

  • Net income attributable to common stockholders of $439,000, or $0.06 per share, compared to a net loss of $(179,000), or $(0.03) per share, in the fourth quarter of 2019, an improvement of $618,000

  • Adjusted EBITDA of $1.6 million for the fourth quarter of 2020 compared to $744,000 in the same quarter last year, a 115% improvement

  • Unearned revenue was $12.1 million as of September 30, 2020 and $11.5 million as of September 30, 2019

Fiscal 2020 Year-End Highlights

  • Billings totaled $35.4 million in fiscal 2020 compared to $35.1 million in the prior year

  • Revenue remained flat year over year at $34.8 million despite impacts from COVID-19

  • Gross margin declined slightly from 73 percent in fiscal 2019 to 72 percent in fiscal 2020

  • Net loss attributable to common stockholders of $(179,000), or $(0.02) per share compared to a net loss of $(3.7) million, or $(0.64) per share in fiscal 2019

  • Adjusted EBITDA was $2.4 million for the year compared to $(450,000) in the prior year. The company adjusts EBITDA for non-cash stock compensation expense and severance expense

Fiscal 2020 Fourth Quarter Review

Product billings were $2.9 million during the fourth quarter of 2020 compared to $3.7 million in the same quarter last year. Service billings, including support, hosting, events and installs were $8 million, compared to $6.1 million in the prior year. Notably, billings related to hosting increased 86 percent in the fourth quarter of 2020 compared to the same quarter last year. These increases in services are indicative of the acceleration in video content creation across the globe. The company expects to recognize $4.1 million of the current unearned revenue in the first quarter of fiscal 2021. Recurring revenue of $6.8 million was 67 percent of total revenue in the fourth quarter of 2020, compared to $5.9 million, or 64 percent of total revenue, in the fourth quarter of 2019.

“It has been incredibly exciting for me to join Sonic Foundry at this pivotal point in its 30-year history,” said Joe Mozden Jr., CEO, Sonic Foundry. “Every organization across the world has been impacted by COVID-19 in a profound way. We have had the sincere privilege of being positioned to help our customers navigate unchartered waters – new users like Norland College in the United Kingdom and Hamid Bin Khalifa University, part of the Qatar Foundation, and longtime clients like Florida Atlantic University and Texas A&M University. Our solutions are helping them continue, if not grow their businesses, by keeping their classes, trainings, work and events going virtually, despite distance.”

Mozden continued: “Whether it’s migrating a health organization’s in-person conference to a virtual platform to ensure they continue to exchange vital information with thousands of users, or enabling teachers to connect with their students in more thoughtful and engaging ways, we’re proud to be a lifeline to our customers in this new video-centric world.”

“We are rapidly adapting our business to the trends that we are seeing, and are accelerating our investments and focus on high value-add markets which we believe will grow in a post COVID world. Increased demand for hosting, our virtual events platform and our video content management capabilities reflect significant opportunities for Sonic Foundry and are the basis for changes we are making in our business. I am extremely proud of our team for quickly pivoting to meet our customers’ needs during this difficult year. We are beginning a new journey with greater emphasis on product orientation coupled with our historical customer-centric focus. A great example of that is the innovations we are driving for in the new hybrid world for the classroom, the office, and the events industry,” he concluded.

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 as well as severance 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 fourth quarter ended September 30, 2020, and 2019 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.

© 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.

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



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

September 30,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

7,619

$

4,295

Accounts receivable, net of allowances of $236 and $135

6,250

6,532

Inventories

1,167

558

Investment in sales-type lease, current

275

163

Capitalized commissions, current

440

464

Prepaid expenses and other current assets

1,065

972

Total current assets

16,816

12,984

Property and equipment:

Leasehold improvements

1,128

1,121

Computer equipment

7,960

5,610

Furniture and fixtures

1,366

1,233

Total property and equipment

10,454

7,964

Less accumulated depreciation and amortization

7,295

6,396

Property and equipment, net

3,159

1,568

Other assets:

Investment in sales-type lease, long-term

76

134

Capitalized commissions, long-term

100

106

Right-of-use assets under operating leases

2,081

Other long-term assets

397

388

Total assets

$

22,629

$

15,180

Liabilities and stockholders’ equity (deficit)

Current liabilities:

Accounts payable

2,689

843

Accrued liabilities

2,565

2,216

Unearned revenue

10,402

9,610

Current portion of finance lease obligations

119

194

Current portion of operating lease obligations

1,425

Current portion of notes payable and warrant debt, net of discounts

1,104

968

Total current liabilities

18,304

13,831

Long-term portion of unearned revenue

1,736

1,842

Long-term portion of finance lease obligations

89

179

Long-term portion of operating lease obligations

665

Long-term portion of notes payable and warrant debt, net of discounts

2,673

5,429

Derivative liability, at fair value

66

9

Other liabilities

144

143

Total liabilities

23,677

21,433

Commitments and contingencies

Stockholders’ equity (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; 7,965,325 and 6,749,359 shares issued and 7,952,609 and 6,736,643 shares outstanding

80

67

Additional paid-in capital

209,022

203,735

Accumulated deficit

(209,519

)

(209,340

)

Accumulated other comprehensive loss

(462

)

(546

)

Treasury stock, at cost, 12,716 shares

(169

)

(169

)

Total stockholders’ equity (deficit)

(1,048

)

(6,253

)

Total liabilities and stockholders’ equity (deficit)

$

22,629

$

15,180



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

Quarters Ended September 30,

Years Ended September 30,

2020

2019

2020

2019

Revenue:

Product and other

$

2,727

$

3,863

$

10,339

$

11,631

Services

7,427

5,351

24,414

23,150

Total revenue

10,154

9,214

34,753

34,781

Cost of revenue:

Product and other

1,243

1,534

4,430

4,387

Services

1,638

1,219

5,204

4,893

Total cost of revenue

2,881

2,753

9,634

9,280

Gross margin

7,273

6,461

25,119

25,501

Operating expenses:

Selling and marketing

3,591

3,163

13,025

14,727

General and administrative

1,408

1,437

5,055

5,929

Product development

1,703

1,736

6,303

7,353

Total operating expenses

6,702

6,336

24,383

28,009

Income/(loss) from operations

571

125

736

(2,508

)

Non-operating income (expenses):

Interest expense, net

(37

)

(240

)

(658

)

(897

)

Other expense, net

41

(51

)

(109

)

(117

)

Total non-operating expenses

4

(291

)

(767

)

(1,014

)

Loss before income taxes

575

(166

)

(31

)

(3,522

)

Income tax provision

(136

)

(13

)

(148

)

(90

)

Net loss

$

439

$

(179

)

$

(179

)

$

(3,612

)

Dividends on preferred stock

(122

)

Net loss attributable to common stockholders

$

439

$

(179

)

$

(179

)

$

(3,734

)

Loss per common share:

Basic net loss per common share

$

0.06

$

(0.03

)

$

(0.02

)

$

(0.64

)

Diluted net loss per common share

$

0.05

$

(0.03

)

$

(0.02

)

$

(0.64

)

Weighted average common shares – Basic

7,940,480

6,736,285

7,216,135

5,833,301

– Diluted

8,346,877

6,736,285

7,216,135

5,833,301



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

Years Ended

September 30,

2020

2019

Operating activities

Net loss

$

(179

)

$

(3,612

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Amortization of other intangibles

231

307

Depreciation and amortization of property and equipment

889

970

Loss on sale of fixed assets

8

Provision for doubtful accounts - including financing receivables

111

116

Provision for inventory reserve

122

Loss on conversion of related party debt to equity

26

Stock-based compensation expense related to stock options and warrants

158

177

Stock issued for board of director’s fees

63

246

Deferred loan interest to related party

317

259

Remeasurement gain on derivative liability

57

(8

)

Changes in operating assets and liabilities:

Accounts receivable

268

950

Financing receivables

293

Inventories

(729

)

472

Investment in sales-type lease

(48

)

120

Capitalized commissions

30

123

Prepaid expenses and other current assets

(57

)

15

Right-of-use assets under operating leases

492

Operating lease obligations

(528

)

Other long-term assets

Accounts payable and accrued liabilities

1,503

(204

)

Other long-term liabilities

(2

)

(68

)

Unearned revenue

617

(900

)

Net cash used in operating activities

3,341

(736

)

Investing activities

Purchases of property and equipment

(1,736

)

(433

)

Net cash used in investing activities

(1,736

)

(433

)

Financing activities

Proceeds from notes payable

3,157

5,500

Proceeds from lines of credit

9,199

Payments on notes payable

(1,358

)

(833

)

Payments on lines of credit

(10,098

)

Payments of debt issuance costs

(110

)

Payments to settle put on term debt

Proceeds from issuance of preferred stock and common stock

73

873

Payments on capital lease and financing arrangements

(202

)

(250

)

Net cash provided by financing activities

1,670

4,281

Changes in cash and cash equivalents due to changes in foreign currency

49

(6

)

Net increase (decrease) in cash and cash equivalents

3,324

3,106

Cash and cash equivalents at beginning of year

4,295

1,189

Cash and cash equivalents at end of year

$

7,619

$

4,295

Supplemental cash flow information:

Interest paid

$

148

$

618

Income taxes paid, foreign

154

99

Non-cash financing and investing activities:

Property and equipment financed by finance lease or accounts payable

724

186

Debt discount and warrant

679

Preferred stock dividend paid in additional shares

122

Conversion of preferred shares to common shares

1,773

Conversion of related party debt to common shares

5,005



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

Quarters Ended September 30,

Years Ended September 30,

2020

2019

2020

2019

Net income (loss)

$

439

$

(179

)

$

(179

)

$

(3,612

)

Add:

Depreciation and amortization

235

228

883

977

Income tax expense

136

13

148

90

Interest expense

37

240

658

897

Stock-based compensation expense

55

(25

)

158

175

Severance

705

467

705

1,023

Adjusted EBITDA

$

1,607

$

744

$

2,373

$

(450

)