MADISON, Wis., Aug. 09, 2018 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted leader for video
creation and management solutions, today announced consolidated financial results for its fiscal 2018 third quarter ended
June 30, 2018.
Fiscal 2018 Third Quarter Highlights
- Total revenues were $8.7 million compared to $9.8 million in the third quarter of 2017, or a decrease of 12%, primarily as a
result of a large multi-year transaction completed in Japan last year
- Gross margin was $6.4 million, or 74% of sales, compared to $7.2 million, or 74% of sales, in the third quarter of 2017
- Adjusted EBITDA was $(343,000) compared to $246,000 in the third quarter of 2017
- Net loss of $(1.0) million, or $(0.23) per share, compared to $(489,000), or ($0.13) per share, in the third quarter of
2017
- Billings totaled $9.0 million in the third quarter of 2018, a decrease of 12%, compared to the same period last year
- Unearned revenue was $12.0 million as of June 30, 2018, down $2.4 million from September 30, 2017. The Company reduced
unearned revenue for a China distributor by $1.5 million during the prior quarter due to an expectation that conversion to
revenue would take an extended period of time and therefore was not fixed and determinable
- Recurring services revenue contributed 68% of total revenues for the quarter
- Successfully raised $3.0 million in privately negotiated transactions
Fiscal 2018 Third Quarter Review
Service billings, including support, hosting, events, and installs recorded a decrease of 9% from prior year to a total of $5.7
million from $6.2 million. A decrease in events billings in Japan and the Netherlands were the primary driver of the change in
service billings. The company expects to recognize $3.7 million of the current unearned revenue in the fourth quarter of fiscal
2018. Recurring revenue of $5.9 million was 68% of total revenue in the third quarter of 2018, compared to $6.0 million, or 61% of
total revenue, in the third quarter of 2017.
Product billings were $3.3 million during the third quarter of fiscal year 2018, compared to $4.1 million last year and are $9.0
million year to date compared to $10.3 million last year. Product billings reflect the large transaction noted above in Japan as
well as a shift toward larger unit shipments of our-lower cost recorders. Year to date, the Mediasite RL 220 and RL Mini recorder
models reflect an increase of 46% over the prior year unit shipments.
Operating expenses were $7.3 million, down $309,000, or 4%, from the same period in 2017. The net loss of $1.0 million increased
from a net loss of $489,000 in the same period in 2017.
“While we maintained our gross margins and reduced our operating expenses, thanks in part to cost savings initiatives we
implemented earlier this year, the higher education market in North America and Europe continues to be challenging in the current
climate. Educators continue to believe that video can improve both student outcomes and retention and CIOs at global modern
campuses see video as a communication mainstay, but they are facing a backlog of budget and resources to meet their digital goals,”
said Gary Weis, CEO of Sonic Foundry.
Weis continued, “We‘ve enhanced our strategy to make video creation more accessible, powerful and easy by increasing our product
mix and removing the hurdles to wide-scale campus video adoption. This approach is resonating with new customers that have chosen
Mediasite to be the focus of their digital campus initiatives, such as Iqra University in Pakistan, Deakin University in Australia
and Cuyahoga Community College in Ohio. We believe other campuses will follow suit when they have appropriate funding. This
strategy is also resonating with customers as they rapidly adopt our newest software release. And we’re buoyed by the strong demand
for our affordable line of recorders. For the remainder of the year we will remain focused on new customer acquisitions and
continuing to build relationships.”
Non-GAAP Financial Information
To supplement and enhance the reader’s understanding of our operating performance and our ability to satisfy lender requirements,
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. Our credit agreement contains a minimum
EBITDA calculation based, in part, on adjusted EBITDA since this measure is representative of adjusted income available for debt
and interest payments. A reconciliation of net income (loss) to adjusted EBITDA for the quarters and nine months ended
June 30, 2018 and 2017 are included in the release. The company is unable to provide a reconciliation of projected EBITDA to
projected net income due to the unknown effect, timing and potential significance of certain income statement items.
Webcast
The company will hold its corporate webcast for analysts and investors at 4:30 p.m. ET today, August 9. Sonic Foundry will use its
webcasting technology, Mediasite, to stream the presentation for live and on-demand viewing. To access the webcast register
at www.sonicfoundry.com/earnings on or before August 9, 2018. A video archive of the full earnings
call, including Q&A, will be available for 90 days.
About Sonic Foundry®, Inc.
Sonic Foundry (NASDAQ:SOFO) is the global leader for video capture, management and streaming solutions. Trusted by more than 4,900
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.
© 2018 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
Sonic Foundry
920.226.0269
nicolew@sonicfoundry.com
Investor:
Peter Seltzberg, Managing Director
Darrow Associates, Inc.
516-419-9915
pseltzberg@darrowir.com
www.darrowir.com
| Sonic Foundry, Inc. |
| Condensed Consolidated Balance
Sheets |
| (in thousands, except for share
data) |
| (Unaudited) |
| |
| |
June
30,
2018 |
|
September
30,
2017 |
| Assets |
|
|
|
| Current assets: |
|
|
|
| Cash and cash equivalents |
$ |
2,129 |
|
|
$ |
1,211 |
|
| Accounts receivable, net of allowances of $475 and $375 |
7,084 |
|
|
7,903 |
|
| Financing receivables, current, net of allowances of $400 and
$200 |
229 |
|
|
925 |
|
| Inventories |
917 |
|
|
986 |
|
| Investment in sales-type lease, current |
154 |
|
|
148 |
|
| Prepaid expenses and other current assets |
803 |
|
|
1,085 |
|
| Total current assets |
11,316 |
|
|
12,258 |
|
| Property and equipment: |
|
|
|
| Leasehold improvements |
1,045 |
|
|
1,041 |
|
| Computer equipment |
7,005 |
|
|
6,101 |
|
| Furniture and fixtures |
928 |
|
|
789 |
|
| Total property and equipment |
8,978 |
|
|
7,931 |
|
| Less accumulated depreciation and amortization |
6,983 |
|
|
6,181 |
|
| Property and equipment, net |
1,995 |
|
|
1,750 |
|
| Other assets: |
|
|
|
| Goodwill |
10,486 |
|
|
10,455 |
|
| Customer relationships, net of amortization of $1,189 and $990 |
1,337 |
|
|
1,505 |
|
| Product rights, net of amortization of $504 and $411 |
169 |
|
|
261 |
|
| Financing receivables, long-term |
201 |
|
|
1,310 |
|
| Investment in sales-type lease, long-term |
290 |
|
|
407 |
|
| Other long-term assets |
463 |
|
|
410 |
|
| Total assets |
$ |
26,257 |
|
|
$ |
28,356 |
|
| Liabilities and stockholders’ equity |
|
|
|
| Current liabilities: |
|
|
|
| Revolving lines of credit |
$ |
2,239 |
|
|
$ |
2,065 |
|
| Accounts payable |
1,390 |
|
|
1,314 |
|
| Accrued liabilities |
1,417 |
|
|
1,387 |
|
| Unearned revenue |
10,325 |
|
|
11,332 |
|
| Current portion of capital lease and financing arrangements |
265 |
|
|
256 |
|
| Current portion of notes payable and warrant debt, net of
discounts |
369 |
|
|
737 |
|
| Total current liabilities |
16,005 |
|
|
17,091 |
|
| Long-term portion of unearned revenue |
1,626 |
|
|
2,970 |
|
| Long-term portion of capital lease and financing arrangements |
241 |
|
|
244 |
|
| Long-term portion of notes payable and warrant debt, net of
discounts |
1,540 |
|
|
123 |
|
| Derivative liability, at fair value |
26 |
|
|
12 |
|
| Other liabilities |
240 |
|
|
372 |
|
| Deferred tax liability |
3,051 |
|
|
4,426 |
|
| Total liabilities |
22,729 |
|
|
25,238 |
|
| Commitments and contingencies |
|
|
|
| Stockholders’ equity: |
|
|
|
| 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; 3,324 and 1,510 shares issued and outstanding, respectively, at amounts paid in |
2,143 |
|
|
1,280 |
|
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; 4,920,057
and 4,470,791 shares issued and 4,907,341
and 4,458,075 shares outstanding, respectively |
49 |
|
|
45 |
|
| Additional paid-in capital |
199,471 |
|
|
197,836 |
|
| Accumulated deficit |
(197,402 |
) |
|
(195,253 |
) |
| Accumulated other comprehensive loss |
(538 |
) |
|
(595 |
) |
| Receivable for common stock issued |
(26 |
) |
|
(26 |
) |
| Treasury stock, at cost, 12,716 shares |
(169 |
) |
|
(169 |
) |
| Total stockholders’ equity |
3,528 |
|
|
3,118 |
|
| Total liabilities and stockholders’ equity |
$ |
26,257 |
|
|
$ |
28,356 |
|
| Sonic Foundry, Inc. |
| Condensed Consolidated Statements of
Operations |
| (in thousands, except for share and per share
data) |
| (Unaudited) |
| |
| |
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Revenue: |
|
|
|
|
|
|
|
| Product and other |
$ |
3,214 |
|
|
$ |
4,335 |
|
|
$ |
8,927 |
|
|
$ |
11,363 |
|
| Services |
5,485 |
|
|
5,498 |
|
|
17,127 |
|
|
16,337 |
|
| Total revenue |
8,699 |
|
|
9,833 |
|
|
26,054 |
|
|
27,700 |
|
| Cost of revenue: |
|
|
|
|
|
|
|
| Product and other |
1,388 |
|
|
1,475 |
|
|
3,814 |
|
|
4,548 |
|
| Services |
916 |
|
|
1,111 |
|
|
3,446 |
|
|
3,132 |
|
| Total cost of revenue |
2,304 |
|
|
2,586 |
|
|
7,260 |
|
|
7,680 |
|
| Gross margin |
6,395 |
|
|
7,247 |
|
|
18,794 |
|
|
20,020 |
|
| Operating expenses: |
|
|
|
|
|
|
|
| Selling and marketing |
3,882 |
|
|
4,368 |
|
|
11,859 |
|
|
13,186 |
|
| General and administrative |
1,631 |
|
|
1,482 |
|
|
4,713 |
|
|
4,400 |
|
| Product development |
1,796 |
|
|
1,768 |
|
|
5,361 |
|
|
5,581 |
|
| Total operating expenses |
7,309 |
|
|
7,618 |
|
|
21,933 |
|
|
23,167 |
|
| Loss from operations |
(914 |
) |
|
(371 |
) |
|
(3,139 |
) |
|
(3,147 |
) |
| Non-operating income (expenses): |
|
|
|
|
|
|
|
| Interest expense, net |
(266 |
) |
|
(130 |
) |
|
(461 |
) |
|
(396 |
) |
| Other income (expense), net |
88 |
|
|
34 |
|
|
98 |
|
|
(43 |
) |
| Total non-operating expenses |
(178 |
) |
|
(96 |
) |
|
(363 |
) |
|
(439 |
) |
| Loss before income taxes |
(1,092 |
) |
|
(467 |
) |
|
(3,502 |
) |
|
(3,586 |
) |
| Benefit (provision) for income taxes |
72 |
|
|
(22 |
) |
|
1,353 |
|
|
132 |
|
| Net loss |
(1,020 |
) |
|
(489 |
) |
|
(2,149 |
) |
|
(3,454 |
) |
| Dividends on preferred stock |
(67 |
) |
|
(75 |
) |
|
(189 |
) |
|
(75 |
) |
| Net loss attributable to common stockholders |
$ |
(1,087 |
) |
|
$ |
(564 |
) |
|
$ |
(2,338 |
) |
|
$ |
(3,529 |
) |
| Loss per common share |
|
|
|
|
|
|
|
| – basic |
$ |
(0.23 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.80 |
) |
| – diluted |
$ |
(0.23 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.80 |
) |
| Weighted average common shares |
|
|
|
|
|
|
|
| – basic |
4,709,516 |
|
|
4,449,893 |
|
|
4,542,955 |
|
|
4,429,006 |
|
| – diluted |
4,709,516 |
|
|
4,449,893 |
|
|
4,542,955 |
|
|
4,429,006 |
|
| Sonic Foundry, Inc. |
| Condensed Consolidated Statements of Cash
Flows |
| (in thousands) |
| (Unaudited) |
| |
| |
Nine Months Ended June 30, |
| |
2018 |
|
2017 |
| Operating activities |
|
|
|
| Net loss |
$ |
(2,149 |
) |
|
$ |
(3,454 |
) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating
activities: |
|
|
|
| Amortization of other intangibles |
482 |
|
|
420 |
|
| Depreciation and amortization of property and equipment |
822 |
|
|
1,096 |
|
| Gain on sale of fixed assets |
— |
|
|
8 |
|
| Provision for doubtful accounts |
300 |
|
|
150 |
|
| Deferred taxes |
(1,387 |
) |
|
(42 |
) |
| Stock-based compensation expense related to stock options |
392 |
|
|
487 |
|
| Conversion of accrued interest to preferred stock |
31 |
|
|
— |
|
| Beneficial conversion feature recognized on debt converted to
preferred stock |
71 |
|
|
— |
|
| Remeasurement gain on subordinated debt |
— |
|
|
(6 |
) |
| Remeasurement gain on derivative liability |
(16 |
) |
|
(42 |
) |
| Changes in operating assets and liabilities: |
|
|
|
| Accounts receivable |
834 |
|
|
2,365 |
|
| Financing receivables |
1,614 |
|
|
(174 |
) |
| Inventories |
70 |
|
|
771 |
|
| Prepaid expenses and other current assets |
356 |
|
|
(190 |
) |
| Accounts payable and accrued liabilities |
(126 |
) |
|
(8 |
) |
| Other long-term liabilities |
(136 |
) |
|
158 |
|
| Unearned revenue |
(2,347 |
) |
|
(823 |
) |
| Net cash provided by (used in) operating activities |
(1,189 |
) |
|
716 |
|
| Investing activities |
|
|
|
| Purchases of property and equipment |
(657 |
) |
|
(676 |
) |
| Net cash used in investing activities |
(657 |
) |
|
(676 |
) |
| Financing activities |
|
|
|
| Proceeds from notes payable |
3,000 |
|
|
— |
|
| Proceeds from revolving lines of credit |
16,706 |
|
|
17,531 |
|
| Payments on notes payable |
(815 |
) |
|
(1,317 |
) |
| Payments to settle warrant debt |
(200 |
) |
|
— |
|
| Payments on revolving lines of credit |
(16,546 |
) |
|
(16,999 |
) |
| Payment of debt issuance costs |
(97 |
) |
|
(26 |
) |
| Proceeds from issuance of preferred stock, common stock and warrants |
1,008 |
|
|
771 |
|
| Payments on capital lease and financing arrangements |
(228 |
) |
|
(255 |
) |
| Net cash provided by (used in) financing activities |
2,828 |
|
|
(295 |
) |
| Changes in cash and cash equivalents due to changes in foreign currency |
(64 |
) |
|
66 |
|
| Net increase (decrease) in cash and cash equivalents |
918 |
|
|
(189 |
) |
| Cash and cash equivalents at beginning of period |
1,211 |
|
|
1,794 |
|
| Cash and cash equivalents at end of period |
$ |
2,129 |
|
|
$ |
1,605 |
|
| Supplemental cash flow information: |
|
|
|
| Interest paid |
$ |
290 |
|
|
$ |
403 |
|
| Income taxes paid, foreign |
48 |
|
|
27 |
|
| Non-cash financing and investing activities: |
|
|
|
| Property and equipment financed by capital lease or accounts
payable |
414 |
|
|
358 |
|
| Stock issued for board of director’s fees |
— |
|
|
133 |
|
| Debt discount and warrant |
127 |
|
|
— |
|
| Deemed dividend for beneficial conversion feature of preferred
stock |
28 |
|
|
69 |
|
| Preferred stock dividends paid in additional shares |
161 |
|
|
6 |
|
| Subordinated note payable converted to preferred stock |
1,000 |
|
|
— |
|
| Sonic Foundry, Inc. |
| Condensed Consolidated Non-GAAP Adjusted
EBITDA Reconciliation |
| (in thousands) |
| (Unaudited) |
| |
| |
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| |
|
|
|
|
|
|
|
| Net loss |
$ |
(1,020 |
) |
|
$ |
(489 |
) |
|
$ |
(2,149 |
) |
|
$ |
(3,454 |
) |
| Add: |
|
|
|
|
|
|
|
| Depreciation and amortization |
411 |
|
|
481 |
|
|
1161 |
|
|
1445 |
|
| Income tax expense (benefit) |
(72 |
) |
|
22 |
|
|
(1,353 |
) |
|
(132 |
) |
| Interest expense |
266 |
|
|
131 |
|
|
462 |
|
|
398 |
|
| Stock-based compensation expense |
72 |
|
|
101 |
|
|
392 |
|
|
487 |
|
| Adjusted EBITDA |
$ |
(343 |
) |
|
$ |
246 |
|
|
$ |
(1,487 |
) |
|
$ |
(1,256 |
) |
| |
|
|
|
|
|
|
|
