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CST: 15/12/2019 01:08:15   

Sonic Foundry Announces Fiscal 2019 Third Quarter Financial Results

123 Days ago

MADISON, Wis., Aug. 13, 2019 (GLOBE NEWSWIRE) -- Sonic Foundry (OTC Pink Sheets: SOFO) today announced consolidated financial results for its fiscal 2019 third quarter ended June 30, 2019.

Fiscal 2019 Third Quarter Highlights

  • Total revenues were $10.1 million ($10.2 million without distribution impact) compared to $8.7 million in the third quarter of 2018
  • Gross margin was $7.4 million or 73 percent of sales compared to $6.4 million or 74 percent of sales in the third quarter of 2018
  • Adjusted EBITDA of $740,000 compared to $(343,000) in the third quarter of 2018
  • Net loss of $(159,000) ($(93,000) without distribution impact) or $(0.03) per share compared to net loss of $(1) million or $(0.23) per share in the third quarter of 2018
  • Billings totaled $10.5 million in the third quarter of 2019, an increase of 16 percent compared to the same period last year
  • Unearned revenue increased to $11 million as of June 30, 2019

Fiscal 2019 Third Quarter Review
Service billings, including support, hosting, events, and installs, saw an increase of 14 percent from the prior year for a total of $6.5 million. Product billings were up 20 percent to $4 million during the third quarter of fiscal year 2019 compared to the same period last year. Product billings and revenue were negatively impacted by a planned reduction of product inventory maintained by domestic distributors of $94,000 during the quarter and $1.3 million year to date. The company expects to recognize $3.4 million of the current unearned revenue in the fourth quarter of fiscal 2019.

Recurring revenue of $6.3 million was 63 percent of total revenue in the third quarter of 2019, compared to $5.9 million, or 68 percent of total revenue in the third quarter of 2018.

Operating expenses were $7.2 million, down $66,000 or 1 percent from the same period in 2018. The net loss of $(159,000) was an improvement compared to the same period in 2018.

“I am pleased to see us execute according to our plan for the quarter. As we proceed with our strategic and operational improvements, we are focused on living up to the expectations and goals we create,” said Michael Norregaard, CEO, Sonic Foundry. “We are confident we have the platform that best helps our customers scale deployments across campuses and enterprises. As we quickly approach the start of a new fiscal year, Mediasite Video Cloud and our unified communications solution Mediasite Join are two of our key priorities. We are zeroing in on our product innovation process and customer success, adding product functions and services to attract and expand more customers.”

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 and 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. 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 ended June 30, 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 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.

© 2019 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.

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

 
Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
(Unaudited)
       
  June 30,
 2019
  September 30,
 2018
Assets      
Current assets:      
Cash and cash equivalents $ 3,387     $ 1,189  
Accounts receivable, net of allowances of $75 and $524 6,890     7,418  
Financing receivables, current, net of allowances of $526, respectively 109     100  
Inventories 955     1,027  
Investment in sales-type lease, current 163     150  
Capitalized commissions, current 435      
Prepaid expenses and other current assets 829     941  
Total current assets 12,768     10,825  
Property and equipment:      
Leasehold improvements 1,122     1,105  
Computer equipment 6,015     5,718  
Furniture and fixtures 1,242     1,099  
Total property and equipment 8,379     7,922  
Less accumulated depreciation and amortization 6,782     6,009  
Property and equipment, net 1,597     1,913  
Other assets:      
Financing receivables, long-term 97     181  
Investment in sales-type lease, long-term 134     249  
Capitalized commissions, long-term 120      
Other long-term assets 400     415  
Total assets $ 15,116     $ 13,583  
Liabilities and stockholders’ deficit      
Current liabilities:      
Revolving lines of credit $ 463     $ 885  
Accounts payable 1,283     1,610  
Accrued liabilities   1,724     1,609  
Unearned revenue 8,887     11,645  
Current portion of capital lease and financing arrangements 169     248  
Current portion of notes payable and warrant debt, net of discounts 768     593  
Total current liabilities 13,294     16,590  
Long-term portion of unearned revenue 2,152     1,691  
Long-term portion of capital lease and financing arrangements 96     187  
Long-term portion of notes payable and warrant debt, net of discounts 5,483     1,357  
Derivative liability, at fair value 5     14  
Other liabilities 165     202  
Total liabilities 21,195     20,041  
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 and 2,678 shares issued and outstanding, respectively, at amounts paid in     1,651  
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; 6,735,512 and 5,113,400 shares issued and 6,722,796 and 5,100,684 shares outstanding 67     51  
Additional paid-in capital 203,752     200,130  
Accumulated deficit (209,161 )   (207,419 )
Accumulated other comprehensive loss (542 )   (676 )
Receivable for common stock issued (26 )   (26 )
Treasury stock, at cost, 12,716 shares (169 )   (169 )
Total stockholders’ deficit (6,079 )   (6,458 )
Total liabilities and stockholders’ deficit $ 15,116     $ 13,583  
               


 
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,
  2019   2018   2019   2018
Revenue:              
Product and other $ 4,221     $ 3,214     7,768     $ 8,927  
Services 5,847     5,485     17,799     17,127  
Total revenue 10,068     8,699     25,567     26,054  
Cost of revenue:              
Product and other 1,558     1,388     2,854     3,814  
Services 1,123     916     3,673     3,446  
Total cost of revenue 2,681     2,304     6,527     7,260  
Gross margin 7,387     6,395     19,040     18,794  
Operating expenses:              
Selling and marketing 3,785     3,882     11,564     11,859  
General and administrative 1,609     1,631     4,492     4,713  
Product development 1,849     1,796     5,617     5,361  
Total operating expenses 7,243     7,309     21,673     21,933  
Income (loss) from operations 144     (914 )   (2,633 )   (3,139 )
Non-operating income (expenses):              
Interest expense, net (276 )   (266 )   (657 )   (461 )
Other income (expense), net (63 )   88     (66 )   98  
Total non-operating expenses (339 )   (178 )   (723 )   (363 )
Loss before income taxes (195 )   (1,092 )   (3,356 )   (3,502 )
Benefit (provision) for income taxes 36     72     (77 )   1,353  
Net loss (159 )   (1,020 )   (3,433 )   (2,149 )
Dividends on preferred stock (24 )   (67 )   (122 )   (189 )
Net loss attributable to common stockholders $ (183 )   $ (1,087 )   $ (3,555 )   $ (2,338 )
Loss per common share              
– basic $ (0.03 )   $ (0.23 )   $ (0.64 )   $ (0.51 )
– diluted $ (0.03 )   $ (0.23 )   $ (0.64 )   $ (0.51 )
Weighted average common shares              
– basic 6,122,098     4,709,516     5,528,999     4,542,955  
– diluted 6,122,098     4,709,516     5,528,999     4,542,955  
                       


 
Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
   
  Nine Months Ended June 30,
  2019   2018
Operating activities      
Net loss $ (3,433 )   $ (2,149 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Amortization 170     482  
Depreciation and amortization of property and equipment 748     822  
Loss on sale of fixed assets 8      
Provision for doubtful accounts - including financing receivables 31     300  
Deferred taxes     (1,387 )
Stock-based compensation expense related to stock options and warrants 203     392  
Stock issued for board of director's fees 246      
Conversion of accrued interest to preferred stock     31  
Beneficial conversion feature recognized on debt converted to preferred stock     71  
Remeasurement gain on derivative liability (12 )   (16 )
Changes in operating assets and liabilities:      
Accounts receivable 660     834  
Financing receivables 87     1,614  
Inventories 75     70  
Capitalized commissions 138      
Prepaid expenses and other current assets 280     356  
Accounts payable and accrued liabilities (294 )   (126 )
Other long-term liabilities (46 )   (136 )
Unearned revenue (1,339 )   (2,347 )
Net cash used in operating activities (2,478 )   (1,189 )
Investing activities      
Purchases of property and equipment (373 )   (657 )
Net cash used in investing activities (373 )   (657 )
Financing activities      
Proceeds from notes payable 5,500     3,000  
Proceeds from revolving lines of credit 9,199     16,706  
Payments on notes payable (583 )   (815 )
Payments to settle warrant debt     (200 )
Payments on revolving lines of credit (9,636 )   (16,546 )
Payment of debt issuance costs (110 )   (97 )
Proceeds from issuance of preferred stock, common stock and warrants 864     1,008  
Payments on capital lease and financing arrangements (193 )   (228 )
Net cash provided by financing activities 5,041     2,828  
Changes in cash and cash equivalents due to changes in foreign currency 8     (64 )
Net increase in cash and cash equivalents 2,198     918  
Cash and cash equivalents at beginning of year 1,189     1,211  
Cash and cash equivalents at end of year $ 3,387     $ 2,129  
Supplemental cash flow information:      
Interest paid $ 425     $ 290  
Income taxes paid, foreign 237     48  
Non-cash financing and investing activities:      
Property and equipment financed by capital lease or accounts payable 45     414  
Debt discount and warrant 679     127  
Deemed dividend for beneficial conversion feature of preferred stock     28  
Preferred stock dividends paid in additional shares 122     161  
Subordinated note payable converted to preferred stock     1,000  
Conversion of preferred shares to common shares 1,772      
           


 
Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
(Unaudited)
       
  Three Months Ended
June 30,
  Nine Months Ended
June 30,
  2019   2018   2019   2018
               
Net loss $ (159 )   $ (1,020 )   $ (3,433 )   $ (2,149 )
Add:              
Depreciation and amortization 240     411     748     1,161  
Income tax benefit (provision) (36 )   (72 )   77     (1,353 )
Interest expense 276     266     657     462  
Stock-based compensation expense (17 )   72     203     392  
Severance expense 436         562      
Adjusted EBITDA $ 740     $ (343 )   $ (1,186 )   $ (1,487 )
               

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