MADISON, Wis. – August 11, 2016 – Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2016 third quarter ended June 30, 2016.
Fiscal 2016 Third Quarter Highlights
- Billings of $11.1 million, flat with $11.1 million in the third quarter of 2015
- Total revenues of $9.8 million, down 7% compared to the third quarter of 2015, were driven by a 16% increase in service revenues to $5.8 million in the quarter, offset by lower product revenues in the quarter
- Gross margin increased to $7.2 million, or 74% of sales compared to $7.1 million, or 67% of sales for the third quarter of 2015
- Adjusted EBITDA of $240,000 represented a positive swing of $369,000 compared to a loss of $(129,000) in the third quarter of 2015
- Net loss declined to $552,000 or $(0.13) per share compared to a net loss of $921,000 or $(0.21) per share in the third quarter of 2015
- Unearned revenue from services and products increased $3.4 million, or 32% to $13.9 million in the third quarter 2016, compared to $10.5 million for the same period last year
- Generated $767,000 in operating cash flow for the quarter
Fiscal 2016 Third Quarter Review
While total revenue of $9.8 million represented a 7% year-over-year decline, services revenue was 16% higher, primarily due to an increase in event services and hosting contracts. The company had $13.9 million in unearned revenue at June 30, 2016, an increase of $3.4 million or 32% from June 30, 2015. Billings associated with the Company’s cloud hosting business at almost $2 million this quarter were 53% higher than the third quarter last year. Another significant impact to unearned revenue was a single large international transaction of $2.1 million billed in September 2015 that did not reach the criteria for revenue recognition in the current quarter. The remaining increase in unearned revenue is a result of increased billings for services, which are recognized as revenues over the life of the respective contract terms. The Company expects to recognize $3.9 million as revenue in the fourth quarter of fiscal 2016, in addition to recorder revenue from a large international transaction that shipped in September 2015.
Consolidated gross margin of 74% was seven percentage points higher than the same period last year, and was the result of higher efficiencies in our events business and by recognizing a high volume, lower margin international transaction last year. The company reported a net loss of $552,000 for the quarter and Adjusted EBITDA income of $240,000, which reflects the company’s continued efforts to maintain a lean operating structure.
“Several key trends in the third quarter aligned to support our position in the market, and point to a positive inflection point for our company. We expanded our addressable market by launching breakthrough solutions that help our customers solve global communication challenges, such as distributed video deployments in bandwidth-challenged areas. We’re also seeing significant momentum in the market with Mediasite Video Cloud as our customers commit to scaling their video education and training initiatives,” said Gary Weis, CEO of Sonic Foundry. “From an operations standpoint we made solid progress in streamlining our costs. We’re optimistic that these trends, coupled with the steady improvement in adjusted EBITDA, gross margins and unearned revenue, put us in the right position to achieve sustainable long term improvement in shareholder value.”
International product and service billings accounted for 34 percent of Sonic Foundry’s consolidated billings in the third quarter 2016, compared to 37 percent in the third quarter 2015. While performance in Japan was relatively flat over last year after realizing 37% growth year over year in the first half of the year, we expect stronger sales from Japan in the fourth quarter, driven by deals that we anticipate closing both in the education and corporate training markets.
The company’s full year outlook included large follow on transactions in the Middle East where construction delays are now causing some risk to closing in the fiscal year. Alternatively, there are several other large opportunities not included in our plan that now show promise for near term completion. Timing of these transactions are very difficult to predict but together provide a path toward achieving our guidance. The Company therefore is reiterating the fiscal 2016 guidance of billings between $42 and $45 million, adjusted EBITDA of between $3.5 and $4.5 million and net income between breakeven and $1.0 million.
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 includes 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 loss to adjusted EBITDA for the quarters ended June 30, 2016 and 2015 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.
Sonic Foundry will host a corporate webcast today, August 11th, for analysts and investors to discuss its fiscal 2016 third quarter results at 3:30 p.m. CT / 4:30 p.m. ET. It will use its patented rich media communications system, Mediasite, to webcast the presentation for both live and on-demand viewing. To access the presentation, register at www.sonicfoundry.com/earnings. Management will be taking questions live via the comment feature of the Mediasite player. An archive of the webcast will be available for 90 days.
About Sonic Foundry®, Inc.
Sonic Foundry (NASDAQ: SOFO) is the trusted global leader for video capture, management and webcasting solutions in education, business and government. The patented Mediasite Enterprise Video Platform transforms communications, training, education and events for more than 3,800 customers in over 65 countries. Sonic Foundry is a leader in Aragon Research’s Globe for Video Content Management, Frost & Sullivan’s lecture capture leader for seven consecutive years, a leader in Forrester’s Enterprise Video Platforms and Webcasting Wave and a challenger in Gartner’s Magic Quadrant for enterprise video content management.
© 2016 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.
Director of Communications
Peter Seltzberg, Managing Director
Darrow Associates, Inc.
1951 Lowell Lane
Merrick, NY 11566
|Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
|June 30,||September 30,|
|Cash and cash equivalents||$ 2,329||$ 1,976|
|Accounts receivable, net of allowances of $100 and $150||11,899||12,659|
|Prepaid expenses and other current assets||985||927|
|Total current assets||17,390||17,947|
|Property and equipment:|
|Furniture and fixtures||1,072||837|
|Total property and equipment||8,328||7,593|
|Less accumulated depreciation and amortization||6,036||4,785|
|Property and equipment, net||2,292||2,808|
|Customer relationships, net of amortization of $657 and $457||1,917||1,872|
|Software development costs, net of amortization of $533 and $429||─||104|
|Product rights, net of amortization of $257 and $164||415||508|
|Other intangibles, net of amortization of $244 and $190||94||112|
|Other long-term assets||598||599|
|Total assets||$ 33,961||$ 34,803|
|Liabilities and stockholders’ equity|
|Revolving line of credit||$ 1,651||$ 1,818|
|Current portion of capital lease and financing arrangements||289||211|
|Current portion of notes payable, net of discounts||1,572||1,299|
|Current portion of subordinated note payable||92||186|
|Total current liabilities||18,384||18,565|
|Long-term portion of unearned revenue||2,200||1,325|
|Long-term portion of capital lease and financing arrangements||276||196|
|Long-term portion of notes payable and warrant debt, net of discounts||1,258||2,080|
|Long-term portion of subordinated note payable||─||92|
|Derivative liability, at fair value||72||109|
|Deferred tax liability||4,520||4,322|
|Commitments and contingencies|
|Preferred stock, $.01 par value, authorized 500,000 shares; none issued||
|5% preferred stock, Series B, voting, cumulative, convertible, $.01 par value (liquidation preference at par), authorized 1,000,000 shares, none issued||
|Common stock, $.01 par value, authorized 10,000,000 shares; 4,416,467 and 4,376,456 shares issued and 4,403,751 and 4,363,740 shares outstanding, respectively||
|Additional paid-in capital||196,839||195,973|
|Accumulated other comprehensive loss||(322)||(1,122)|
|Receivable for common stock issued||(26)||(26)|
|Treasury stock, at cost, 12,716 shares||(169)||(169)|
|Total stockholders’ equity||6,999||7,803|
|Total liabilities and stockholders’ equity||$ 33,961||$ 34,803|
| Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)
|Three Months Ended June 30,||Nine Months Ended June 30,|
|Product||$ 3,937||$ 5,441||$ 11,840||$ 12,030|
|Cost of revenue:|
|Total cost of revenue||2,582||3,468||7,634||8,029|
|Selling and marketing||4,575||4,798||13,449||13,503|
|General and administrative||1,371||1,530||4,218||4,333|
|Total operating expenses||7,687||7,973||22,666||22,558|
|Loss from operations||(452)||(885)||(1,782)||(3,184)|
|Non-operating income (expenses):|
|Interest expense, net||(149)||(100)||(452)||(229)|
|Other income (expense), net||31||(21)||34||143|
|Total non-operating income (expenses)||(118)||(121)||(418)||(86)|
|Loss before incomes taxes||(570)||(1,006)||(2,200)||(3,270)|
|Benefit (provision) for income taxes||18||85||(270)||(33)|
|Loss per common share:|
|-basic||$ (0.13)||$ (0.21)||$ (0.56)||$ (0.76)|
|-diluted||$ (0.13)||$ (0.21)||$ (0.56)||$ (0.76)|
|Weighted average common shares|
Sonic Foundry, Inc.
|Three Months Ended June 30,||Nine Months Ended June 30,|
|Net loss||$ (552)||$ (921)||$ (2,470)||$ (3,303)|
|Depreciation and amortization||533||570||1,619||1,684|
|Income tax expense||(18)||(85)||270||33|
|Stock-based compensation expense||150||207||671||746|
|Adjusted EBITDA||$ 240||$ (129)||$ 520||$ (611)|
|Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
|Nine Months Ended June 30,|
|Net loss||$ (2,470)||$ (3,303)|
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:|
|Amortization of other intangibles||255||259|
|Amortization of software development costs||104||133|
|Amortization of product rights||93||92|
|Amortization of debt discount||63||9|
|Depreciation and amortization of property and equipment||1,181||1,199|
|Provision for doubtful accounts||(50)||27|
|Stock-based compensation expense related to stock options||671||745|
|Remeasurement gain on subordinated debt||(4)||(205)|
|Remeasurement gain on derivative liability||(53)||(62)|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other current assets||43||54|
|Accounts payable and accrued liabilities||(717)||(333)|
|Other long-term liabilities||(66)||(65)|
|Net cash provided by (used in) operating activities||1,808||(2,363)|
|Purchases of property and equipment||(208)||(611)|
|Net cash used in investing activities||(208)||(611)|
|Proceeds from notes payable||500||2,336|
|Proceeds from line of credit||11,845||6,927|
|Payments on notes payable||(1,279)||(2,661)|
|Payments on line of credit||(12,076)||(5,677)|
|Payment of debt issuance costs||(36)||(122)|
|Proceeds from issuance of common stock and warrants||31||663|
|Proceeds from exercise of common stock options and warrants||–||41|
|Payments on capital lease and financing arrangements||(202)||(187)|
|Net cash provided by (used in) financing activities||(1,217)||1,320|
|Changes in cash and cash equivalents due to changes in foreign currency||(30)||(129)|
|Net increase (decrease) in cash and cash equivalents||353||(1,783)|
|Cash and cash equivalents at beginning of period||1,976||4,344|
|Cash and cash equivalents at end of period||$ 2,329||$ 2,561|
About Sonic Foundry®, Inc.
Sonic Foundry (OTC: 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.mediasite.com and @mediasite.
© 2020 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.