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Press Release

Sonic Foundry Announces Fourth Quarter and Fiscal 2014 Financial Results

MADISON, Wis. — December 11, 2014 — Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted leader for video creation and management solutions, today announced financial results for its fiscal 2014 fourth quarter ended September 30, 2014, including results for the recently acquired Mediasite KK and MediaMission BV.

Revenues showed improvement over fourth quarter 2013, increasing 25 percent to $8.5 million in 2014, up from $6.8 million recorded last year, driven by the impact of the acquisitions. The company billed two transactions totaling approximately $620 thousand that were not included in revenue for the quarter, resulting in a delay in the recording of revenue and earnings until fiscal 2015. Gross margin rates were slightly lower due to a higher number of discounted refresh recorders sold during the quarter.

Selected financial highlights:

Consolidated
Sonic Foundry Only
Quarter Ended September 30,
Quarter Ended September 30,
Percent
Percent
2014
2013
Change
2014
2013
Change
Billings $9.2M $7.3M 26% $7.7M $7.3M 6%
Revenue:
   Total 8.5M 6.8M 25 6.8M 6.8M 0
   Product and other 4.0M 3.7M 9 3.4M 3.6M (9)
   Service 4.5M 3.1M 45 3.4M 3.1M 10
   Support and maintenance 2.3M 2.1M 14 2.2M 2.1M 10
   Event services 2.2M 1.0M 105 1.2M 1.0M 21
Gross margin 5.9M or 69% 4.9M or 72% 4.7M or 70% 4.9M or 72%
Net loss (1.3M) (666K) (1.3M) (666K)
Net loss / share (.30) (.17) (.31) (.17)
Cash 4.3M 1.4M
Unearned revenue 10.0M 7.1M 9.3M 7.1M
Increase in unearned revenue 731K 547K 973K 547K
Adjusted EBITDA (435K) (80K) (507K) (80K)
Adjusted EBITDA / share (0.10) (0.02) (0.12) (0.02)

 

Consolidated
Sonic Foundry Only
Year Ended September 30,
Year Ended September 30,
Percent
Percent
2014
2013
Change
2014
2013
Change
Billings $38.2M $29.2M 30% $32.6M $29.2M 12%
Revenue:
   Total 35.8M 27.8M 29 30.5M 27.8M 10
   Product and other 17.1M 13.9M 24 15.2M 13.9M 10
   Service 18.7M 13.9M 34 15.3M 13.9M 10
   Support and maintenance 9.2M 7.9M 15 8.4M 7.9M 5
   Event services 9.5M 6.0M 59 6.9M 6.0M 15
Gross margin 25.6M or 71% 20.1M or 72% 21.9M or 72% 20.1M or 72%
Net loss (2.8M) (792K) (2.7M) (792K)
Net loss / share (.67) (.20) (.68) (.20)
Unearned revenue 2.9M 1.5M 2.2M 1.5M
Adjusted EBITDA 1.2M 1.4M 1.1M 1.4M
Adjusted EBITDA / share 0.28 0.36 0.27 0.36

To supplement the reader’s understanding of our operating performance and our ability to satisfy lender requirements, we disclose Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), a non-GAAP measure of operating performance that is defined by the SEC. Due to the exclusion of non-cash stock-based compensation expense we refer to this measure as Adjusted 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 debt service coverage ratio 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 and years ended September 30, 2014 and 2013 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.

As of September 30, 2014, $10 million of revenue from services was deferred (an increase from $7.1 million as of September 30, 2013), of which the company expects to realize $3.8 million in the quarter ending December 31, 2014. Services revenue, which includes Mediasite customer support contracts, training, installation, rental, event and content hosting services, is recognized over the life of the contract.

International product and service billings accounted for 39 percent of Sonic Foundry’s consolidated billings in the fourth quarter of fiscal 2014, compared to 26 percent in the fourth quarter of fiscal 2013. Total international product and service billings accounted for 37 percent of Sonic Foundry’s consolidated billings for fiscal 2014, compared to 29 percent for fiscal 2013. International billings have increased over prior periods primarily as a result of the acquisition of Mediasite KK and MediaMission.

Sonic Foundry-Only Highlights:

Recurring My Mediasite billings exceeded $1.3 million during fiscal 2014, an increase of over $600 thousand, or 85 percent, year over year. Revenue will be recorded over the period covered by the license and therefore had a smaller impact on revenue during the current year.

For the fourth quarter of fiscal 2014, 79 percent of billings were to existing customers, compared to 78 percent during the same period last year, with 69 percent to education customers and 19 percent to corporate customers.

Mediasite KK:

Mediasite KK experienced a delay in expected system deployments and event-capture services primarily as a result of a shortage of construction labor required to complete university expansions. The delay changed Mediasite KK’s expected fourth quarter income from $100 thousand to a net loss of approximately $100 thousand in the fourth quarter 2014. Mediasite KK expects to recoup the shortfall in revenue and income during fiscal 2015.

“Despite the complexities we experienced this year, including two planned international acquisitions, an unforeseen legal settlement, a shortfall of construction labor delaying forecasted projects in Japan and a significant change in the currency conversion rate, we’re confident we’ve taken the right steps to position the company for improved operational, sales and financial performance over time. Interest in our products and services has intensified in higher education as schools such as University of Leeds, New York University and Teikyo University in Japan strategically scale their installations of Mediasite to become the largest fully-automated lecture capture deployments in the world today. We also continue to see a surge in the events industry, as increasingly large and complex conferences place a premium on our turnkey webcasting solution,” said Gary Weis, chief executive officer of Sonic Foundry.

Sonic Foundry is setting fiscal 2015 guidance for billings at $45 million. With this growth, along with plans to manage expenses, the company expects to show significant improvement in earnings. The company also expects to improve upon fiscal 2014 adjusted EBITDA of $1.2 million to between $4.5 and $5.5 million and projecting net income between $1 million and $2 million in fiscal 2015.

Sonic Foundry will host a corporate webcast today for analysts and investors to discuss its fiscal 2014 fourth 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 atwww.sonicfoundry.com/earnings. An archive of the webcast will be available for 90 days.

About Sonic Foundry®, Inc.

Sonic Foundry (NASDAQ: SOFO) is the trusted 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 over 3,000 customers in over 60 countries. The company empowers organizations to reach everyone through the power of video; accelerating knowledge-sharing, preserving valuable content, building stronger teams and getting results.

© 2014 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners

Certain statements contained in this news release regarding matters that are not historical facts may be forward-looking statements. Because such forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed in or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, uncertainties pertaining to continued market acceptance for Sonic Foundry’s products, its ability to succeed in capturing significant revenues from media services and/or systems, the effect of new competitors in its market, integration of acquired business and other risk factors identified from time to time in its filings with the Securities and Exchange Commission.

For investor inquiries: investor@sonicfoundry.com

For media relations:mailto:tammy@sonicfoundry.com

 

Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
  September 30, 2014   September 30, 2013
Assets
 
Current assets:
     Cash and cash equivalents $       4,344 $       3,482
     Accounts receivable, net of allowances of $150 and $90 8,449 6,885
     Inventories 1,721 1,447
     Prepaid expenses and other current assets 1,544 805
          Total current assets 16,058 12,619
Property and equipment:
     Leasehold improvements 911 852
     Computer equipment 5,440 5,296
     Furniture and fixtures 720 581
          Total property and equipment 7,071 6,729
          Less accumulated depreciation and amortization 3,675 3,449
               Net property and equipment 3,396 3,280
Other assets:
     Goodwill 11,185 7,576
     Minority interest in Mediasite KK 385
     Customer relationships, net of amortization of $191 and $0 2,471
     Software development costs, net of amortization of $252 and $75 281 458
     Product rights, net of amortization of $41 and $0 631
     Other intangibles, net of amortization of $162 and $135 37 15
     Other long-term assets 564
Total assets $34,623 $24,333
Liabilities and stockholders’ equity
Current liabilities:
     Revolving line of credit $           – $          –
     Accounts payable 1,183        1,513
     Accrued liabilities 2,512 1,204
     Unearned revenue 9,079 6,470
     Current portion of capital lease obligation 196 223
     Current portion of notes payable to bank 974 634
     Current portion of subordinated notes payable 2,096
          Total current liabilities 16,040 10,044
     Long-term portion of unearned revenue 929 648
     Long-term portion of subordinated note payable 314
     Long-term portion of capital lease obligation 173 149
     Long-term portion of notes payable to bank 1,139 133
     Leasehold improvement liability 401 445
     Deferred tax liability 4,312 2,210
          Total liabilities 23,308 13,629
Stockholders’ equity:
     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; 4,276,470 and 3,999,634 shares issued and 4,263,754 and 3,986,918 shares outstanding 43 40
     Additional paid-in capital 194,260 190,653
     Accumulated deficit (182,372) (179,556)
     Accumulated other comprehensive loss (421) (238)
     Receivable for common stock issued (26) (26)
     Treasury stock, at cost, 12,716 shares (169) (169)
          Total stockholders’ equity 11,315 10,704
Total liabilities and stockholders’ equity $34,623 $24,333

 

Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)
Years Ended September 30,
  2014 2013
Revenue:
Product $       16,773 $       13,588
Services 18,649 13,933
Other 408 235
Total revenue 35,830 27,756
Cost of revenue:
Product 7,350 6,215
Services 2,925 1,481
Total cost of revenue 10,275 7,696
Gross margin 25,555 20,060
 
Operating expenses:
Selling and marketing 16,551 13,079
General and administrative 5,623 3,343
Product development 5,545 4,276
Patent charge 428
Acquisition costs 490
Total operating expenses 28,637 20,698
Loss from operations
(3,082) (638)
Gain on investment in MSKK 1,390
Equity in earnings of investment in MSKK 38 209
Other expense, net (58) (123)
Income (loss) before income taxes (1,712) (552)
Provision for income taxes (1,104) (240)
Net loss $        (2,816) $          (792)
Loss per common share:
Basic net loss per common share $         (0.67) $         (0.20)
Diluted net loss per common share $         (0.67) $         (0.20)
Weighted average common shares
     – Basic 4,174,191 3,932,692
     – Diluted 4,174,191 3,932,692

 

 Sonic Foundry, Inc.
Adjusted EBITDA Reconciliation
(in thousands)
Consolidated Consolidated
Fiscal Quarter Ended Fiscal Year Ended
September 30, September 30,
2014 2013 2014 2013
Net Loss $     (1,288) $       (666) $     (2,816) $       (792)
Add:
     Depreciation and amortization 518 335 1,730 1,206
     Income tax expense 32 60 1,104 240
     Interest expense 61 20 231 92
     Stock-based compensation expense 242 171 921 656
Adjusted EBITDA $        (435) $         (80) $        1,170 $       1,402
 
Sonic Foundry Only Sonic Foundry Only
Fiscal Quarter Ended Fiscal Year Ended
September 30, September 30,
2014 2013 2014 2013
Net Loss $     (1,313) $       (666) $     (2,718) $       (792)
Add:
     Depreciation and amortization 469 335 1,629 1,206
     Income tax expense 34 60 1,064 240
     Interest expense 61 20 231 92
     Stock-based compensation expense 242 171 921 656
Adjusted EBITDA $        (507) $         (80) $        1,127 $       1,402

 

Sonic Foundry, Inc. Condensed Consolidated Statements of Cash Flows (in thousands)
Twelve Months Ended September 30,
2014 2013
Operating activities
Net loss $(2,816) $(792)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
   Gain or equity in earnings on investment in Mediasite KK (1,429) (209)
   Amortization of other intangibles 244 20
   Amortization of software development costs 177 75
   Amortization of product rights 41
   Depreciation and amortization of property and equipment 1,268 1,111
   Deferred taxes 1,064 5
   Stock-based compensation expense related to stock options 921 240
   Provision for doubtful accounts 60
   Remeasurement gain on subordinated debt (157)
   Changes in operating assets and liabilities, net of acquisition:
      Accounts receivable (597) (1,312)
      Inventories 259 (394)
      Prepaid expenses and other current assets (547) (48)
      Accounts payable and accrued liabilities (810) 263
      Other long-term liabilities (94) (87)
      Unearned revenue 2,329 1,485
Net cash (used in) provided by operating activities (87) 1,013
Investing activities
Software development costs (533)
Purchases of property and equipment (862) (1,162)
Cash received in Mediasite KK acquisition, net of cash paid 1,281
Cash paid for MediaMission acquisitions net of cash acquired (119)
Net cash provided by (used in) investing activities 300 (1,695)
Financing activities
Proceeds from notes payable 1,954
Payments on notes payable (1,199) (666)
Payment on debt issuance costs (49) (20)
Proceeds from exercise of common stock options 286 448
Proceeds from issuance of common stock 98 75
Dividends from investment in Mediasite KK 22
Payments on capital lease obligations (229) (173)
Net cash provided by (used in) financing activities 861 (314)
Changes in cash and cash equivalents due to changes in foreign currency exchange rates (212)
Net increase (decrease) in cash and cash equivalents 862 (996)
Cash and cash equivalents at beginning of period 3,482 4,478
Cash and cash equivalents at end of period $         4,344 $         3,482

About Sonic Foundry®, Inc.

Sonic Foundry (OTC: 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.mediasite.com and @mediasite.

© 2019 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.

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