MADISON, Wis. – March 15, 2019 – Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2018 fourth quarter and fiscal year ended September 30, 2018.
Fiscal 2018 Fourth Quarter Highlights
- Billings totaled $9.9 million in the fourth quarter of 2018, an increase of 5 percent, compared to the same period last year
- Total revenues of $8.5 million compared to $8.3 million in the fourth quarter of 2017
- Gross margin was $6.1 million, or 72 percent of sales, compared to $6.1 million, or 74 percent of sales, in the fourth quarter of 2017
- Non-cash expense of $11.8 million related to impairment of goodwill and intangible assets recorded in fourth quarter of 2018 compared to $600,000 related to impairment of goodwill recorded in fourth quarter of 2017
- Deferred tax liability write-off of the portion related to goodwill and intangible assets recorded in fourth quarter of 2018 which offsets impact of impairment by $2.4 million
- Net loss of $(10) million, or $(2.01) per share, compared to $(1.6) million, or $(0.37) per share, in the fourth quarter of 2017; net loss, net of the one-time impairment charges and the benefit from the write-off of the related deferred tax liability, was $(1.2) million in the fourth quarter of 2018 compared to $(985,000) in the fourth quarter of 2017
- Net loss in the fourth quarter of 2018 improved by $640,000 from preliminary results released on December 20, 2018 as a result of a final tax adjustment
- Adjusted EBITDA was $(547,000) compared to $(236,000) in the fourth quarter of 2017
- Unearned revenue was $13.3 million as of September 30, 2018, down $966,000 from September 30, 2017.
Fiscal 2018 Fourth Quarter Review
Service billings, including support, hosting, events, and installs increased 10 percent to $6.5 million, compared to $5.9 million the prior year. Increases in support and hosting billings primarily drove the change in service billings. The company expects to recognize $4.6 million of the current unearned revenue in the first quarter of fiscal 2019. Recurring revenue of $5.6 million was 66 percent of total revenue in the fourth quarter of 2018, up from $5.4 million, or 65 percent of total revenue, in the fourth quarter of 2017.
Product billings were $3.4 million during the fourth quarter of fiscal year 2018, compared to $3.5 million in the same quarter last year. Product billings are $12.5 million year-to-date, compared to $14.2 million last year, reflecting the shift toward larger unit shipments of our lower cost recorders. Year-to-date, shipments of the Mediasite RL 220, RL 120 and RL Mini recorders increased 50 percent over the prior year (811 in fiscal 2018 vs. 541 in fiscal 2017).
Operating expenses were $7.2 million during the fourth quarter of 2018, up $262,000 or 4 percent, from the same period in 2017. Full impairment of the remaining balance of goodwill and intangible assets of $11.8 million was recorded in the fourth quarter of 2018 compared to $600,000 of goodwill impairment recorded in the same period last year. The net loss of $10 million increased from a net loss of $1.6 million in the same period in 2017, largely due to the impairment charge.
“Our strategic focus in fiscal 2018 to bolster our affordable line of products led to larger shipments of our newest recorder models. We’ve also updated our product mix to offer the most accessible and engaging video solutions on the market, and saw substantial growth of our cloud customers,” said Gary Weis, CEO, Sonic Foundry. “As I’ve said previously, we expect to realize the benefits of actions we’ve already taken to improve business efficiency. The executive team and I are focused on the fundamentals of the business, with the confidence that the strategic operational changes that we’ve put in place will result in efficiencies expected to drive significant improvement to adjusted EBITDA in fiscal 2019 and beyond.”
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 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 income (loss) to adjusted EBITDA for the fourth quarters and fiscal year ended September 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.
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
| Sonic Foundry, Inc. Condensed Consolidated Balance Sheets (in thousands, except for share and per share data) |
| September 30, | September 30, | |
| 2018 | 2017 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 1,189 | $ 1,211 |
| Accounts receivable, net of allowances of $524 and $375 | 7,418 | 7,903 |
| Financing receivables, current, net of allowances of $526 and $200 | 100 | 925 |
| Inventories | 1,027 | 986 |
| Investment in sales-type lease, current | 150 | 148 |
| Prepaid expenses and other current assets | 941 | 1,085 |
| Total current assets | 10,825 | 12,258 |
| Property and equipment: | ||
| Leasehold improvements | 1,105 | 1,041 |
| Computer equipment | 5,718 | 6,101 |
| Furniture and fixtures | 1,099 | 789 |
| Total property and equipment | 7,922 | 7,931 |
| Less accumulated depreciation and amortization | 6,009 | 6,181 |
| Property and equipment, net | 1,913 | 1,750 |
| Other assets: | ||
| Goodwill | ─ | 10,455 |
| Customer relationships, net of amortization of $1,256 and $990 | ─ | 1,505 |
| Product rights, net of amortization of $534 and $411 | ─ | 261 |
| Financing receivables, long-term | 181 | 1,310 |
| Investment in sales-type lease, long-term | 249 | 407 |
| Other long-term assets | 415 | 410 |
| Total assets | $ 13,583 | $ 28,356 |
| Liabilities and stockholders’ equity (deficit) | ||
| Current liabilities: | ||
| Revolving lines of credit | $ 885 | $ 2,065 |
| Accounts payable | 1,610 | 1,314 |
| Accrued liabilities | 1,609 | 1,387 |
| Unearned revenue | 11,645 | 11,332 |
| Current portion of capital lease and financing arrangements | 248 | 256 |
| Current portion of notes payable and warrant debt, net of discounts | 593 | 737 |
| Total current liabilities | 16,590 | 17,091 |
| Long-term portion of unearned revenue | 1,691 | 2,970 |
| Long-term portion of capital lease and financing arrangements | 187 | 244 |
| Long-term portion of notes payable and warrant debt, net of discounts | 1,357 | 123 |
| Derivative liability, at fair value | 14 | 12 |
| Other liabilities | 202 | 372 |
| Deferred tax liability | ─ | 4,426 |
| Total liabilities | 20,041 | 25,238 |
| 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, 2,678 and 1,510 shares issued and outstanding, respectively, at amounts paid in |
1,651 |
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; 5,113,400 and 4,470,791 shares issued and 5,100,684 and 4,458,075 shares outstanding |
51 |
45 |
| Additional paid-in capital | 200,130 | 197,836 |
| Accumulated deficit | (207,419) | (195,253) |
| Accumulated other comprehensive loss | (676) | (595) |
| Receivable for common stock issued | (26) | (26) |
| Treasury stock, at cost, 12,716 shares | (169) | (169) |
| Total stockholders’ equity (deficit) | (6,458) | 3,118 |
| Total liabilities and stockholders’ equity (deficit) | $ 13,583 | $ 28,356 |
| Sonic Foundry, Inc. Condensed Consolidated Statements of Operations (in thousands, except for share and per share data) |
| Quarters Ended
September 30, |
Years Ended
September 30, |
|||
| 2018 | 2017 | 2018 | 2017 | |
| Revenue: | ||||
| Product and other | $ 3,384 | $ 3,340 | $ 12,311 | $ 14,883 |
| Services | 5,106 | 4,960 | 22,233 | 21,117 |
| Total revenue | 8,490 | 8,300 | 34,544 | 36,000 |
| Cost of revenue: | ||||
| Product and other | 1,416 | 1,368 | 5,231 | 6,097 |
| Services | 979 | 819 | 4,425 | 3,770 |
| Total cost of revenue | 2,395 | 2,187 | 9,656 | 9,867 |
| Gross margin | 6,095 | 6,113 | 24,888 | 26,133 |
| Operating expenses: | ||||
| Selling and marketing | 3,764 | 3,726 | 15,622 | 16,912 |
| General and administrative | 1,641 | 1,541 | 6,354 | 5,941 |
| Product development | 1,781 | 1,657 | 7,142 | 7,238 |
| Impairment of goodwill and intangible assets | 11,809 | 600 | 11,809 | 600 |
| Total operating expenses | 18,995 | 7,524 | 40,927 | 30,691 |
| Loss from operations | (12,900) | (1,411) | (16,039) | (4,558) |
| Non-operating income (expenses): | ||||
| Interest expense, net | (140) | (99) | (601) | (495) |
| Other income (expense), net | 44 | (22) | 142 | (65) |
| Total non-operating expenses | (96) | (121) | (459) | (560) |
| Loss before incomes taxes | (12,996) | (1,532) | (16,498) | (5,118) |
| Benefit (provision) for income taxes | 2,978 | (53) | 4,332 | 79 |
| Net loss | (10,018) | (1,585) | (12,166) | (5,039) |
| Dividends on preferred stock | (70) | (94) | (257) | (169) |
| Net loss attributable to common stockholders | (10,088) | (1,679) | (12,423) | (5,208) |
| Loss per common share: | ||||
| -Basic | $ (2.01) | $ (0.37) | $ (2.67) | $ (1.17) |
| -Diluted | $ (2.01) | $ (0.37) | $ (2.67) | $ (1.17) |
| Weighted average common shares | ||||
| -Basic | 4,989,544 | 4,458,075 | 4,655,520 | 4,436,333 |
| -Diluted | 4,989,544 | 4,458,075 | 4,655,520 | 4,436,333 |
| Sonic Foundry, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) |
|||
| Years Ended September 30, | |||
| 2018 | 2017 | ||
| Operating activities | |||
| Net loss | $ (12,166) | $ (5,039) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
| Amortization of other intangibles | 621 | 555 | |
| Depreciation and amortization of property and equipment | 1,118 | 1,422 | |
| Impairment of goodwill and intangible assets | 11,809 | 600 | |
| Loss on sale of fixed assets | ─ | 8 | |
| Provision for doubtful accounts – including financing receivables | 475 | 349 | |
| Deferred taxes | (4,450) | (103) | |
| Stock-based compensation expense related to stock options and warrants | 476 | 622 | |
| Conversion of accrued interest to preferred stock | 31 | ─ | |
| Beneficial conversion feature recognized on debt converted to preferred stock | 70 | ─ | |
| Remeasurement gain on subordinated debt | ─ | (6) | |
| Remeasurement gain on derivative liability | (28) | (55) | |
| Changes in operating assets and liabilities: | |||
| Accounts receivable | 348 | 1,613 | |
| Financing receivables | 1,630 | (558) | |
| Inventories | (41) | 904 | |
| Prepaid expenses and other current assets | 290 | 89 | |
| Accounts payable and accrued liabilities | 268 | (109) | |
| Other long-term liabilities | (169) | 129 | |
| Unearned revenue | (920) | 250 | |
| Net cash provided by (used in) operating activities | (638) | 671 | |
| Investing activities | |||
| Purchases of property and equipment | (840) | (839) | |
| Net cash used in investing activities | (840) | (839) | |
| Financing activities | |||
| Proceeds from notes payable | 3,000 | ─ | |
| Proceeds from lines of credit | 22,236 | 23,257 | |
| Payments on notes payable | (815) | (1,727) | |
| Payments on lines of credit | (23,422) | (22,928) | |
| Payment of debt issuance costs | (97) | (26) | |
| Payments to settle put on term debt | (200) | ─ | |
| Proceeds from issuance of preferred stock and common stock | 1,094 | 1,298 | |
| Payments on capital lease and financing arrangements | (298) | (348) | |
| Net cash provided by (used in) financing activities | 1,498 | (474) | |
| Changes in cash and cash equivalents due to changes in foreign currency | (42) | 59 | |
| Net decrease in cash and cash equivalents | (22) | (583) | |
| Cash and cash equivalents at beginning of year | 1,211 | 1,794 | |
| Cash and cash equivalents at end of year | $ 1,189 | $ 1,211 | |
| Supplemental cash flow information: | |||
| Interest paid | $ 409 | $ 505 | |
| Income taxes paid, foreign | 370 | 111 | |
| Non-cash financing and investing activities: | |||
| Property and equipment financed by capital lease or accounts payable | 460 | 341 | |
| Debt discount | 127 | ─ | |
| Stock issued for board of director’s fees | ─ | 133 | |
| Deemed dividend for beneficial conversion feature of preferred stock | 28 | 139 | |
| Preferred stock dividends paid in additional shares | 230 | 30 | |
| Subordinated note payable converted to preferred stock | 1,000 | ─ | |
|
Sonic Foundry, Inc. |
| Quarters Ended
September 30, |
Years Ended
September 30, |
||||||
| 2018 | 2017 | 2018 | 2017 | ||||
| Net loss | $ (10,018) | $ (1,585) | $ (12,166) | $ (5,039) | |||
| Add: | |||||||
| Depreciation and amortization | 415 | 461 | 1,576 | 1,907 | |||
| Income tax expense (benefit) | (2,978) | 53 | (4,331) | (79) | |||
| Interest expense | 140 | 100 | 602 | 498 | |||
| Stock-based compensation expense | 85 | 135 | 477 | 622 | |||
| Impairment of goodwill and intangible assets | 11,809 | 600 | 11,809 | 600 | |||
| Adjusted EBITDA | $ (547) | $ (236) | $ (2,033) | $ (1,491) | |||
About Sonic Foundry®, Inc.
Founded in 1991 and headquartered in Madison, Wis., Sonic Foundry (OTC: SOFO) is dedicated to transforming how the world works and learns through innovative and scalable technology solutions. Sonic Foundry’s brands include Vidable® and Global Learning Exchange® which help unlock a smarter, more connected world for learners, workers, and entrepreneurs everywhere. For more information visit www.sonicfoundry.com.
© 2024 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.
