Sonic Foundry Reports Second Quarter Fiscal 2013 Results

MADISON, Wis. – April 25, 2013 – Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted market leader for video management and academic, enterprise and event webcasting, today announced financial results for its fiscal 2013 second quarter ended March 31, 2013.

GAAP results include:

• Revenues of $6.4 million, up 8 percent from the fiscal second quarter of 2012
• Product and other revenue of $3.0 million, up 13 percent from the fiscal second quarter of 2012
• Services revenue of $3.4 million, up 5 percent from $3.3 million in the second quarter of fiscal 2012
  • Support and maintenance revenue of $1.9 million, an increase of 6 percent over the second quarter of fiscal 2012
  • Event services and hosting revenue of $1.5 million, an increase of 5 percent over the second quarter of fiscal 2012
• Unearned revenue balance of $6.1 million, compared to $5.3 million at March 31, 2012
• GAAP net  loss of $(27) thousand or $(0.01) per basic share, compared to net loss of $(115) thousand or $(0.03) per basic share in the fiscal second quarter of 2012
• Gross margin of $4.7 million or 73 percent compared to $4.3 million or 72 percent for the fiscal second quarter of 2012
• Cash balance of $3.7 million at March 31, 2013
• Equity investment in earnings from Mediasite KK of $90 thousand related to our current 29% ownership interest in our Japanese partner

Non-GAAP results include:

• Billings of $6.6 million, an increase of 19 percent over the second quarter of fiscal 2012
• Product and other billings of $3.2 million, up 19 percent from the second quarter of fiscal 2012
• Services billings of $3.4 million, an increase of 18 percent over the second quarter of fiscal 2012
  • Support and maintenance billings of $1.8 million, an increase of 11 percent over the second quarter of fiscal 2012
  • Event services and hosting billings of $1.6 million, an increase of 28 percent over the second quarter of fiscal 2012
• Non-GAAP net income of $612 thousand or $0.16 per basic share compared to non-GAAP net loss of $(60) thousand or $(0.02) per basic share in the second quarter of fiscal 2012

Non-GAAP net income primarily excludes all non-cash related expenses of stock compensation, depreciation, amortization, provision for income taxes and includes the cash impact of billings not recognized as revenue. Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

At March 31, 2013, $6.1 million of revenue was deferred, of which the company expects to realize approximately $2.5 million in the quarter ending June 30, 2013. Revenue from service contracts is recognized over the life of the contract. Services revenue includes Mediasite customer support contracts as well as training, installation, rental, event and content hosting services.

Gross margin improved from 72 percent in the second quarter of fiscal 2012 to 73 percent in the second quarter of fiscal 2013 due to operational efficiencies in recorder and services costs.

International product and service billings accounted for 33 percent of overall billings, compared to 34 percent in the second quarter of fiscal 2012. During the second quarter of this fiscal year, 86 percent of billings were to preexisting customers, compared to 81 percent in second quarter fiscal 2012, with 47 percent to education customers and 39 percent to corporate.

“The new products we brought to market in the past year have contributed to the positive momentum we’re seeing in the second quarter,” said Gary Weis, chief executive officer of Sonic Foundry. “With the launch of Mediasite Enterprise Video Platform and My Mediasite we are providing customers with the most comprehensive video strategy solution in the market. As our team focuses on bringing these and other innovations to leading colleges, universities and corporations, we will continue to see growth in new annual licenses and renewals. As we enter our strongest quarters, I’m confident the momentum we’re seeing now will translate into revenue and income growth which will meet or exceed our three year goal of a minimum of $40 million in revenue with 15% pre-tax net income.”

Sonic Foundry will host a corporate webcast today for analysts and investors to discuss its fiscal 2013 second 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. An archive of the webcast will be available for 30 days.

EXPLANATION OF NON-GAAP MEASURES

To supplement our financial results presented on a GAAP basis, we use a measure of non-GAAP net income or loss in our financial presentation, which excludes certain non-cash costs and includes certain cash billings not recognized as revenue for GAAP purposes. Our non-GAAP financial measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Our non-GAAP financial measures reflect adjustments based on the following items:

• Billings not recorded as revenue: We have included the cash effect of billings not recorded as revenue, which are deferred for GAAP purposes, in arriving at non-GAAP net income or loss. Our services are typically billed and collected in advance of providing the service which requires minimal cost to perform in the future. Billings are a better indicator of customer activity and cash flow than revenue is, in management’s opinion, and is therefore used by management as a key operational indicator.

• Depreciation and amortization of intangible and other assets expenses: We have excluded the effect of depreciation and amortization of assets from our non-GAAP net income or loss. Depreciation and amortization of asset costs is a non-cash expense that includes the periodic write-off of tooling, product design and other assets that contributed to revenues earned during the periods presented and will contribute to future period revenues as well.

• Non-cash provision for income taxes: We have excluded the impact of the provision for income taxes from our non-GAAP net income or loss. The provision for income taxes is associated with the difference in treatment of goodwill which is not expensed for GAAP purposes but is amortized over a fifteen year life for Federal income tax purposes. The result is a non-cash expense and liability that will never be paid.

• Stock-based compensation expenses: We maintain an employee qualified stock option plan under which we grant options to acquire common stock to eligible employees. We also maintain an employee stock purchase plan under which common stock may be issued to eligible employees at a reduced price. Stock-based compensation expenses are recorded for these plans in accordance with FASB Accounting Standards Codification subtopic 718, Compensation-Stock Compensation. Stock-based compensation expense is a non-cash expense. As a result, we have excluded the effect of stock-based compensation expenses from our non-GAAP net income or loss.

 

About Sonic Foundry®, Inc.

Sonic Foundry (NASDAQ: SOFO) is the trusted market leader for enterprise webcasting solutions, providing video content management and distribution for education, business and government. Powered by the patented Mediasite webcasting platform and webcast services of Mediasite Events, the company empowers people to advance how they share knowledge online, using video webcasts to bridge time and distance, enhance learning outcomes and improve performance.

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: tammy@sonicfoundry.com

 

 

Sonic Foundry, Inc. Condensed Consolidated Balance Sheets (in thousands, except for share data) (Unaudited)
	March 31, 2013		Sept. 30, 2012
Assets
Current assets:
Cash and cash equivalents	$         3,676		$      4,478
Accounts receivable, net of allowances of $85	5,653		5,578
Inventories	1,030		1,053
Prepaid expenses and other current assets	915		757
Total current assets	11,274		11,866
Property and equipment:
Leasehold improvements	852		852
Computer equipment	4,557		3,851
Furniture and fixtures	865		865
Total property and equipment	6,274		5,568
Less accumulated depreciation and amortization	3,154		2,624
Net property and equipment	3,120		2,944
Other assets:
Goodwill	7,576		7,576
Investment in Mediasite KK	588		420
Software development costs	458		–
Other intangibles, net of amortization of $190 and $180	5		15
Total assets	$        23,021		$       22,821
Liabilities and stockholders’ equity
Current liabilities:
Revolving line of credit	$                –		$              –
Accounts payable	1,305		1,604
Accrued liabilities	761		850
Unearned revenue	5,725		5,284
Current portion of capital lease obligation	184		129
Current portion of notes payable	667		667
Total current liabilities	8,642		8,534
Long-term portion of unearned revenue	363		349
Long-term portion of capital lease obligation	174		131
Long-term portion of notes payable	433		766
Leasehold improvement liability	488		532
Deferred tax liability	2,090		1,970
Total liabilities	12,190		12,282
Stockholders’ equity:
Preferred stock, $.01 par value, authorized 500,000 shares;   none issued and outstanding	—		—
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; 3,932,730 and 3,909,040 shares issued and 3,920,014 and 3,896,324 shares outstanding	39		39
Additional paid-in capital	189,917		189,459
Accumulated deficit	(178,930)		(178,764)
Receivable for common stock issued	(26)		(26)
Treasury stock, at cost, 12,716 shares	(169)		(169)
Total stockholders’ equity	10,831		10,539
Total liabilities and stockholders’ equity	$       23,021		$      22,821

 

 

Sonic Foundry, Inc. Condensed Consolidated Statements of Operations (in thousands, except for share and per share data) (Unaudited)
	Three Months Ended March 31,				Six Months Ended March 31,
	2013		2012		2013		2012
Revenue:
Product	$       2,958		$       2,617		$       5,799		$       5,216
Services	3,415		3,250		7,055		6,750
Other	57		61		128		147
Total revenue	6,430		5,928		12,982		12,113
Cost of revenue:
Product	1,360		1,354		2,674		2,616
Services	380		290		751		706
Total cost of revenue	1,740		1,644		3,425		3,322
Gross margin	4,690		4,284		9,557		8,791
Operating expenses:
Selling and marketing	3,022		2,704		6,029		5,477
General and administrative	834		650		1,649		1,475
Product development	868		962		2,044		1,944
Total operating expenses	4,724		4,316		9,722		8,892
Loss from operations	(34)		(32)		(165)		(105)
Equity in earnings from investment in Mediasite KK	90		–		168		–
Other expense, net	(23)		(23)		(49)		(75)
Income (loss) before income taxes	33		(55)		(46)		(180)
Provision for income taxes	(60)		(60)		(120)		(120)
Net loss	$         (27)		$         (115)		$         (166)		$          (300)
Net loss per common share:
– basic	$         (0.01)		$         (0.03)		$         (0.04)		$         (0.08)
– diluted	$         (0.01)		$         (0.03)		$         (0.04)		$         (0.08)
Weighted average common shares
– basic	3,910,237		3,852,664		3,903,991		3,846,251
– diluted	3,910,237		3,852,664		3,903,991		3,846,251

 

 

Non-GAAP Consolidated Statements of Operations
(in thousands, except for per share data)

		Fiscal Quarter Ended March 31, 2013							Fiscal Quarter Ended March 31, 2012
		GAAP		Adj(1)		Non-GAAP			GAAP		Adj(1)		Non-GAAP
Revenues		$  6,430		$    132		$ 6,562			$  5,928		$  (407)		$  5,521
Cost of revenue		1,740		—		1,740			1,644		—		1,644
Total operating expenses		4,724		(447)		4,277			4,316		(402)		3,914
Income (loss) from operations		(34)		579		545			(32)		(5)		(37)
Equity investment in earnings from Mediasite KK		90		—		90			—		—		—
Other expense, net		(23)		—		(23)			(23)		—		(23)
Provision for income taxes		(60)		60		—			(60)		60		—
Net income (loss)		$    (27)		$    639		$  612			$   (115)		$      55		$    (60)
Basic net income (loss) per common share		$ (0.01)		$   0.16		$ 0.16			$  (0.03)		$   0.01		$ (0.02)
(1)Adjustments consist of the following:
Billings				$  132							$   (407)
Depreciation and amortization				283							219
Non-cash tax provision				60							60
Stock-based compensation(2)				164							183
Total non-GAAP adjustments				$     639							$     55
(2) Stock-based compensation is included in the following GAAP operating expenses:
Selling and marketing				$     108							$     119
General and administrative				10							11
Product development				46							53
Total stock-based compensation				$    164							$    183