MADISON, Wis., May 15, 2018 (GLOBE NEWSWIRE) — Sonic Foundry, Inc. (NASDAQ:SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2018 second quarter ended March 31, 2018.
Fiscal 2018 Second Quarter Highlights
- Total revenues were $8.5 million compared to $8.6 million in the second quarter of 2017
- Gross margin was $5.9 million, or 70% of sales compared to $6.1 million, or 71% of sales in the second quarter of 2017
- Adjusted EBITDA was $(808) thousand compared to $(736) thousand in the second quarter of 2017
- Net loss of $(1.4) million, or $(0.32) per share compared to $(1.5) million, or $(0.33) per share in the second quarter of 2017
- Billings totaled $8.5 million in the second quarter of 2018, a decrease of 7% compared to the same period last year
- Unearned revenue decreased to $11.6 million as of March 31, 2018. The Company reduced unearned revenue for a China distributor by $1.5 million during the quarter due to an expectation that conversion to revenue would take an extended period of time and therefore was not fixed and determinable
- Reduced operating cash usage by approximately $1.0 million for the six-month period
Fiscal 2018 Second Quarter Review
Service billings, including support, hosting, events, and installs recorded an increase of 5% from prior year to a total of $5.7 million. The company expects to recognize $4.1 million of the current unearned revenue in the third quarter of fiscal 2018. Recurring revenue of $6.2 million was 74% of total revenue in the second quarter of 2018, up from $5.6 million, or 65% of total revenue in the second quarter of 2017.These increases were driven mainly by the strong demand for our cloud offerings.
Product billings were $2.8 million during the second quarter of fiscal year 2018, compared to $3.7 million last year and are $5.7 million year to date compared to $6.5 million last year. Recorder units shipped increased 13% for the first half of the year compared to last year with shipments of our RL 220 and mini recorders showing an 80% growth.
The loss before income taxes decreased from prior year by $136,000 due in large part to efforts made by the company to reduce operating expenses, including certain headcount reductions made in the third quarter of 2017. Operating expenses were $7.2 million, down $150 thousand or 2% from the same period in 2017. The net loss of $1.4 million was comparable to the same period in 2017.
Sonic Foundry recently closed a financing round with Partners for Growth, a partnership that provides capital funding solutions to private and public technology and life science companies. The facility provides for up to $2.5 million of additional capital on terms similar to the last transaction completed with PFG, which was fully paid earlier this month.
“We are pleased to once again be working with PFG, a partnership that has shown consistent support for Sonic Foundry over the years. The funding, in combination with a recent equity transaction with an existing investor in the company, gives us the ability to make strategic investments to our data centers that enable us to support the increase in Mediasite Video Cloud usage by our customers and fund key strategic initiatives,” said Gary Weis, CEO of Sonic Foundry.
Weis continued, “In the second quarter, we saw our right-sized video solutions continue to extend the value of Mediasite product and services technologies to a broadening customer base. This allows customers to ‘mix and match’ capture solutions ranging from software-only to our most capable recorders. Our strategy to address low technology rooms and grow the market for our affordable hardware solutions is an area of increased interest from customers. The increase in recorder units shipped in the first half of fiscal 2018, along with a boost in Mediasite Video Cloud services, leaves us confident that we are on the right track to support our customers’ video strategies, increase our win-rate and ultimately drive revenues to higher levels.”
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 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 and six months ended March 31, 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.
Webcast
The company will hold its corporate webcast for analysts and investors at 4:30 p.m. ET today, May 15. Sonic Foundry will use its webcasting technology, Mediasite, to stream the presentation for live and on-demand viewing. To access the webcast register at www.sonicfoundry.com/earnings on or before May 15, 2018. A video archive of the full earnings call, including Q&A, will be available for 90 days.
About Sonic Foundry®, Inc.
Sonic Foundry (NASDAQ:SOFO) is the global leader for video capture, management and streaming solutions. Trusted by more than 4,700 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. Leading research firms Aragon, Forrester, Wainhouse and Frost & Sullivan recognize Sonic Foundry as a leader in enterprise video, webcasting and lecture capture. Learn more at www.sonicfoundry.com and @mediasite.
© 2018 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.
Contacts:
Media:
Nicole Wise
Director of Communications
Sonic Foundry
920.226.0269
[email protected]
Investor:
Peter Seltzberg, Managing Director
Darrow Associates, Inc.
516-419-9915
[email protected]
www.darrowir.com
Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
(Unaudited)
| March 31, 2018 |
September 30, 2017 |
||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,180 | $ | 1,211 | |||
| Accounts receivable, net of allowances of $450 and $375 | 7,021 | 7,903 | |||||
| Financing receivables, current, net of allowances of $300 and $200 | 330 | 925 | |||||
| Inventories | 1,047 | 986 | |||||
| Investment in sales-type lease, current | 157 | 148 | |||||
| Prepaid expenses and other current assets | 672 | 1,085 | |||||
| Total current assets | 10,407 | 12,258 | |||||
| Property and equipment: | |||||||
| Leasehold improvements | 1,055 | 1,041 | |||||
| Computer equipment | 6,486 | 6,101 | |||||
| Furniture and fixtures | 917 | 789 | |||||
| Total property and equipment | 8,458 | 7,931 | |||||
| Less accumulated depreciation and amortization | 6,720 | 6,181 | |||||
| Property and equipment, net | 1,738 | 1,750 | |||||
| Other assets: | |||||||
| Goodwill | 10,617 | 10,455 | |||||
| Customer relationships, net of amortization of $1,123 and $990 | 1,461 | 1,505 | |||||
| Product rights, net of amortization of $473 and $411 | 200 | 261 | |||||
| Financing receivables, long-term | 302 | 1,310 | |||||
| Investment in sales-type lease, long-term | 430 | 407 | |||||
| Other long-term assets | 484 | 410 | |||||
| Total assets | $ | 25,639 | $ | 28,356 | |||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Revolving lines of credit | $ | 2,170 | $ | 2,065 | |||
| Accounts payable | 1,934 | 1,314 | |||||
| Accrued liabilities | 1,640 | 1,387 | |||||
| Unearned revenue | 9,388 | 11,332 | |||||
| Current portion of capital lease and financing arrangements | 259 | 256 | |||||
| Current portion of notes payable and warrant debt, net of discounts | 233 | 737 | |||||
| Total current liabilities | 15,624 | 17,091 | |||||
| Long-term portion of unearned revenue | 2,228 | 2,970 | |||||
| Long-term portion of capital lease and financing arrangements | 270 | 244 | |||||
| Long-term portion of notes payable and warrant debt, net of discounts | — | 123 | |||||
| Long-term portion of subordinated note payable | 1,000 | — | |||||
| Derivative liability, at fair value | 3 | 12 | |||||
| Other liabilities | 284 | 372 | |||||
| Deferred tax liability | 3,084 | 4,426 | |||||
| Total liabilities | 22,493 | 25,238 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| 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 2,500 shares; 2,259 and 1,510 shares issued and outstanding, respectively, at amounts paid in |
1,874 | 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; 4,474,062 and 4,470,791 shares issued and 4,461,346 and 4,458,075 shares outstanding, respectively |
45 | 45 | |||||
| Additional paid-in capital | 198,070 | 197,836 | |||||
| Accumulated deficit | (196,382 | ) | (195,253 | ) | |||
| Accumulated other comprehensive loss | (266 | ) | (595 | ) | |||
| Receivable for common stock issued | (26 | ) | (26 | ) | |||
| Treasury stock, at cost, 12,716 shares | (169 | ) | (169 | ) | |||
| Total stockholders’ equity | 3,146 | 3,118 | |||||
| Total liabilities and stockholders’ equity | $ | 25,639 | $ | 28,356 | |||
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, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Revenue: | |||||||||||||||
| Product and other | $ | 2,690 | $ | 3,305 | $ | 5,713 | $ | 7,029 | |||||||
| Services | 5,770 | 5,255 | 11,642 | 10,838 | |||||||||||
| Total revenue | 8,460 | 8,560 | 17,355 | 17,867 | |||||||||||
| Cost of revenue: | |||||||||||||||
| Product and other | 1,203 | 1,432 | 2,426 | 3,074 | |||||||||||
| Services | 1,328 | 1,064 | 2,530 | 2,020 | |||||||||||
| Total cost of revenue | 2,531 | 2,496 | 4,956 | 5,094 | |||||||||||
| Gross margin | 5,929 | 6,064 | 12,399 | 12,773 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling and marketing | 3,867 | 4,008 | 7,977 | 8,818 | |||||||||||
| General and administrative | 1,509 | 1,468 | 3,082 | 2,918 | |||||||||||
| Product development | 1,812 | 1,862 | 3,565 | 3,813 | |||||||||||
| Total operating expenses | 7,188 | 7,338 | 14,624 | 15,549 | |||||||||||
| Loss from operations | (1,259 | ) | (1,274 | ) | (2,225 | ) | (2,776 | ) | |||||||
| Non-operating income (expenses): | |||||||||||||||
| Interest expense, net | (103 | ) | (116 | ) | (195 | ) | (266 | ) | |||||||
| Other income (expense), net | 19 | (89 | ) | 10 | (77 | ) | |||||||||
| Total non-operating expenses | (84 | ) | (205 | ) | (185 | ) | (343 | ) | |||||||
| Loss before income taxes | (1,343 | ) | (1,479 | ) | (2,410 | ) | (3,119 | ) | |||||||
| Benefit (provision) for income taxes | (106 | ) | 23 | 1,281 | 154 | ||||||||||
| Net loss | (1,449 | ) | (1,456 | ) | (1,129 | ) | (2,965 | ) | |||||||
| Dividends on preferred stock | (50 | ) | — | (122 | ) | — | |||||||||
| Net loss attributable to common stockholders | $ | (1,499 | ) | $ | (1,456 | ) | $ | (1,251 | ) | $ | (2,965 | ) | |||
| Loss per common share | |||||||||||||||
| – basic | $ | (0.34 | ) | $ | (0.33 | ) | $ | (0.28 | ) | $ | (0.67 | ) | |||
| – diluted | $ | (0.34 | ) | $ | (0.33 | ) | $ | (0.28 | ) | $ | (0.67 | ) | |||
| Weighted average common shares | |||||||||||||||
| – basic | 4,461,310 | 4,425,720 | 4,459,675 | 4,418,562 | |||||||||||
| – diluted | 4,461,310 | 4,425,720 | 4,459,675 | 4,418,562 | |||||||||||
Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended March 31, | |||||||
| 2018 | 2017 | ||||||
| Operating activities | |||||||
| Net loss | $ | (1,129 | ) | $ | (2,965 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Amortization of other intangibles | 268 | 282 | |||||
| Depreciation and amortization of property and equipment | 536 | 757 | |||||
| Provision for doubtful accounts | 175 | 50 | |||||
| Deferred taxes | (1,361 | ) | (15 | ) | |||
| Stock-based compensation expense related to stock options | 320 | 386 | |||||
| Remeasurement gain on subordinated debt | — | (6 | ) | ||||
| Remeasurement gain on derivative liability | (9 | ) | (21 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 995 | (727 | ) | ||||
| Financing receivables | 1,525 | 26 | |||||
| Inventories | (59 | ) | 457 | ||||
| Prepaid expenses and other current assets | 381 | 511 | |||||
| Accounts payable and accrued liabilities | 700 | 798 | |||||
| Other long-term liabilities | (101 | ) | 141 | ||||
| Unearned revenue | (2,789 | ) | (1,296 | ) | |||
| Net cash used in operating activities | (548 | ) | (1,622 | ) | |||
| Investing activities | |||||||
| Purchases of property and equipment | (238 | ) | (586 | ) | |||
| Net cash used in investing activities | (238 | ) | (586 | ) | |||
| Financing activities | |||||||
| Proceeds from notes payable | 1,000 | — | |||||
| Proceeds from revolving lines of credit | 10,822 | 12,529 | |||||
| Payments on notes payable | (681 | ) | (907 | ) | |||
| Payments on revolving lines of credit | (10,743 | ) | (10,249 | ) | |||
| Payment of debt issuance costs | (20 | ) | (26 | ) | |||
| Proceeds from issuance of preferred stock, common stock and warrants | 508 | 21 | |||||
| Payments on capital lease and financing arrangements | (159 | ) | (150 | ) | |||
| Net cash provided by financing activities | 727 | 1,218 | |||||
| Changes in cash and cash equivalents due to changes in foreign currency | 28 | 46 | |||||
| Net decrease in cash and cash equivalents | (31 | ) | (944 | ) | |||
| Cash and cash equivalents at beginning of period | 1,211 | 1,794 | |||||
| Cash and cash equivalents at end of period | $ | 1,180 | $ | 850 | |||
| Supplemental cash flow information: | |||||||
| Interest paid | $ | 169 | $ | 277 | |||
| Income taxes paid, foreign | 43 | 27 | |||||
| Non-cash financing and investing activities: | |||||||
| Property and equipment financed by capital lease or accounts payable | 256 | 341 | |||||
| Deemed dividend for beneficial conversion feature of preferred stock | 28 | — | |||||
| Stock issued for board of director’s fees | — | 133 | |||||
| Preferred stock dividends paid in additional shares | 50 | — | |||||
Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
(Unaudited)
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net loss | $ | (1,449 | ) | $ | (1,456 | ) | $ | (1,129 | ) | $ | (2,965 | ) | |||
| Add: | |||||||||||||||
| Depreciation and amortization | 381 | 518 | 800 | 1,011 | |||||||||||
| Income tax expense (benefit) | 106 | (23 | ) | (1,281 | ) | (154 | ) | ||||||||
| Interest expense | 79 | 93 | 147 | 220 | |||||||||||
| Stock-based compensation expense | 75 | 132 | 320 | 386 | |||||||||||
| Adjusted EBITDA | $ | (808 | ) | $ | (736 | ) | $ | (1,143 | ) | $ | (1,502 | ) | |||