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Sonic Foundry Announces Fiscal 2018 First Quarter Financial Results
[February 13, 2018]

Sonic Foundry Announces Fiscal 2018 First Quarter Financial Results


MADISON, Wis., Feb. 13, 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 first quarter ended December 31, 2017.

Fiscal 2018 First Quarter Highlights

  • Total revenues were $8.9 million compared to $9.3 million in the first quarter of 2017
  • Gross margin was $6.5 million, or 73% of sales compared to $6.7 million, or 72% of sales in the first quarter of 2017
  • Adjusted EBITDA more than cut in half to $(335,000), compared to $(765,000) in the first quarter of 2017
  • Net income of $320 thousand, or $0.06 per share compared to a net loss of $(1.5) million, or $(0.34) per share in the first quarter of 2017 (Net Income in the first quarter of 2018 benefited from a tax gain of $1.3 million related to tax legislation changes in December 2017)
  • Billings totaled $7.6 million in the first quarter of 2018, an increase of 5% compared to the same period last year
  • Unearned revenue decreased to $13.0 million as of December 31, 2017, as we recognized over $1.3 million in revenues primarily from a number of large events billed in the prior quarter
  • Over $1 million positive swing in operating cash flow, to $231,000 for the three month period

Fiscal 2018 First Quarter Review

Service billings, including support, hosting, events, and installs saw an increase of 5% from prior year to a total of $4.7 million. Product billings saw an increase of 4% to $2.9 million during the first quarter of fiscal year 2018. The company expects to recognize $3.8 million of the current unearned revenue in the second quarter of fiscal 2018.

Recurring revenue of $6.2 million was 70% of total revenue in the first quarter of 2018, up from $5.9 million, or 64% of total revenue in the first quarter of 2017. These increases were driven by the strong demand for our cloud offering and annual software licenses, strength in support services, and continued customer repeat purchases and renewals.

The loss before income taxes decreased by $573,000 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 $7.4 million, down $776 thousand or 9% from the same period in 2017. The net loss in the prior year of $1.5 million improved to income of $320,000 due to a tax credit of $1.3 million related to the recent reduction in Federal tax rates.

“In the first 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. This has resulted in a 50% increase in recorders shipped over Q1 of 2017,” said Gary Weis, CEO of Sonic Foundry.

Mr. Weis continued, “We continue to invest in technology partnerships based on value to our customers, such as the recently announced integration of our platform with NewTek NDI, which are geared to enabling our customers to harness the power of Mediasite for their specific video creation and management needs. In 2018 we will remain focused on customer acquisition, higher levels of sales and operating performance, and technology development."

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 ended December 31, 2017 and 2016 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, February 13. 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 February 13, 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
nicolew@sonicfoundry.com

Investor:
Peter Seltzberg, Managing Director
Darrow Associates, Inc.
1951 Lowell Lane
Merrick, NY 11566
516-419-9915
pseltzberg@darrowir.com 
www.darrowir.com  


Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
(Unaudited)
 
 December 31,
 2017
 September 30,
 2017
Assets   
Current assets:   
Cash and cash equivalents$1,507  $1,211 
Accounts receivable, net of allowances of $400 and $3755,878  7,903 
Financing receivables, current, net of allowances of $200924  925 
Inventories934  986 
Investment in sales-type lease, current148  148 
Prepaid expenses and other current assets921  1,085 
Total current assets10,312  12,258 
Property and equipment:   
Leasehold improvements1,041  1,041 
Computer equipment6,135  6,101 
Furniture and fixtures813  789 
Total property and equipment7,989  7,931 
Less accumulated depreciation and amortization6,457  6,181 
Property and equipment, net1,532  1,750 
Other assets:   
Goodwill10,468  10,455 
Customer relationships, net of amortization of $1,056 and $9901,447  1,505 
Product rights, net of amortization of $442 and $411230  261 
Financing receivables, long-term1,310  1,310 
Investment in sales-type lease, long-term406  407 
Other long-term assets515  410 
Total assets$26,220  $28,356 
Liabilities and stockholders’ equity   
Current liabilities:   
Revolving lines of credit$2,215  $2,065 
Accounts payable1,076  1,314 
Accrued liabilities1,426  1,387 
Unearned revenue9,797  11,332 
Current portion of capital lease and financing arrangements217  256 
Current portion of notes payable, net of discounts338  737 
Total current liabilities15,069  17,091 
Long-term portion of unearned revenue3,239  2,970 
Long-term portion of capital lease and financing arrangements192  244 
Long-term portion of notes payable and warrant debt, net of discounts129  123 
Derivative liability, at fair value9  12 
Other liabilities303  372 
Deferred tax liability3,076  4,426 
Total liabilities22,017  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; 2,209 and 1,510 shares issued and outstanding, respectively, at amounts paid in1,824  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; 4,470,791 shares issued and 4,458,075 shares outstanding45  45 
Additional paid-in capital198,037  197,836 
Accumulated deficit(194,933) (195,253)
Accumulated other comprehensive loss(575) (595)
Receivable for common stock issued(26) (26)
Treasury stock, at cost, 12,716 shares(169) (169)
Total stockholders’ equity4,203  3,118 
Total liabilities and stockholders’ equity$26,220  $28,356 


Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)
(Unaudited)
  
 Three Months Ended December 31,
 2017 2016
Revenue:   
Product and other$3,080  $3,769 
Services5,815  5,538 
Total revenue8,895  9,307 
Cost of revenue:   
Product and other1,280  1,687 
Services1,145  911 
Total cost of revenue2,425  2,598 
Gross margin6,470  6,709 
Operating expenses:   
Selling and marketing4,110  4,810 
General and administrative1,573  1,450 
Product development1,753  1,951 
Total operating expenses7,436  8,211 
Loss from operations(966) (1,502)
Non-operating income (expenses):   
Interest expense, net(92) (150)
Other income (expense), net(9) 12 
Total non-operating expenses(101) (138)
Loss before income taxes(1,067) (1,640)
Benefit for income taxes1,387  131 
Net income (loss)320  (1,509)
Dividends on preferred stock(72)  
Net income (loss) attributable to common stockholders$248  $(1,509)
Earnings (loss) per common share   
– basic$0.06  $(0.34)
– diluted$0.06  $(0.34)
Weighted average common shares   
– basic4,458,075  4,411,559 
– diluted4,512,822  4,411,559 



Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
  
 Three Months Ended December 31,
 2017 2016
Operating activities   
Net income (loss)$320  $(1,509)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Amortization of other intangibles134  140 
Depreciation and amortization of property and equipment285  362 
Provision for doubtful accounts25  (30)
Deferred taxes(1,396) (3)
Stock-based compensation expense related to stock options245  254 
Remeasurement gain on subordinated debt  (6)
Remeasurement gain on derivative liability(3) (21)
Changes in operating assets and liabilities:   
Accounts receivable2,007  1,044 
Financing receivables  33 
Inventories52  614 
Prepaid expenses and other current assets106  147 
Accounts payable and accrued liabilities(202) (147)
Other long-term liabilities(69) 87 
Unearned revenue(1,273) (1,793)
Net cash provided by (used in) operating activities231  (828)
Investing activities   
Purchases of property and equipment(68) (548)
Net cash used in investing activities(68) (548)
Financing activities   
Proceeds from notes payable   
Proceeds from line of credit5,743  6,922 
Payments on notes payable(410) (497)
Payments on line of credit(5,591) (5,585)
Payment of debt issuance costs(20)  
Proceeds from issuance of preferred stock, common stock and warrants500   
Payments on capital lease and financing arrangements(91) (73)
Net cash provided by financing activities131  767 
Changes in cash and cash equivalents due to changes in foreign currency2  (105)
Net increase (decrease) in cash and cash equivalents296  (714)
Cash and cash equivalents at beginning of period1,211  1,794 
Cash and cash equivalents at end of period$1,507  $1,080 
Supplemental cash flow information:   
Interest paid$91  $139 
Income taxes paid, foreign34  27 
Non-cash financing and investing activities:   
Property and equipment financed by capital lease or accounts payable  34 
Deemed dividend for beneficial conversion feature of preferred stock28   
Preferred stock dividends paid in additional shares44   
    


Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
(Unaudited)
  
 Three Months Ended
December 31,
 2017 2016
    
Net income (loss)$320  $(1,509)
Add:   
  Depreciation and amortization419  494 
  Income tax expense(1,387) (131)
  Interest expense68  127 
  Stock-based compensation expense245  254 
Adjusted EBITDA$(335) $(765)
    

 

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