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Sonic Foundry Announces Fiscal 2018 Third Quarter Financial Results
[August 09, 2018]

Sonic Foundry Announces Fiscal 2018 Third Quarter Financial Results

MADISON, Wis., Aug. 09, 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 third quarter ended June 30, 2018.

Fiscal 2018 Third Quarter Highlights

  • Total revenues were $8.7 million compared to $9.8 million in the third quarter of 2017, or a decrease of 12%, primarily as a result of a large multi-year transaction completed in Japan last year
  • Gross margin was $6.4 million, or 74% of sales, compared to $7.2 million, or 74% of sales, in the third quarter of 2017
  • Adjusted EBITDA was $(343,000) compared to $246,000 in the third quarter of 2017
  • Net loss of $(1.0) million, or $(0.23) per share, compared to $(489,000), or ($0.13) per share, in the third quarter of 2017
  • Billings totaled $9.0 million in the third quarter of 2018, a decrease of 12%, compared to the same period last year
  • Unearned revenue was $12.0 million as of June 30, 2018, down $2.4 million from September 30, 2017. The Company reduced unearned revenue for a China distributor by $1.5 million during the prior quarter due to an expectation that conversion to revenue would take an extended period of time and therefore was not fixed and determinable
  • Recurring services revenue contributed 68% of total revenues for the quarter
  • Successfully raised $3.0 million in privately negotiated transactions

Fiscal 2018 Third Quarter Review

Service billings, including support, hosting, events, and installs recorded a decrease of 9% from prior year to a total of $5.7 million from $6.2 million. A decrease in events billings in Japan and the Netherlands were the primary driver of the change in service billings. The company expects to recognize $3.7 million of the current unearned revenue in the fourth quarter of fiscal 2018. Recurring revenue of $5.9 million was 68% of total revenue in the third quarter of 2018, compared to $6.0 million, or 61% of total revenue, in the third quarter of 2017.

Product billings were $3.3 million during the third quarter of fiscal year 2018, compared to $4.1 million last year and are $9.0 million year to date compared to $10.3 million last year. Product billings reflect the large transaction noted above in Japan as well as a shift toward larger unit shipments of our-lower cost recorders. Year to date, the Mediasite RL 220 and RL Mini recorder models reflect an increase of 46% over the prior year unit shipments.

Operating expenses were $7.3 million, down $309,000, or 4%, from the same period in 2017. The net loss of $1.0 million increased from a net loss of $489,000 in the same period in 2017.

“While we maintained our gross margins and reduced our operating expenses, thanks in part to cost savings initiatives we implemented earlier this year, the higher education market in North America and Europe continues to be challenging in the current climate. Educators continue to believe that video can improve both student outcomes and retention and CIOs at global modern campuses see video as a communication mainstay, but they are facing a backlog of budget and resources to meet their digital goals,” said Gary Weis, CEO of Sonic Foundry.

Weis continued, “We‘ve enhanced our strategy to make video creation more accessible, powerful and easy by increasing our product mix and removing the hurdles to wide-scale campus video adoption. This approach is resonating with new customers that have chosen Mediasite to be the focus of their digital campus initiatives, such as Iqra University in Pakistan, Deakin University in Australia and Cuyahoga Community College in Ohio. We believe other campuses will follow suit when they have appropriate funding. This strategy is also resonating with customers as they rapidly adopt our newest software release. And we’re buoyed by the strong demand for our affordable line of recorders. For the remainder of the year we will remain focused on new customer acquisitions and continuing to build relationships.”

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 nine months ended June 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.

The company will hold its corporate webcast for analysts and investors at 4:30 p.m. ET today, August 9. Sonic Foundry will use its webcasting technology, Mediasite, to stream the presentation for live and on-demand viewing. To access the webcast register at on or before August 9, 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 4,900 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 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 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.


Nicole Wise
Director of Communications
Sonic Foundry

Peter Seltzberg, Managing Director
Darrow Associates, Inc.


Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
 June 30,
 September 30,
Current assets:   
Cash and cash equivalents$2,129  $1,211 
Accounts receivable, net of allowances of $475 and $3757,084  7,903 
Financing receivables, current, net of allowances of $400 and $200229  925 
Inventories917  986 
Investment in sales-type lease, current154  148 
Prepaid expenses and other current assets803  1,085 
Total current assets11,316  12,258 
Property and equipment:   
Leasehold improvements1,045  1,041 
Computer equipment7,005  6,101 
Furniture and fixtures928  789 
Total property and equipment8,978  7,931 
Less accumulated depreciation and amortization6,983  6,181 
Property and equipment, net1,995  1,750 
Other assets:   
Goodwill10,486  10,455 
Customer relationships, net of amortization of $1,189 and $9901,337  1,505 
Product rights, net of amortization of $504 and $411169  261 
Financing receivables, long-term201  1,310 
Investment in sales-type lease, long-term290  407 
Other long-term assets463  410 
Total assets$26,257  $28,356 
Liabilities and stockholders’ equity   
Current liabilities:   
Revolving lines of credit$2,239  $2,065 
Accounts payable1,390  1,314 
Accrued liabilities1,417  1,387 
Unearned revenue10,325  11,332 
Current portion of capital lease and financing arrangements265  256 
Current portion of notes payable and warrant debt, net of discounts369  737 
Total current liabilities16,005  17,091 
Long-term portion of unearned revenue1,626  2,970 
Long-term portion of capital lease and financing arrangements241  244 
Long-term portion of notes payable and warrant debt, net of discounts1,540  123 
Derivative liability, at fair value26  12 
Other liabilities240  372 
Deferred tax liability3,051  4,426 
Total liabilities22,729  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 4,500 shares; 3,324 and 1,510 shares issued and outstanding, respectively, at amounts paid in
2,143  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; 4,920,057 and 4,470,791 shares issued and 4,907,341 
and 4,458,075 shares outstanding, respectively
49  45 
Additional paid-in capital199,471  197,836 
Accumulated deficit(197,402) (195,253)
Accumulated other comprehensive loss(538) (595)
Receivable for common stock issued(26) (26)
Treasury stock, at cost, 12,716 shares(169) (169)
Total stockholders’ equity3,528  3,118 
Total liabilities and stockholders’ equity$26,257  $28,356 

Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)
 Three Months Ended June 30, Nine Months Ended June 30,
 2018 2017 2018 2017
Product and other$3,214  $4,335  $8,927  $11,363 
Services5,485  5,498  17,127  16,337 
Total revenue8,699  9,833  26,054  27,700 
Cost of revenue:       
Product and other1,388  1,475  3,814  4,548 
Services916  1,111  3,446  3,132 
Total cost of revenue2,304  2,586  7,260  7,680 
Gross margin6,395  7,247  18,794  20,020 
Operating expenses:       
Selling and marketing3,882  4,368  11,859  13,186 
General and administrative1,631  1,482  4,713  4,400 
Product development1,796  1,768  5,361  5,581 
Total operating expenses7,309  7,618  21,933  23,167 
Loss from operations(914) (371) (3,139) (3,147)
Non-operating income (expenses):       
Interest expense, net(266) (130) (461) (396)
Other income (expense), net88  34  98  (43)
Total non-operating expenses(178) (96) (363) (439)
Loss before income taxes(1,092) (467) (3,502) (3,586)
Benefit (provision) for income taxes72  (22) 1,353  132 
Net loss(1,020) (489) (2,149) (3,454)
Dividends on preferred stock(67) (75) (189) (75)
Net loss attributable to common stockholders$(1,087) $(564) $(2,338) $(3,529)
Loss per common share       
– basic$(0.23) $(0.13) $(0.51) $(0.80)
– diluted$(0.23) $(0.13) $(0.51) $(0.80)
Weighted average common shares       
– basic4,709,516  4,449,893  4,542,955  4,429,006 
– diluted4,709,516  4,449,893  4,542,955  4,429,006 



Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 Nine Months Ended June 30,
 2018 2017
Operating activities   
Net loss$(2,149) $(3,454)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Amortization of other intangibles482  420 
Depreciation and amortization of property and equipment822  1,096 
Gain on sale of fixed assets  8 
Provision for doubtful accounts300  150 
Deferred taxes(1,387) (42)
Stock-based compensation expense related to stock options392  487 
Conversion of accrued interest to preferred stock31   
Beneficial conversion feature recognized on debt converted to preferred stock71   
Remeasurement gain on subordinated debt  (6)
Remeasurement gain on derivative liability(16) (42)
Changes in operating assets and liabilities:   
Accounts receivable834  2,365 
Financing receivables1,614  (174)
Inventories70  771 
Prepaid expenses and other current assets356  (190)
Accounts payable and accrued liabilities(126) (8)
Other long-term liabilities(136) 158 
Unearned revenue(2,347) (823)
Net cash provided by (used in) operating activities(1,189) 716 
Investing activities   
Purchases of property and equipment(657) (676)
Net cash used in investing activities(657) (676)
Financing activities   
Proceeds from notes payable3,000   
Proceeds from revolving lines of credit16,706  17,531 
Payments on notes payable(815) (1,317)
Payments to settle warrant debt (200)  
Payments on revolving lines of credit(16,546) (16,999)
Payment of debt issuance costs(97) (26)
Proceeds from issuance of preferred stock, common stock and warrants1,008  771 
Payments on capital lease and financing arrangements(228) (255)
Net cash provided by (used in) financing activities2,828  (295)
Changes in cash and cash equivalents due to changes in foreign currency(64) 66 
Net increase (decrease) in cash and cash equivalents918  (189)
Cash and cash equivalents at beginning of period1,211  1,794 
Cash and cash equivalents at end of period$2,129  $1,605 
Supplemental cash flow information:   
Interest paid$290  $403 
Income taxes paid, foreign48  27 
Non-cash financing and investing activities:   
Property and equipment financed by capital lease or accounts payable414  358 
Stock issued for board of director’s fees  133 
Debt discount and warrant127   
Deemed dividend for beneficial conversion feature of preferred stock28  69 
Preferred stock dividends paid in additional shares161  6 
Subordinated note payable converted to preferred stock1,000   



Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
 Three Months Ended June 30, Nine Months Ended June 30,
 2018 2017 2018 2017
Net loss$(1,020) $(489) $(2,149) $(3,454)
  Depreciation and amortization411  481  1161  1445 
  Income tax expense (benefit)(72) 22  (1,353) (132)
  Interest expense266  131  462  398 
  Stock-based compensation expense72  101  392  487 
Adjusted EBITDA$(343) $246  $(1,487) $(1,256)

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