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Sonic Foundry Announces Fourth Quarter and Fiscal 2018 Financial Results
[March 15, 2019]

Sonic Foundry Announces Fourth Quarter and Fiscal 2018 Financial Results


MADISON, Wis., March 15, 2019 (GLOBE NEWSWIRE) -- 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
nicolew@sonicfoundry.com

 

Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)

 September 30,
 2018 2017
Assets   
Current assets:   
Cash and cash equivalents$1,189  $1,211 
Accounts receivable, net of allowances of $524 and $3757,418  7,903 
Financing receivables, current, net of allowances of $526 and $200100  925 
Inventories1,027  986 
Investment in sales-type lease, current150  148 
Prepaid expenses and other current assets941  1,085 
     Total current assets10,825  12,258 
Property and equipment:   
Leasehold improvements1,105  1,041 
Computer equipment5,718  6,101 
Furniture and fixtures1,099  789 
     Total property and equipment7,922  7,931 
     Less accumulated depreciation and amortization6,009  6,181 
          Property and equipment, net1,913  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-term181  1,310 
Investment in sales-type lease, long-term249  407 
Other long-term assets415  410 
Total assets$13,583  $28,356 
Liabilities and stockholders’ equity (deficit)   
Current liabilities:   
Revolving lines of credit$885  $2,065 
Accounts payable1,610  1,314 
Accrued liabilities1,609  1,387 
Unearned revenue11,645  11,332 
Current portion of capital lease and financing arrangements248  256 
Current portion of notes payable and warrant debt, net of discounts593  737 
     Total current liabilities16,590  17,091 
Long-term portion of unearned revenue1,691  2,970 
Long-term portion of capital lease and financing arrangements187  244 
Long-term portion of notes payable and warrant debt, net of discounts1,357  123 
Derivative liability, at fair value14  12 
Other liabilities202  372 
Deferred tax liability  4,426 
     Total liabilities20,041  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 capital200,130  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 
Services5,106  4,960  22,233  21,117 
Total revenue8,490  8,300  34,544  36,000 
Cost of revenue:       
Product and other1,416  1,368  5,231  6,097 
Services979  819  4,425  3,770 
Total cost of revenue2,395  2,187  9,656  9,867 
Gross margin6,095  6,113  24,888  26,133 
Operating expenses:       
Selling and marketing3,764  3,726  15,622  16,912 
General and administrative1,641  1,541  6,354  5,941 
Product development1,781  1,657  7,142  7,238 
Impairment of goodwill and intangible assets11,809  600  11,809  600 
Total operating expenses18,995  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), net44  (22) 142  (65)
Total non-operating expenses(96) (121) (459) (560)
Loss before income taxes(12,996) (1,532) (16,498) (5,118)
Benefit (provision) for income taxes2,978  (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       
– basic4,989,544  4,458,075  4,655,520  4,436,333 
– diluted4,989,544  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 intangibles621  555 
Depreciation and amortization of property and equipment1,118  1,422 
Impairment of goodwill & intangible assets11,809  600 
Loss on sale of fixed assets  8 
Provision for doubtful accounts - including financing receivables475  349 
Deferred taxes(4,450) (103)
Stock-based compensation expense related to stock options and warrants476  622 
Conversion of accrued interest to preferred stock31   
Beneficial conversion feature recognized on debt converted to preferred stock70   
Remeasurement gain on subordinated debt  (6)
Remeasurement gain on derivative liability(28) (55)
Changes in operating assets and liabilities:   
     Accounts receivable348  1,613 
     Financing receivables1,630  (558)
     Inventories(41) 904 
     Prepaid expenses and other current assets290  89 
     Accounts payable and accrued liabilities268  (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 payable3,000   
Proceeds from lines of credit22,236  23,257 
Payments on notes payable(815) (1,727)
Payments on lines of credit(23,422) (22,928)
Payments of debt issuance costs(97) (26)
Payments to settle put on term debt(200)  
Proceeds from issuance of preferred stock and common stock1,094  1,298 
Payments on capital lease and financing arrangements(298) (348)
Net cash provided by (used in) financing activities1,498  (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 year1,211  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, foreign370  111 
Non-cash financing and investing activities:   
Property and equipment financed by capital lease or accounts payable460  341 
Debt discount127   
Stock issued for board of director's fees  133 
Deemed dividend for beneficial conversion feature of preferred stock28  139 
Preferred stock dividend paid in additional shares230  30 
Subordinated note payable converted to preferred stock1,000   

 

Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)

 Quarters Ended September 30, Years Ended September 30,
 2018 2017 2018 2017
        
Net loss$(10,018) $(1,585) $(12,166) $(5,039)
Add:       
   Depreciation and amortization415  461  1,576  1,907 
   Income tax expense (benefit)(2,978) 53  (4,331) (79)
   Interest expense140  100  602  498 
   Stock-based compensation expense85  135  477  622 
   Impairment of goodwill and intangible asset11,809  600  11,809  600 
Adjusted EBITDA$(547) $(236) $(2,033) $(1,491)
        

 

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