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Sonic Foundry Announces Fiscal 2019 Third Quarter Financial Results
[August 13, 2019]

Sonic Foundry Announces Fiscal 2019 Third Quarter Financial Results

MADISON, Wis., Aug. 13, 2019 (GLOBE NEWSWIRE) -- Sonic Foundry (OTC Pink Sheets: SOFO) today announced consolidated financial results for its fiscal 2019 third quarter ended June 30, 2019.

Fiscal 2019 Third Quarter Highlights

  • Total revenues were $10.1 million ($10.2 million without distribution impact) compared to $8.7 million in the third quarter of 2018
  • Gross margin was $7.4 million or 73 percent of sales compared to $6.4 million or 74 percent of sales in the third quarter of 2018
  • Adjusted EBITDA of $740,000 compared to $(343,000) in the third quarter of 2018
  • Net loss of $(159,000) ($(93,000) without distribution impact) or $(0.03) per share compared to net loss of $(1) million or $(0.23) per share in the third quarter of 2018
  • Billings totaled $10.5 million in the third quarter of 2019, an increase of 16 percent compared to the same period last year
  • Unearned revenue increased to $11 million as of June 30, 2019

Fiscal 2019 Third Quarter Review
Service billings, including support, hosting, events, and installs, saw an increase of 14 percent from the prior year for a total of $6.5 million. Product billings were up 20 percent to $4 million during the third quarter of fiscal year 2019 compared to the same period last year. Product billings and revenue were negatively impacted by a planned reduction of product inventory maintained by domestic distributors of $94,000 during the quarter and $1.3 million year to date. The company expects to recognize $3.4 million of the current unearned revenue in the fourth quarter of fiscal 2019.

Recurring revenue of $6.3 million was 63 percent of total revenue in the third quarter of 2019, compared to $5.9 million, or 68 percent of total revenue in the third quarter of 2018.

Operating expenses were $7.2 million, down $66,000 or 1 percent from the same period in 2018. The net loss of $(159,000) was an improvement compared to the same period in 2018.

“I am pleased to see us execute according to our plan for the quarter. As we proceed with our strategic and operational improvements, we are focused on living up to the expectations and goals we create,” said Michael Norregaard, CEO, Sonic Foundry. “We are confident we have the platform that best helps our customers scale deployments across campuses and enterprises. As we quickly approach the start of a new fiscal year, Mediasite Video Cloud and our unified communications solution Mediasite Join are two of our key priorities. We are zeroing in on our product innovation process and customer success, adding product functions and services to attract and expand more customers.”

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 and severance 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 June 30, 2019 and 2018 are included in the release.

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 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 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

Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
 June 30,
 September 30,
Current assets:   
Cash and cash equivalents$3,387  $1,189 
Accounts receivable, net of allowances of $75 and $5246,890  7,418 
Financing receivables, current, net of allowances of $526, respectively109  100 
Inventories955  1,027 
Investment in sales-type lease, current163  150 
Capitalized commissions, current435   
Prepaid expenses and other current assets829  941 
Total current assets12,768  10,825 
Property and equipment:   
Leasehold improvements1,122  1,105 
Computer equipment6,015  5,718 
Furniture and fixtures1,242  1,099 
Total property and equipment8,379  7,922 
Less accumulated depreciation and amortization6,782  6,009 
Property and equipment, net1,597  1,913 
Other assets:   
Financing receivables, long-term97  181 
Investment in sales-type lease, long-term134  249 
Capitalized commissions, long-term120   
Other long-term assets400  415 
Total assets$15,116  $13,583 
Liabilities and stockholders’ deficit   
Current liabilities:   
Revolving lines of credit$463  $885 
Accounts payable1,283  1,610 
Accrued liabilities 1,724  1,609 
Unearned revenue8,887  11,645 
Current portion of capital lease and financing arrangements169  248 
Current portion of notes payable and warrant debt, net of discounts768  593 
Total current liabilities13,294  16,590 
Long-term portion of unearned revenue2,152  1,691 
Long-term portion of capital lease and financing arrangements96  187 
Long-term portion of notes payable and warrant debt, net of discounts5,483  1,357 
Derivative liability, at fair value5  14 
Other liabilities165  202 
Total liabilities21,195  20,041 
Commitments and contingencies   
Stockholders’ 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; zero and 2,678 shares issued and outstanding, respectively, at amounts paid in  1,651 
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; 6,735,512 and 5,113,400 shares issued and 6,722,796 and 5,100,684 shares outstanding67  51 
Additional paid-in capital203,752  200,130 
Accumulated deficit(209,161) (207,419)
Accumulated other comprehensive loss(542) (676)
Receivable for common stock issued(26) (26)
Treasury stock, at cost, 12,716 shares(169) (169)
Total stockholders’ deficit(6,079) (6,458)
Total liabilities and stockholders’ deficit$15,116  $13,583 

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,
 2019 2018 2019 2018
Product and other$4,221  $3,214  7,768  $8,927 
Services5,847  5,485  17,799  17,127 
Total revenue10,068  8,699  25,567  26,054 
Cost of revenue:       
Product and other1,558  1,388  2,854  3,814 
Services1,123  916  3,673  3,446 
Total cost of revenue2,681  2,304  6,527  7,260 
Gross margin7,387  6,395  19,040  18,794 
Operating expenses:       
Selling and marketing3,785  3,882  11,564  11,859 
General and administrative1,609  1,631  4,492  4,713 
Product development1,849  1,796  5,617  5,361 
Total operating expenses7,243  7,309  21,673  21,933 
Income (loss) from operations144  (914) (2,633) (3,139)
Non-operating income (expenses):       
Interest expense, net(276) (266) (657) (461)
Other income (expense), net(63) 88  (66) 98 
Total non-operating expenses(339) (178) (723) (363)
Loss before income taxes(195) (1,092) (3,356) (3,502)
Benefit (provision) for income taxes36  72  (77) 1,353 
Net loss(159) (1,020) (3,433) (2,149)
Dividends on preferred stock(24) (67) (122) (189)
Net loss attributable to common stockholders$(183) $(1,087) $(3,555) $(2,338)
Loss per common share       
– basic$(0.03) $(0.23) $(0.64) $(0.51)
– diluted$(0.03) $(0.23) $(0.64) $(0.51)
Weighted average common shares       
– basic6,122,098  4,709,516  5,528,999  4,542,955 
– diluted6,122,098  4,709,516  5,528,999  4,542,955 

Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 Nine Months Ended June 30,
 2019 2018
Operating activities   
Net loss$(3,433) $(2,149)
Adjustments to reconcile net loss to net cash used in operating activities:   
Amortization170  482 
Depreciation and amortization of property and equipment748  822 
Loss on sale of fixed assets8   
Provision for doubtful accounts - including financing receivables31  300 
Deferred taxes  (1,387)
Stock-based compensation expense related to stock options and warrants203  392 
Stock issued for board of director's fees246   
Conversion of accrued interest to preferred stock  31 
Beneficial conversion feature recognized on debt converted to preferred stock  71 
Remeasurement gain on derivative liability(12) (16)
Changes in operating assets and liabilities:   
Accounts receivable660  834 
Financing receivables87  1,614 
Inventories75  70 
Capitalized commissions138   
Prepaid expenses and other current assets280  356 
Accounts payable and accrued liabilities(294) (126)
Other long-term liabilities(46) (136)
Unearned revenue(1,339) (2,347)
Net cash used in operating activities(2,478) (1,189)
Investing activities   
Purchases of property and equipment(373) (657)
Net cash used in investing activities(373) (657)
Financing activities   
Proceeds from notes payable5,500  3,000 
Proceeds from revolving lines of credit9,199  16,706 
Payments on notes payable(583) (815)
Payments to settle warrant debt  (200)
Payments on revolving lines of credit(9,636) (16,546)
Payment of debt issuance costs(110) (97)
Proceeds from issuance of preferred stock, common stock and warrants864  1,008 
Payments on capital lease and financing arrangements(193) (228)
Net cash provided by financing activities5,041  2,828 
Changes in cash and cash equivalents due to changes in foreign currency8  (64)
Net increase in cash and cash equivalents2,198  918 
Cash and cash equivalents at beginning of year1,189  1,211 
Cash and cash equivalents at end of year$3,387  $2,129 
Supplemental cash flow information:   
Interest paid$425  $290 
Income taxes paid, foreign237  48 
Non-cash financing and investing activities:   
Property and equipment financed by capital lease or accounts payable45  414 
Debt discount and warrant679  127 
Deemed dividend for beneficial conversion feature of preferred stock  28 
Preferred stock dividends paid in additional shares122  161 
Subordinated note payable converted to preferred stock  1,000 
Conversion of preferred shares to common shares1,772   

Sonic Foundry, Inc.
Condensed Consolidated Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
 Three Months Ended
June 30,
 Nine Months Ended
June 30,
 2019 2018 2019 2018
Net loss$(159) $(1,020) $(3,433) $(2,149)
Depreciation and amortization240  411  748  1,161 
Income tax benefit (provision)(36) (72) 77  (1,353)
Interest expense276  266  657  462 
Stock-based compensation expense(17) 72  203  392 
Severance expense436    562   
Adjusted EBITDA$740  $(343) $(1,186) $(1,487)

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