Sonic Foundry Announces Fiscal 2020 Third Quarter Financial Results - Second Consecutive Quarter of Net Income


MADISON, Wis., Aug. 13, 2020 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2020 third quarter ended June 30, 2020.

Fiscal 2020 Third Quarter Highlights

  • Billings of $7.7 million in the third quarter of 2020, bringing total billings for the year to $24.3 million which is $300,000 ahead of last year
  • Total revenues of $7.9 million compared to $10.1 million in the third quarter of 2019, and $24.6 million total revenue year-to-date compared to $25.6 million last year
  • Gross margin remained consistent at 73 percent for the third quarter in both 2020 and 2019
  • Net income attributable to common stockholders of $107,000, or $.01 per share, compared to a net loss of $(159,000), or $(0.03) per share, in the third quarter of 2019, an improvement of $266,000
  • Adjusted EBITDA of $353,000 for the third quarter of 2020, bringing year-to-date adjusted EBITDA to $767,000, which is $2 million ahead of last year 
  • Unearned revenue was $11.3 million as of June 30, 2020 and $11.5 million as of September 30, 2019 

Fiscal 2020 Third Quarter Review

Due to supply chain interruptions caused by COVID-19, product billings were $2.5 million during the third quarter of 2020 compared to $4 million in the same quarter last year. Service billings, including support, hosting, events and installs were $5.2 million, compared to $6.5 million in the prior year. Events billings, particularly with MSKK, our Japanese subsidiary, were negatively impacted by cancellations due to COVID-19. The company expects to recognize $4.6 million of the current unearned revenue in the fourth quarter of fiscal 2020. Recurring revenue of $5.6 million was 70 percent of total revenue in the third quarter of 2020, compared to $6.3 million, or 63 percent of total revenue, in the third quarter of 2019.

“In this new video-centric world, Sonic Foundry is well positioned to help schools and organizations react quickly to meet their expanding communication needs with Mediasite. I am proud of how the team has innovated to launch additional products and services that are in high demand. We expect that Mediasite Mosaic, our new personal capture app, and our expanded Zoom integration will be integral to hybrid back-to-school plans around the world. Our Mediasite Events team pivoted almost overnight to a complete virtual event offering that grew out of our 15-year history of creating dynamic online experiences – a business segment we expect to grow as the long-reaching effects of the pandemic on in-person conferences continues into next year,” said Michael Norregaard, CEO, Sonic Foundry.

Norregaard continued: “We are reminded daily that our customers continue to navigate uncertain budgets and back-to-school plans during these unprecedented times. As we welcome new customers, such as Edgecombe Community College and Kansas State Lottery into the Mediasite fold, and help our current customers expand their existing footprint, we are honored to be their trusted solution to help them recover faster and emerge stronger than ever.”

“We appreciate Michael Norregaard’s contributions to the company in terms of efficiencies he implemented that led us to improved profitability,” said Mark Burish, chairman, Sonic Foundry. “Now as we face new demands for virtual learning and enterprise communication brought on by the pandemic, we believe a focus on sales growth is critical to maximizing shareholder value. We believe that Joe Mozden, with his proven experience in building sustainable growth, is the right person to lead this initiative when he takes the reins next month.”

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 loss to adjusted EBITDA for the third quarter ended June 30, 2020, and 2019 are included in the release.

About Sonic Foundry®, Inc.
Sonic Foundry (OTC: SOFO) is the global leader for video capture, management and streaming solutions. Trusted by more than 5,200 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.

© 2020 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:
Nicole Wise, Director of Communications
920.226.0269
nicolew@sonicfoundry.com

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

 June 30,
 2020
 September 30,
 2019
Assets   
Current assets:   
Cash and cash equivalents$6,442  $4,295 
Accounts receivable, net of allowances of $159 & $1355,438  6,532 
Inventories544  558 
Investment in sales-type lease, current147  163 
Capitalized commissions, current354  464 
Prepaid expenses and other current assets1,111  972 
Total current assets14,036  12,984 
Property and equipment:   
Leasehold improvements1,122  1,121 
Computer equipment6,644  5,610 
Furniture and fixtures1,326  1,233 
Total property and equipment9,092  7,964 
Less accumulated depreciation and amortization7,056  6,396 
Property and equipment, net2,036  1,568 
Other assets:   
Investment in sales-type lease, long-term13  134 
Capitalized commissions, long-term89  106 
Right-of-use assets under operating leases2,335   
Other long-term assets413  388 
Total assets$18,922  $15,180 
Liabilities and stockholders’ deficit   
Current liabilities:   
Accounts payable$1,544  $843 
Accrued liabilities1,122  2,216 
Unearned revenue9,558  9,610 
Current portion of finance lease obligations137  194 
Current portion of operating lease obligations1,364   
Current portion of notes payable and warrant debt, net of discounts1,255  968 
Total current liabilities14,980  13,831 
Long-term portion of unearned revenue1,760  1,842 
Long-term portion of finance lease obligations110  179 
Long-term portion of operating lease obligations989   
Long-term portion of notes payable and warrant debt, net of discounts2,485  5,429 
Derivative liability, at fair value125  9 
Other liabilities141  143 
Total liabilities20,590  21,433 
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 shares issued and outstanding, at amounts paid in   
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; 7,934,760 and 6,749,359 shares issued, respectively and 7,922,044 and 6,736,643 shares outstanding, respectively79  67 
Additional paid-in capital208,914  203,735 
Accumulated deficit(209,958) (209,340)
Accumulated other comprehensive loss(534) (546)
Treasury stock, at cost, 12,716 shares(169) (169)
Total stockholders’ deficit(1,668) (6,253)
Total liabilities and stockholders’ deficit$18,922  $15,180 

See accompanying notes to the condensed consolidated financial statements.


Sonic Foundry, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for share and per share data)
(Unaudited)

 Three Months Ended June 30, Nine Months Ended June 30,
 2020 2019 2020 2019
Revenue:       
Product and other $2,744   $4,221   $7,612   $7,768 
Services5,173  5,847  16,987  17,799 
Total revenue7,917  10,068  24,599  25,567 
Cost of revenue:       
Product and other1,199  1,558  3,188  2,854 
Services971  1,123  3,566  3,673 
Total cost of revenue2,170  2,681  6,754  6,527 
Gross margin5,747  7,387  17,845  19,040 
Operating expenses:       
Selling and marketing2,980  3,785  9,433  11,564 
General and administrative1,030  1,609  3,647  4,492 
Product development1,511  1,849  4,600  5,617 
Total operating expenses5,521  7,243  17,680  21,673 
Income (loss) from operations226  144  165  (2,633)
Non-operating expenses:       
Interest expense, net(140) (276) (621) (657)
Other expense, net(106) (63) (150) (66)
Total non-operating expenses(246) (339) (771) (723)
Income (loss) before income taxes(20) (195) (606  (3,356)
Income tax benefit (expense)127  36  (12) (77)
Net income (loss) $107   $(159)  $(618)  $(3,433)
Dividends on preferred stock   (24)   (122)
Net income (loss) attributable to common stockholders $107   $(183)  $(618)  $(3,555)
Income (loss) per common share       
– basic $0.01   $(0.03)  $(0.09)  $(0.64)
– diluted $0.01   $(0.03)  $(0.09)  $(0.64)
Weighted average common shares       
– basic7,399,545  6,122,098  6,972,924  5,528,999 
– diluted7,830,293  6,122,098  6,972,924  5,528,999 

See accompanying notes to the condensed consolidated financial statements


Sonic Foundry, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

 Nine Months Ended
June 30,
 2020 2019
Operating activities   
Net loss$(618) $(3,433)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Amortization of other intangibles204  170 
Depreciation and amortization of property and equipment644  748 
Loss on sale of fixed assets  8 
Provision for doubtful accounts - including financing receivables31  31 
Provision for inventory reserve90   
Loss on conversion of related party debt to equity26   
Stock-based compensation expense related to stock options and warrants104  203 
Stock issued for board of director fees61  246 
Deferred loan interest to related party322   
Remeasurement loss (gain) on derivative liability116  (12)
Changes in operating assets and liabilities:   
Accounts receivable1,077  660 
Financing receivables  87 
Inventories(76) 75 
Investment in sales-type lease136   
Capitalized commissions127  138 
Prepaid expenses and other current assets(128) 280 
Right-of-use assets under operating leases208   
Operating lease obligations(234)  
Other long-term assets(24)  
Accounts payable and accrued liabilities(749) (294)
Other long-term liabilities(2) (46)
Unearned revenue(153) (1,339)
Net cash provided by (used in) operating activities1,162  (2,478)
Investing activities   
Purchases of property and equipment(683) (373)
Net cash used in investing activities(683) (373)
Financing activities   
Proceeds from notes payable2,778  5,500 
Proceeds from lines of credit  9,199 
Payments on notes payable(984) (583)
Payments on lines of credit  (9,636)
Payment of debt issuance costs  (110)
Proceeds from issuance of preferred stock and common stock2  864 
Proceeds from exercise of common stock options18   
Payments on finance lease obligations(162) (193)
Net cash provided by (used in) financing activities1,652  5,041 
Changes in cash and cash equivalents due to changes in foreign currency16  8 
Net increase (decrease) in cash and cash equivalents2,147  2,198 
Cash and cash equivalents at beginning of year4,295  1,189 
Cash and cash equivalents at end of period$6,442  $3,387 
Supplemental cash flow information:   
Interest paid$114  $425 
Income taxes paid, foreign141  237 
Non-cash financing and investing activities:   
Property and equipment financed by finance lease or accounts payable478  45 
Debt discount and warrant  679 
Preferred stock dividends paid in additional shares  122 
Conversion of preferred shares to common shares  1,772 
Conversion of related party debt to common shares5,005   
      

See accompanying notes to the condensed consolidated financial statements.

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

 Three Months Ended
June 30,
 Nine Months Ended
June 30,
 2020 2019 2020 2019
        
Net income (loss)$107  $(159) $(618) $(3,433)
Add:       
Depreciation and amortization 215   240   648   748 
Income tax (benefit) expense(127) (36)  12   77 
Interest expense 140   276   621   657 
Stock-based compensation expense 18  (17)  104   203 
Severance   436     562 
Adjusted EBITDA$353  $740  $767  $(1,186)