Sonic Foundry Announces Fiscal 2018 First Quarter Financial Results
February 13 2018 - 4:05PM
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 InformationTo 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.
WebcastThe 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 StatementsThis 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 WiseDirector of
CommunicationsSonic Foundry920.226.0269nicolew@sonicfoundry.com
Investor:Peter Seltzberg, Managing
DirectorDarrow Associates, Inc.1951 Lowell LaneMerrick, NY
11566516-419-9915pseltzberg@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 $375 |
5,878 |
|
|
7,903 |
|
Financing
receivables, current, net of allowances of $200 |
924 |
|
|
925 |
|
Inventories |
934 |
|
|
986 |
|
Investment in sales-type lease, current |
148 |
|
|
148 |
|
Prepaid
expenses and other current assets |
921 |
|
|
1,085 |
|
Total
current assets |
10,312 |
|
|
12,258 |
|
Property and
equipment: |
|
|
|
Leasehold
improvements |
1,041 |
|
|
1,041 |
|
Computer
equipment |
6,135 |
|
|
6,101 |
|
Furniture
and fixtures |
813 |
|
|
789 |
|
Total
property and equipment |
7,989 |
|
|
7,931 |
|
Less
accumulated depreciation and amortization |
6,457 |
|
|
6,181 |
|
Property
and equipment, net |
1,532 |
|
|
1,750 |
|
Other assets: |
|
|
|
Goodwill |
10,468 |
|
|
10,455 |
|
Customer
relationships, net of amortization of $1,056 and $990 |
1,447 |
|
|
1,505 |
|
Product
rights, net of amortization of $442 and $411 |
230 |
|
|
261 |
|
Financing
receivables, long-term |
1,310 |
|
|
1,310 |
|
Investment in sales-type lease, long-term |
406 |
|
|
407 |
|
Other
long-term assets |
515 |
|
|
410 |
|
Total
assets |
$ |
26,220 |
|
|
$ |
28,356 |
|
Liabilities and
stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Revolving
lines of credit |
$ |
2,215 |
|
|
$ |
2,065 |
|
Accounts
payable |
1,076 |
|
|
1,314 |
|
Accrued
liabilities |
1,426 |
|
|
1,387 |
|
Unearned
revenue |
9,797 |
|
|
11,332 |
|
Current
portion of capital lease and financing arrangements |
217 |
|
|
256 |
|
Current
portion of notes payable, net of discounts |
338 |
|
|
737 |
|
Total
current liabilities |
15,069 |
|
|
17,091 |
|
Long-term
portion of unearned revenue |
3,239 |
|
|
2,970 |
|
Long-term
portion of capital lease and financing arrangements |
192 |
|
|
244 |
|
Long-term
portion of notes payable and warrant debt, net of discounts |
129 |
|
|
123 |
|
Derivative liability, at fair value |
9 |
|
|
12 |
|
Other
liabilities |
303 |
|
|
372 |
|
Deferred
tax liability |
3,076 |
|
|
4,426 |
|
Total
liabilities |
22,017 |
|
|
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 in |
1,824 |
|
|
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 outstanding |
45 |
|
|
45 |
|
Additional paid-in capital |
198,037 |
|
|
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’ equity |
4,203 |
|
|
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 |
|
Services |
5,815 |
|
|
5,538 |
|
Total revenue |
8,895 |
|
|
9,307 |
|
Cost of
revenue: |
|
|
|
Product and other |
1,280 |
|
|
1,687 |
|
Services |
1,145 |
|
|
911 |
|
Total cost of
revenue |
2,425 |
|
|
2,598 |
|
Gross
margin |
6,470 |
|
|
6,709 |
|
Operating
expenses: |
|
|
|
Selling and
marketing |
4,110 |
|
|
4,810 |
|
General and
administrative |
1,573 |
|
|
1,450 |
|
Product
development |
1,753 |
|
|
1,951 |
|
Total operating
expenses |
7,436 |
|
|
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
taxes |
1,387 |
|
|
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 |
|
|
|
–
basic |
4,458,075 |
|
|
4,411,559 |
|
–
diluted |
4,512,822 |
|
|
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 intangibles |
134 |
|
|
140 |
|
Depreciation and amortization of property and equipment |
285 |
|
|
362 |
|
Provision
for doubtful accounts |
25 |
|
|
(30 |
) |
Deferred
taxes |
(1,396 |
) |
|
(3 |
) |
Stock-based compensation expense related to stock options |
245 |
|
|
254 |
|
Remeasurement gain on subordinated debt |
— |
|
|
(6 |
) |
Remeasurement gain on derivative liability |
(3 |
) |
|
(21 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
2,007 |
|
|
1,044 |
|
Financing
receivables |
— |
|
|
33 |
|
Inventories |
52 |
|
|
614 |
|
Prepaid
expenses and other current assets |
106 |
|
|
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 activities |
231 |
|
|
(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
credit |
5,743 |
|
|
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 warrants |
500 |
|
|
— |
|
Payments on capital
lease and financing arrangements |
(91 |
) |
|
(73 |
) |
Net cash provided by
financing activities |
131 |
|
|
767 |
|
Changes in cash and
cash equivalents due to changes in foreign currency |
2 |
|
|
(105 |
) |
Net increase (decrease)
in cash and cash equivalents |
296 |
|
|
(714 |
) |
Cash and cash
equivalents at beginning of period |
1,211 |
|
|
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, foreign |
34 |
|
|
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 stock |
28 |
|
|
— |
|
Preferred
stock dividends paid in additional shares |
44 |
|
|
— |
|
|
|
|
|
Sonic Foundry, Inc.Condensed
Consolidated Non-GAAP Adjusted EBITDA
Reconciliation(in
thousands)(Unaudited) |
|
|
|
Three Months EndedDecember 31, |
|
2017 |
|
2016 |
|
|
|
|
Net income (loss) |
$ |
320 |
|
|
$ |
(1,509 |
) |
Add: |
|
|
|
Depreciation and
amortization |
419 |
|
|
494 |
|
Income tax
expense |
(1,387 |
) |
|
(131 |
) |
Interest
expense |
68 |
|
|
127 |
|
Stock-based
compensation expense |
245 |
|
|
254 |
|
Adjusted EBITDA |
$ |
(335 |
) |
|
$ |
(765 |
) |
|
|
|
|
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