June 16, 2024

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Sonic Foundry Announces Fiscal 2020 Fourth Quarter and Fiscal 2020 Financial Results – Third Consecutive Quarter of Net Income

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MADISON, Wis., Dec. 22, 2020 (GLOBE NEWSWIRE) — Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, as well as virtual and hybrid events, today announced consolidated financial results for its fiscal 2020 fourth quarter and fiscal year ended September 30, 2020.

Fiscal 2020 Fourth Quarter Highlights

  • Billings of $11 million in the fourth quarter of 2020, a $1.2 million increase over the same quarter last year
  • Total revenues of $10.2 million compared to $9.2 million in the fourth quarter of 2019, a 10 percent increase
  • Gross margin was $7.3 million, or 72 percent in the fourth quarter of 2020 compared to $6.5 million, or 70 percent in the fourth quarter of 2019
  • Net income attributable to common stockholders of $439,000, or $0.06 per share, compared to a net loss of $(179,000), or $(0.03) per share, in the fourth quarter of 2019, an improvement of $618,000
  • Adjusted EBITDA of $1.6 million for the fourth quarter of 2020 compared to $744,000 in the same quarter last year, a 115% improvement
  • Unearned revenue was $12.1 million as of September 30, 2020 and $11.5 million as of September 30, 2019

Fiscal 2020 Year-End Highlights

  • Billings totaled $35.4 million in fiscal 2020 compared to $35.1 million in the prior year
  • Revenue remained flat year over year at $34.8 million despite impacts from COVID-19
  • Gross margin declined slightly from 73 percent in fiscal 2019 to 72 percent in fiscal 2020
  • Net loss attributable to common stockholders of $(179,000), or $(0.02) per share compared to a net loss of $(3.7) million, or $(0.64) per share in fiscal 2019
  • Adjusted EBITDA was $2.4 million for the year compared to $(450,000) in the prior year. The company adjusts EBITDA for non-cash stock compensation expense and severance expense

Fiscal 2020 Fourth Quarter Review

Product billings were $2.9 million during the fourth quarter of 2020 compared to $3.7 million in the same quarter last year. Service billings, including support, hosting, events and installs were $8 million, compared to $6.1 million in the prior year.  Notably, billings related to hosting increased 86 percent in the fourth quarter of 2020 compared to the same quarter last year.  These increases in services are indicative of the acceleration in video content creation across the globe. The company expects to recognize $4.1 million of the current unearned revenue in the first quarter of fiscal 2021. Recurring revenue of $6.8 million was 67 percent of total revenue in the fourth quarter of 2020, compared to $5.9 million, or 64 percent of total revenue, in the fourth quarter of 2019. 

“It has been incredibly exciting for me to join Sonic Foundry at this pivotal point in its 30-year history,” said Joe Mozden Jr., CEO, Sonic Foundry. ”Every organization across the world has been impacted by COVID-19 in a profound way. We have had the sincere privilege of being positioned to help our customers navigate unchartered waters – new users like Norland College in the United Kingdom and Hamid Bin Khalifa University, part of the Qatar Foundation, and longtime clients like Florida Atlantic University and Texas A&M University. Our solutions are helping them continue, if not grow their businesses, by keeping their classes, trainings, work and events going virtually, despite distance.”  

Mozden continued: “Whether it’s migrating a health organization’s in-person conference to a virtual platform to ensure they continue to exchange vital information with thousands of users, or enabling teachers to connect with their students in more thoughtful and engaging ways, we’re proud to be a lifeline to our customers in this new video-centric world.” 

“We are rapidly adapting our business to the trends that we are seeing, and are accelerating our investments and focus on high value-add markets which we believe will grow in a post COVID world. Increased demand for hosting, our virtual events platform and our video content management capabilities reflect significant opportunities for Sonic Foundry and are the basis for changes we are making in our business. I am extremely proud of our team for quickly pivoting to meet our customers’ needs during this difficult year. We are beginning a new journey with greater emphasis on product orientation coupled with our historical customer-centric focus. A great example of that is the innovations we are driving for in the new hybrid world for the classroom, the office, and the events industry,” he concluded.  

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 as well as 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. A reconciliation of net loss to adjusted EBITDA for the fourth quarter ended September 30, 2020, and 2019 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 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.

© 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.

Contact:
Nicole Wise, Director of Communications
920.226.0269
[email protected]

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

    September 30,  
    2020     2019  
Assets                
Current assets:                
Cash and cash equivalents   $ 7,619     $ 4,295  
Accounts receivable, net of allowances of $236 and $135     6,250       6,532  
Inventories     1,167       558  
Investment in sales-type lease, current     275       163  
Capitalized commissions, current     440       464  
Prepaid expenses and other current assets     1,065       972  
Total current assets     16,816       12,984  
Property and equipment:                
Leasehold improvements     1,128       1,121  
Computer equipment     7,960       5,610  
Furniture and fixtures     1,366       1,233  
Total property and equipment     10,454       7,964  
Less accumulated depreciation and amortization     7,295       6,396  
Property and equipment, net     3,159       1,568  
Other assets:                
Investment in sales-type lease, long-term     76       134  
Capitalized commissions, long-term     100       106  
Right-of-use assets under operating leases     2,081        
Other long-term assets     397       388  
Total assets   $ 22,629     $ 15,180  
Liabilities and stockholders’ equity (deficit)                
Current liabilities:                
Accounts payable     2,689       843  
Accrued liabilities     2,565       2,216  
Unearned revenue     10,402       9,610  
Current portion of finance lease obligations     119       194  
Current portion of operating lease obligations     1,425        
Current portion of notes payable and warrant debt, net of discounts     1,104       968  
Total current liabilities     18,304       13,831  
Long-term portion of unearned revenue     1,736       1,842  
Long-term portion of finance lease obligations     89       179  
Long-term portion of operating lease obligations     665        
Long-term portion of notes payable and warrant debt, net of discounts     2,673       5,429  
Derivative liability, at fair value     66       9  
Other liabilities     144       143  
Total liabilities     23,677       21,433  
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; 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; 7,965,325 and 6,749,359 shares issued and 7,952,609 and 6,736,643 shares outstanding     80       67  
Additional paid-in capital     209,022       203,735  
Accumulated deficit     (209,519 )     (209,340 )
Accumulated other comprehensive loss     (462 )     (546 )
Treasury stock, at cost, 12,716 shares     (169 )     (169 )
Total stockholders’ equity (deficit)     (1,048 )     (6,253 )
Total liabilities and stockholders’ equity (deficit)   $ 22,629     $ 15,180  

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

    Quarters Ended September 30,     Years Ended September 30,  
    2020     2019     2020     2019  
Revenue:                                
Product and other   $ 2,727     $ 3,863     $ 10,339     $ 11,631  
Services     7,427       5,351       24,414       23,150  
Total revenue     10,154       9,214       34,753       34,781  
Cost of revenue:                                
Product and other     1,243       1,534       4,430       4,387  
Services     1,638       1,219       5,204       4,893  
Total cost of revenue     2,881       2,753       9,634       9,280  
Gross margin     7,273       6,461       25,119       25,501  
Operating expenses:                                
Selling and marketing     3,591       3,163       13,025       14,727  
General and administrative     1,408       1,437       5,055       5,929  
Product development     1,703       1,736       6,303       7,353  
Total operating expenses     6,702       6,336       24,383       28,009  
Income/(loss) from operations     571       125       736       (2,508 )
Non-operating income (expenses):                                
Interest expense, net     (37 )     (240 )     (658 )     (897 )
Other expense, net     41       (51 )     (109 )     (117 )
Total non-operating expenses     4       (291 )     (767 )     (1,014 )
Loss before income taxes     575       (166 )     (31 )     (3,522 )
Income tax provision     (136 )     (13 )     (148 )     (90 )
Net loss   $ 439     $ (179 )   $ (179 )   $ (3,612 )
Dividends on preferred stock                       (122 )
Net loss attributable to common stockholders   $ 439     $ (179 )   $ (179 )   $ (3,734 )
Loss per common share:                                
Basic net loss per common share   $ 0.06     $ (0.03 )   $ (0.02 )   $ (0.64 )
Diluted net loss per common share   $ 0.05     $ (0.03 )   $ (0.02 )   $ (0.64 )
Weighted average common shares – Basic     7,940,480       6,736,285       7,216,135       5,833,301  
                                                  – Diluted     8,346,877       6,736,285       7,216,135       5,833,301  

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

    Years Ended  
    September 30,  
    2020     2019  
Operating activities                
Net loss   $ (179 )   $ (3,612 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Amortization of other intangibles     231       307  
Depreciation and amortization of property and equipment     889       970  
Loss on sale of fixed assets           8  
Provision for doubtful accounts – including financing receivables     111       116  
Provision for inventory reserve     122        
Loss on conversion of related party debt to equity     26        
Stock-based compensation expense related to stock options and warrants     158       177  
Stock issued for board of director’s fees     63       246  
Deferred loan interest to related party     317       259  
Remeasurement gain on derivative liability     57       (8 )
Changes in operating assets and liabilities:                
Accounts receivable     268       950  
Financing receivables           293  
Inventories     (729 )     472  
Investment in sales-type lease     (48 )     120  
Capitalized commissions     30       123  
Prepaid expenses and other current assets     (57 )     15  
Right-of-use assets under operating leases     492        
Operating lease obligations     (528 )      
Other long-term assets            
Accounts payable and accrued liabilities     1,503       (204 )
Other long-term liabilities     (2 )     (68 )
Unearned revenue     617       (900 )
Net cash used in operating activities     3,341       (736 )
Investing activities                
Purchases of property and equipment     (1,736 )     (433 )
Net cash used in investing activities     (1,736 )     (433 )
Financing activities                
Proceeds from notes payable     3,157       5,500  
Proceeds from lines of credit           9,199  
Payments on notes payable     (1,358 )     (833 )
Payments on lines of credit           (10,098 )
Payments of debt issuance costs           (110 )
Payments to settle put on term debt            
Proceeds from issuance of preferred stock and common stock     73       873  
Payments on capital lease and financing arrangements     (202 )     (250 )
Net cash provided by financing activities     1,670       4,281  
Changes in cash and cash equivalents due to changes in foreign currency     49       (6 )
Net increase (decrease) in cash and cash equivalents     3,324       3,106  
Cash and cash equivalents at beginning of year     4,295       1,189  
Cash and cash equivalents at end of year   $ 7,619     $ 4,295  
Supplemental cash flow information:                
Interest paid   $ 148     $ 618  
Income taxes paid, foreign     154       99  
Non-cash financing and investing activities:                
Property and equipment financed by finance lease or accounts payable     724       186  
Debt discount and warrant           679  
Preferred stock dividend paid in additional shares           122  
Conversion of preferred shares to common shares           1,773  
Conversion of related party debt to common shares     5,005        

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

    Quarters Ended September 30,     Years Ended September 30,  
    2020     2019     2020     2019  
Net income (loss)   $ 439     $ (179 )   $ (179 )   $ (3,612 )
Add:                                
Depreciation and amortization     235       228       883       977  
Income tax expense     136       13       148       90  
Interest expense     37       240       658       897  
Stock-based compensation expense     55       (25 )     158       175  
Severance     705       467       705       1,023  
Adjusted EBITDA   $ 1,607     $ 744     $ 2,373     $ (450 )


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