Sonic Foundry Announces Fiscal 2021 Second Quarter Financial Results

Friday, 14. May 2021 00:17

MADISON, Wis., May 13, 2021 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation, management solutions as well as virtual and hybrid events, today announced consolidated financial results for its fiscal 2021 second quarter ended March 31, 2021.

Fiscal 2021 Second Quarter Highlights

  • Total revenues of $8.7 million, exceeding the plan and slightly ahead of $8.7 million in the second quarter of 2020; This despite the second quarter of 2021 being fully under COVID-19 constraints, while second quarter of 2020 had minimal COVID-19 impact.
  • Gross margin was $6.1 million, or 70 percent of sales, compared to $6.3 million, or 72 percent of sales, in the second quarter of 2020.
  • Net income attributable to common stockholders of $257,000, or $0.03 per share, compared to net income of $95,000, or $0.01 per share in the second quarter of 2020.
  • Adjusted EBITDA was $851,000 compared to $710,000 in the second quarter of 2020.

Year-to-date Financial Highlights

  • Total year-to-date revenues of $17.9 million compared to $16.7 million at the second quarter of 2020, a $1.2 million or 7 percent increase.
  • Gross margin was $12.9 million, or 72 percent of sales, compared to $12.1 million, or 73 percent of sales, in the second quarter of 2020.
  • Year-to-date net income attributable to common stockholders of $889,000, or $0.11 per share, compared to net loss of $725,000, or $(0.11) per share, year-to-date at the second quarter of 2020.
  • Year-to-date adjusted EBITDA was $2.2 million compared to $564,000, year-to-date at the second quarter of 2020.

Fiscal 2021 Second Quarter Review
Service revenue, including support, hosting, events, and installs were $6.1 million, compared to $5.9 million in the prior year. Product revenue was $2.6 million during the second quarter of fiscal year 2021 compared to $2.7 million in the same quarter last year. Revenue related to hosting increased 27 percent in the second quarter of 2021 compared to the same quarter last year. The increase reflects the company’s strategy to invest and execute services in the hosting services product offering.

Year-to-date Financial Review
Service revenue, including support, hosting, events, and professional services were $13.2 million year to date this year, compared to $11.8 million in the prior year. Product revenue was $4.7 million year to date through the second quarter of 2021 compared to $4.9 million as of the same period last year. Notably, year-to-date revenue related to hosting increased 42 percent as of the second quarter of 2021 compared to the same period last year. The company expects to recognize $3.8 million of the current unearned revenue in the third quarter of fiscal 2021.

“We continue to exceed our plan and outperform the prior year by addressing and overcoming challenges presented by the pandemic,” said Joe Mozden Jr., CEO, Sonic Foundry. “Traditionally, the classroom has been our primary focus in the marketplace with major components of our revenue coming from in-room activity. Even though no one has been in the classroom the past year, we overcame this challenge and I’m pleased to once again say that our quarter delivered strong results across several key financial metrics. I attribute overcoming this roadblock and success to the deliberate, strategic decisions we made at the start of the pandemic to invest in and aggressively pursue two new large growth markets – video hosting management and hybrid events – components of our larger plan to create greater long-term, sustainable growth at Sonic Foundry. We anticipated the demand for services in these areas, invested accordingly and we positioned our company to best help our clients through the uncertainty of the past year.”

Mozden continued: “We believe these new areas of focus will continue to grow substantially for us. We're encouraged by the overall growth in both our hosting and events businesses. The hosting business has increased by 42%. We believe the events business will grow based on year-to-date sales activity and growing pipeline. Post-COVID, we anticipate not only the positive momentum from our new businesses but also a renewed energy and growth in the traditional classroom. Classrooms will open again in the near future, and the need for video technologies like Mediasite to deliver anytime, anywhere education is a critical piece of the puzzle for schools.”

“Our technology is unmatched, and we have an extensive customer base that understands the new realities their students and instructors demand. I’m proud of the progress we’ve made as a business to date, and fully anticipate we will continue to create new revenue streams to grow our business,” Mozden 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 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 to adjusted EBITDA for the second quarter ended March 31, 2021 and 2020 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 as well as virtual and hybrid events. 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.

© 2021 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:
Media:
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)

  March 31,   September 30, 
  2021  2020 
Assets        
Current assets:        
Cash and cash equivalents $5,425   $7,619  
Accounts receivable, net of allowances of $233 & $236  5,109    6,250  
Inventories  1,090    1,167  
Investment in sales-type lease, current  203    275  
Capitalized commissions, current  315    440  
Prepaid expenses and other current assets  1,083    1,065  
Total current assets  13,225    16,816  
Property and equipment:        
Leasehold improvements  1,113    1,128  
Computer equipment  8,282    7,960  
Furniture and fixtures  1,400    1,366  
Total property and equipment  10,795    10,454  
Less accumulated depreciation and amortization  7,760    7,295  
Property and equipment, net  3,035    3,159  
Other assets:        
Investment in sales-type lease, long-term  72    76  
Capitalized commissions, long-term  71    100  
Right-of-use assets under operating leases  1,403    2,081  
Other long-term assets  467    397  
Total assets $18,273   $22,629  
Liabilities and stockholders equity (deficit)        
Current liabilities:        
Accounts payable $1,077   $2,689  
Accrued liabilities  2,454    2,565  
Current portion of unearned revenue  7,813    10,402  
Current portion of finance lease obligations  85    119  
Current portion of operating lease obligations  1,135    1,425  
Current portion of notes payable and warrant debt, net of discounts  1,086    1,104  
Total current liabilities  13,650    18,304  
Long-term portion of unearned revenue  1,766    1,736  
Long-term portion of finance lease obligations  46    89  
Long-term portion of operating lease obligations  267    665  
Long-term portion of notes payable and warrant debt, net of discounts  2,089    2,673  
Derivative liability, at fair value  85    66  
Other liabilities  154    144  
Total liabilities  18,057    23,677  
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; 8,063,713 and
7,965,325 shares issued, respectively and 8,050,997 and 7,952,609 shares
outstanding, respectively
  81    80  
Additional paid-in capital  209,523    209,022  
Accumulated deficit  (208,630)   (209,519) 
Accumulated other comprehensive loss  (589)   (462) 
Treasury stock, at cost, 12,716 shares  (169)   (169) 
Total stockholders’ equity (deficit)  216    (1,048) 
Total liabilities and stockholders equity (deficit) $18,273   $22,629  



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

  Three Months Ended
March 31,
  Six Months Ended
March 31,
 
  2021  2020  2021  2020 
Revenue:                 
Product and other $2,571   $2,812   $4,747   $4,867   
Services  6,140    5,854    13,129    11,814   
Total revenue  8,711    8,666    17,876    16,681   
Cost of revenue:                 
Product and other  951    1,158    1,764    1,989   
Services  1,624    1,247    3,222    2,595   
Total cost of revenue  2,575    2,405    4,986    4,584   
Gross margin  6,136    6,261    12,890    12,097   
Operating expenses:                 
Selling and marketing  2,895    3,057    5,905    6,453   
General and administrative  1,055    1,176    2,253    2,617   
Product development  1,731    1,499    3,472    3,089   
Total operating expenses  5,681    5,732    11,630    12,159   
Income (loss) from operations  455    529    1,260    (62)  
Non-operating expenses:                 
Interest expense, net  (23)   (218)   (52)   (481)  
Other expense, net  (38)   (58)   (27)   (43)  
Total non-operating expenses  (61)   (276)   (79)   (524)  
Income (loss) before income taxes  394    253    1,181    (586)  
Income tax benefit (expense)  (137)   (158)   (292)   (139)  
Net income (loss) $257   $95   $889   $(725)  
Dividends on preferred stock                 
Net income (loss) attributable to common
stockholders
 $257   $95   $889   $(725)  
Income (loss) per common share                 
– basic $0.03   $0.01   $0.11   $(0.11)  
– diluted $0.03   $0.01   $0.11   $(0.11)  
Weighted average common shares                 
– basic  8,040,513    6,785,180    8,001,723    6,760,779   
– diluted  8,557,788    6,933,227    8,451,913    6,760,779   



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

  Six Months Ended 
  March 31, 
  2021
  2020
 
Operating activities        
Net Income (loss) $889   $(725) 
Adjustments to reconcile net income ( loss ) to net cash provided by (used
in) operating activities:
        
Amortization of other intangibles  33    150  
Depreciation and amortization of property and equipment  539    433  
Loss on sale of fixed assets  5      
Provision for doubtful accounts - including financing receivables  3    9  
Stock-based compensation expense related to stock options  283    86  
Stock issued for board of director fees      64  
Deferred loan interest to related party      264  
Remeasurement loss (gain) on derivative liability  19    63  
Changes in operating assets and liabilities:        
Accounts receivable  925    175  
Inventories  71    (45) 
Investment in sales-type lease  63    126  
Capitalized commissions  154    134  
Prepaid expenses and other current assets  (45)   64  
Right-of-use assets under operating leases  655    562  
Operating lease obligations  (665)   (578) 
Other long-term assets  (93)   4  
Accounts payable and accrued liabilities  (1,628)   (162) 
Other long-term liabilities  17    (1) 
Unearned revenue  (2,495)   57  
Net cash provided by (used in) operating activities  (1,270)   680  
Investing activities        
Purchases of property and equipment  (448)   (118) 
Net cash used in investing activities  (448)   (118) 
Financing activities        
Proceeds from notes payable      463  
Payments on notes payable  (618)   (618) 
Proceeds from issuance of preferred stock and common stock  10      
Proceeds from exercise of common stock options  209    1  
Payments on finance lease obligations  (76)   (124) 
Net cash used in financing activities  (475)   (278) 
Changes in cash and cash equivalents due to changes in foreign currency  (1)   7  
Net increase (decrease) in cash and cash equivalents  (2,194)   291  
Cash and cash equivalents at beginning of year  7,619    4,295  
Cash and cash equivalents at end of period $5,425   $4,586  
Supplemental cash flow information:        
Interest paid $31   $479  
Income taxes paid, foreign  44    90  
Non-cash financing and investing activities:        
Property and equipment financed by finance lease or accounts payable      821  



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

  Three Months Ended
March 31,
  Six Months Ended
March 31,
 
  2021  2020  2021  2020
  
Net income (loss) $257  $95  $888  $(725)  
Add:                 
Depreciation and amortization  270   262   538   583   
Income tax expense (benefit)  137   158   292   139   
Interest expense  23   218   52   481   
Stock-based compensation expense  165   34   284   86   
Severance  -   -   101   0   
Adjusted EBITDA $852  $767  $2,155  $564   

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