Authorization

Sonic Foundry Announces Fourth Quarter and Fiscal 2018 Financial Results

MADISON, Wis., March 15, 2019 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2018 fourth quarter and fiscal year ended SeptemberA30, 2018.Fiscal 2018 Fourth Quarter Highlights

Billings totaled $9.9 million in the fourth quarter of 2018, an increase of 5 percent, compared to the same period last year



Total revenues of $8.5 million compared to $8.3 million in the fourth quarter of 2017



Gross margin was $6.1 million, or 72 percent of sales, compared to $6.1 million, or 74 percent of sales, in the fourth quarter of 2017



Non-cash expense of $11.8 million related to impairment of goodwill and intangible assets recorded in fourth quarter of 2018 compared to $600,000 related to impairment of goodwill recorded in fourth quarter of 2017



Deferred tax liability write-off of the portion related to goodwill and intangible assets recorded in fourth quarter of 2018 which offsets impact of impairment by $2.4 million



Net loss of $(10) million, or $(2.01) per share, compared to $(1.6) million, or $(0.37) per share, in the fourth quarter of 2017; net loss, net of the one-time impairment charges and the benefit from the write-off of the related deferred tax liability, was $(1.2) million in the fourth quarter of 2018 compared to $(985,000) in the fourth quarter of 2017



Net loss in the fourth quarter of 2018 improved by $640,000 from preliminary results released on December 20, 2018 as a result of a final tax adjustment



Adjusted EBITDA was $(547,000) compared to $(236,000) in the fourth quarter of 2017



Unearned revenue was $13.3 million as of SeptemberA30, 2018, down $966,000 from SeptemberA30, 2017.

Fiscal 2018 Fourth Quarter ReviewService billings, including support, hosting, events, and installs increased 10 percent to $6.5 million, compared to $5.9 million the prior year. Increases in support and hosting billings primarily drove the change in service billings. The company expects to recognize $4.6 million of the current unearned revenue in the first quarter of fiscal 2019. Recurring revenue of $5.6 million was 66 percent of total revenue in the fourth quarter of 2018, up from $5.4 million, or 65 percent of total revenue, in the fourth quarter of 2017.Product billings were $3.4 million during the fourth quarter of fiscal year 2018, compared to $3.5 million in the same quarter last year. Product billings are $12.5 million year-to-date, compared to $14.2 million last year, reflecting the shift toward larger unit shipments of our lower cost recorders. Year-to-date, shipments of the Mediasite RL 220, RL 120 and RL Mini recorders increased 50 percent over the prior year (811 in fiscal 2018 vs. 541 in fiscal 2017).Operating expenses were $7.2 million during the fourth quarter of 2018, up $262,000 or 4 percent, from the same period in 2017. Full impairment of the remaining balance of goodwill and intangible assets of $11.8 million was recorded in the fourth quarter of 2018 compared to $600,000 of goodwill impairment recorded in the same period last year. The net loss of $10 million increased from a net loss of $1.6 million in the same period in 2017, largely due to the impairment charge.a??Our strategic focus in fiscal 2018 to bolster our affordable line of products led to larger shipments of our newest recorder models. Wea??ve also updated our product mix to offer the most accessible and engaging video solutions on the market, and saw substantial growth of our cloudAcustomers,a?? said Gary Weis, CEO, Sonic Foundry. a??As Ia??ve said previously, we expect to realize the benefits of actions wea??ve already taken to improve business efficiency. The executive team and I are focused on the fundamentals of the business,Awith the confidence that the strategic operational changes that wea??ve put in place will result in efficiencies expected to drive significant improvement to adjusted EBITDA in fiscal 2019 and beyond.a??Non-GAAP Financial Information
To supplement and enhance the readera??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 (loss) to adjusted EBITDA for the fourth quarters and fiscal year ended SeptemberA30, 2018 and 2017 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.About Sonic FoundryA, 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 www.sonicfoundry.com and @mediasite.A 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.A 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 companya??s future.A These types of statements address matters that are subject to many risks and uncertainties.A Actual results could differ materially from the forward-looking guidance we provide.A 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.A These filings can be accessed on-line at www.sec.gov and other websites or can be obtained from the companya??s investor relations department.A 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
920.226.0269
nicolew@sonicfoundry.comASonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)

A



September 30,



A



2018



A



2017



Assets



A



A



A



Current assets:



A



A



A



Cash and cash equivalents



$



1,189



A



A



$



1,211



A



Accounts receivable, net of allowances of $524 and $375



7,418



A



A



7,903



A



Financing receivables, current, net of allowances of $526 and $200



100



A



A



925



A



Inventories



1,027



A



A



986



A



Investment in sales-type lease, current



150



A



A



148



A



Prepaid expenses and other current assets



941



A



A



1,085



A



A A ATotal current assets



10,825



A



A



12,258



A



Property and equipment:



A



A



A



Leasehold improvements



1,105



A



A



1,041



A



Computer equipment



5,718



A



A



6,101



A



Furniture and fixtures



1,099



A



A



789



A



A A ATotal property and equipment



7,922



A



A



7,931



A



A A ALess accumulated depreciation and amortization



6,009



A



A



6,181



A



A A A A A Property and equipment, net



1,913



A



A



1,750



A



Other assets:



A



A



A



Goodwill



a??



A



A



10,455



A



Customer relationships, net of amortization of $1,256 and $990



a??



A



A



1,505



A



Product rights, net of amortization of $534 and $411



a??



A



A



261



A



Financing receivables, long-term



181



A



A



1,310



A



Investment in sales-type lease, long-term



249



A



A



407



A



Other long-term assets



415



A



A



410



A



Total assets



$



13,583



A



A



$



28,356



A



Liabilities and stockholdersa?? equity (deficit)



A



A



A



Current liabilities:



A



A



A



Revolving lines of credit



$



885



A



A



$



2,065



A



Accounts payable



1,610



A



A



1,314



A



Accrued liabilities



1,609



A



A



1,387



A



Unearned revenue



11,645



A



A



11,332



A



Current portion of capital lease and financing arrangements



248



A



A



256



A



Current portion of notes payable and warrant debt, net of discounts



593



A



A



737



A



A A ATotal current liabilities



16,590



A



A



17,091



A



Long-term portion of unearned revenue



1,691



A



A



2,970



A



Long-term portion of capital lease and financing arrangements



187



A



A



244



A



Long-term portion of notes payable and warrant debt, net of discounts



1,357



A



A



123



A



Derivative liability, at fair value



14



A



A



12



A



Other liabilities



202



A



A



372



A



Deferred tax liability



a??



A



A



4,426



A



A A ATotal liabilities



20,041



A



A



25,238



A



Commitments and contingencies



A



A



A



Stockholdersa?? equity (deficit):



A



A



A



Preferred stock, $.01 par value, authorized 500,000 shares; none issued



a??



A



A



a??



A



9% Preferred stock, Series A, voting, cumulative, convertible, $.01 par value (liquidation preference of $1,000 per
share), authorized 4,500 shares; 2,678 and 1,510 shares issued and outstanding, respectively, at amounts paid in



1,651



A



A



1,280



A



5% Preferred stock, Series B, voting, cumulative, convertible, $.01 par value (liquidation preference at par),
authorized 1,000,000 shares, none issued



a??



A



A



a??



A



Common stock, $.01 par value, authorized 10,000,000 shares; 5,113,400 and 4,470,791 shares issued and 5,100,684
and 4,458,075 shares outstanding



51



A



A



45



A



Additional paid-in capital



200,130



A



A



197,836



A



Accumulated deficit



(207,419



)



A



(195,253



)



Accumulated other comprehensive loss



(676



)



A



(595



)



Receivable for common stock issued



(26



)



A



(26



)



Treasury stock, at cost, 12,716 shares



(169



)



A



(169



)



A A ATotal stockholdersa?? equity (deficit)



(6,458



)



A



3,118



A



Total liabilities and stockholdersa?? equity (deficit)



$



13,583



A



A



$



28,356



A


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

A



Quarters Ended September 30,



A



Years Ended September 30,



A



2018



A



2017



A



2018



A



2017



Revenue:



A



A



A



A



A



A



A



Product and other



$



3,384



A



A



$



3,340



A



A



$



12,311



A



A



$



14,883



A



Services



5,106



A



A



4,960



A



A



22,233



A



A



21,117



A



Total revenue



8,490



A



A



8,300



A



A



34,544



A



A



36,000



A



Cost of revenue:



A



A



A



A



A



A



A



Product and other



1,416



A



A



1,368



A



A



5,231



A



A



6,097



A



Services



979



A



A



819



A



A



4,425



A



A



3,770



A



Total cost of revenue



2,395



A



A



2,187



A



A



9,656



A



A



9,867



A



Gross margin



6,095



A



A



6,113



A



A



24,888



A



A



26,133



A



Operating expenses:



A



A



A



A



A



A



A



Selling and marketing



3,764



A



A



3,726



A



A



15,622



A



A



16,912



A



General and administrative



1,641



A



A



1,541



A



A



6,354



A



A



5,941



A



Product development



1,781



A



A



1,657



A



A



7,142



A



A



7,238



A



Impairment of goodwill and intangible assets



11,809



A



A



600



A



A



11,809



A



A



600



A



Total operating expenses



18,995



A



A



7,524



A



A



40,927



A



A



30,691



A



Loss from operations



(12,900



)



A



(1,411



)



A



(16,039



)



A



(4,558



)



Non-operating income (expenses):



A



A



A



A



A



A



A



Interest expense, net



(140



)



A



(99



)



A



(601



)



A



(495



)



Other income (expense), net



44



A



A



(22



)



A



142



A



A



(65



)



Total non-operating expenses



(96



)



A



(121



)



A



(459



)



A



(560



)



Loss before income taxes



(12,996



)



A



(1,532



)



A



(16,498



)



A



(5,118



)



Benefit (provision) for income taxes



2,978



A



A



(53



)



A



4,332



A



A



79



A



Net loss



(10,018



)



A



(1,585



)



A



$



(12,166



)



A



$



(5,039



)



Dividends on preferred stock



(70



)



A



(94



)



A



(257



)



A



(169



)



Net loss attributable to common stockholders



$



(10,088



)



A



$



(1,679



)



A



$



(12,423



)



A



$



(5,208



)



Loss per common share:



A



A



A



A



A



A



A



a?? basic



$



(2.01



)



A



$



(0.37



)



A



(2.67



)



A



(1.17



)



a?? diluted



$



(2.01



)



A



$



(0.37



)



A



(2.67



)



A



(1.17



)



Weighted average common shares



A



A



A



A



A



A



A



a?? basic



4,989,544



A



A



4,458,075



A



A



4,655,520



A



A



4,436,333



A



a?? diluted



4,989,544



A



A



4,458,075



A



A



4,655,520



A



A



4,436,333



A


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

A



Years Ended September 30,



A



2018



A



2017



Operating activities



A



A



A



Net loss



$



(12,166



)



A



$



(5,039



)



Adjustments to reconcile net loss to net cash provided by (used in) operating activities:



A



A



A



Amortization of other intangibles



621



A



A



555



A



Depreciation and amortization of property and equipment



1,118



A



A



1,422



A



Impairment of goodwill & intangible assets



11,809



A



A



600



A



Loss on sale of fixed assets



a??



A



A



8



A



Provision for doubtful accounts - including financing receivables



475



A



A



349



A



Deferred taxes



(4,450



)



A



(103



)



Stock-based compensation expense related to stock options and warrants



476



A



A



622



A



Conversion of accrued interest to preferred stock



31



A



A



a??



A



Beneficial conversion feature recognized on debt converted to preferred stock



70



A



A



a??



A



Remeasurement gain on subordinated debt



a??



A



A



(6



)



Remeasurement gain on derivative liability



(28



)



A



(55



)



Changes in operating assets and liabilities:



A



A



A



A A AAccounts receivable



348



A



A



1,613



A



A A AFinancing receivables



1,630



A



A



(558



)



A A AInventories



(41



)



A



904



A



A A APrepaid expenses and other current assets



290



A



A



89



A



A A AAccounts payable and accrued liabilities



268



A



A



(109



)



A A AOther long-term liabilities



(169



)



A



129



A



A A AUnearned revenue



(920



)



A



250



A



Net cash provided by (used in) operating activities



(638



)



A



671



A



Investing activities



A



A



A



Purchases of property and equipment



(840



)



A



(839



)



Net cash used in investing activities



(840



)



A



(839



)



Financing activities



A



A



A



Proceeds from notes payable



3,000



A



A



a??



A



Proceeds from lines of credit



22,236



A



A



23,257



A



Payments on notes payable



(815



)



A



(1,727



)



Payments on lines of credit



(23,422



)



A



(22,928



)



Payments of debt issuance costs



(97



)



A



(26



)



Payments to settle put on term debt



(200



)



A



a??



A



Proceeds from issuance of preferred stock and common stock



1,094



A



A



1,298



A



Payments on capital lease and financing arrangements



(298



)



A



(348



)



Net cash provided by (used in) financing activities



1,498



A



A



(474



)



Changes in cash and cash equivalents due to changes in foreign currency



(42



)



A



59



A



Net decrease in cash and cash equivalents



(22



)



A



(583



)



Cash and cash equivalents at beginning of year



1,211



A



A



1,794



A



Cash and cash equivalents at end of year



$



1,189



A



A



$



1,211



A



Supplemental cash flow information:



A



A



A



Interest paid



$



409



A



A



$



505



A



Income taxes paid, foreign



370



A



A



111



A



Non-cash financing and investing activities:



A



A



A



Property and equipment financed by capital lease or accounts payable



460



A



A



341



A



Debt discount



127



A



A



a??



A



Stock issued for board of director's fees



a??



A



A



133



A



Deemed dividend for beneficial conversion feature of preferred stock



28



A



A



139



A



Preferred stock dividend paid in additional shares



230



A



A



30



A



Subordinated note payable converted to preferred stock



1,000



A



A



a??



A

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

A



Quarters Ended September 30,



A



Years Ended September 30,



A



2018



A



2017



A



2018



A



2017



A



A



A



A



A



A



A



A



Net loss



$



(10,018



)



A



$



(1,585



)



A



$



(12,166



)



A



$



(5,039



)



Add:



A



A



A



A



A



A



A



A ADepreciation and amortization



415



A



A



461



A



A



1,576



A



A



1,907



A



A AIncome tax expense (benefit)



(2,978



)



A



53



A



A



(4,331



)



A



(79



)



A AInterest expense



140



A



A



100



A



A



602



A



A



498



A



A AStock-based compensation expense



85



A



A



135



A



A



477



A



A



622



A



A AImpairment of goodwill and intangible asset



11,809



A



A



600



A



A



11,809



A



A



600



A



Adjusted EBITDA



$



(547



)



A



$



(236



)



A



$



(2,033



)



A



$



(1,491



)



A



A



A



A



A



A



A



A

A
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