Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted leader in video
capture, management and streaming solutions, and virtual and hybrid
events, today announced financial results for the fourth quarter
and fiscal year ended September 30, 2022.
Highlights for the Fourth Quarter Ended September 30,
2022:
- Total revenue was $6.5 million compared to $8.6 million in the
prior-year quarter primarily due to lower hardware sales, softness
in the virtual and hybrid events industry, delays in renewals of
support contracts due to macro concerns, global foreign currency
impact and new pandemic related restrictions in Japan.
- Gross margin was 61% of sales versus 69% of sales in the
comparable quarter primarily due to increased depreciation costs on
cloud service assets. The depreciation increase is a result of
one-time adjustment associated with the AWS transition to improve
the hosting environment, limit long-term capital investment, and
better position the company for growth.
- Net loss attributable to common stockholders was $0.25 per
share compared to net loss of $0.06 per diluted share in the fourth
fiscal quarter of 2021, reflecting investments made to enter new
markets per previously disclosed strategy.
- Adjusted EBITDA was a negative $2.1 million compared to a
negative $270 thousand in the fourth fiscal quarter of 2021, mostly
attributable to investments in our new growth areas.
Fiscal Year 2022 Financial Highlights
- Total fiscal year revenues of $27.5 million compared to $35.2
million in fiscal year 2021, a $7.7 million or 22% decrease.
- Full fiscal year 2022 gross margin was $18.8 million, or 68% of
sales, compared to $24.9 million, or 71% of sales, in fiscal year
2021.
- Full fiscal year net loss attributable to common stockholders
of $7.1 million, or $0.72 per diluted share, compared to net income
of $3.1 million, or $0.36 per diluted share, in fiscal year
2021.
- Full fiscal year 2022 Adjusted EBITDA was a loss of $5.2
million compared to $2.7 million gain reported in fiscal year
2021.
Management Commentary
“2022 was both challenging and exhilarating. Regarding
our current financial results, our core Mediasite business
continued to face headwinds throughout the fiscal year. While we
were seeing a gradual improvement in our in-person Events business,
it remained off pace from pre-pandemic levels. The widespread
conversion to hybrid and virtual meeting formats, which filled the
gap during the height of COVID, declined in 2022. Overall, there is
uncertainty in the events market as organizations try to strike the
right balance with their target audiences. In Japan, where we have
a sizeable operation, unfavorable currency exchange rates and a
rise in COVID infections which caused the government to mandate
restrictions, greatly impacted our events business there. While we
have proven that these two business lines can be profitable under
more positive circumstances, the current environment is
challenging. We expect to see improvements in our Mediasite
business in 2023 as we capitalize on some favorable emerging trends
in the space, while we continue to invest in new growth
initiatives.” said Sonic Foundry CEO Joe Mozden, Jr.
“Our team recognized two years ago that the video market
segment that Mediasite traditionally served has growth limitations.
While we could confidently grow the Mediasite business inside a
limited market, it did not have the dynamic growth opportunity we
wanted. After carefully studying the video landscape, we developed
a strategic plan that would leverage our video expertise, data
analytics, customer base and reputation to launch new initiatives
with tremendous and relevant market opportunity. I’m thrilled to
report that in the timeframe of just one year, we added three
business lines to our family of brands—Vidable™, Video Solutions,
and Global Learning Exchange™ (GLX). Each one of these businesses
achieved significant proof points in recent months including
customer adoption, new strategic partnerships and, in the case of
GLX, student enrollments. We are moving quickly for a rapid scaleup
phase of all three brands, and our goal is to make these new
business units profitable before we exit 2024. We now have the
management, infrastructure, and most important the capital to
continue transforming Sonic Foundry into a high-velocity,
high-growth company.”
“As reported earlier, in April, we raised $4.3 million through a
public offering of 1.7 million shares at $2.55 per share. In
November, we secured $8.5 million in debt financing and raised an
additional $1.2 million in an equity agreement. We also re-aligned
our corporate structure and resources to accelerate the launch of
our multi-brand strategy. Now all four brands—Mediasite, Vidable,
Video Solutions and Global Learning Exchange—operate independently
under the direction of a single GM while maintaining an efficient
balance of shared services and dedicated resources.”
Mozden continued, “Now I’ll recap the significant progress we
made this year in transforming Sonic Foundry. The first Vidable
captioning services were deployed this summer on a limited
availability trial to Mediasite customers, and later for general
availability. The feedback we received from customers was
outstanding and within a few weeks 100% had elected to move
forward with Vidable as their primary captioning solution and
we are now moving quickly to deploy several other new Vidable
capabilities. We believe that the Vidable platform offers a
compelling value proposition to current and future customers. Users
will have access to the best AI toolsets in the market, and they
can now monetize vast libraries of video content in ways that were
formerly too costly or time consuming to transform and distribute
without the AI power of Vidable.”
“For me personally, the high point of 2022 was seeing our
innovative concept Global Learning Exchange become a reality.
In July, we celebrated the opening of our first GLX Hub in the
Bahamas where students can now choose from a wide range of
available program options from our participating learning
providers. We are also making substantial progress in moving the
GLX model into the continent of Africa. In November, I had the
honor of traveling to Abuja, Nigeria to officially announce GLX’s
partnership with UNESCO and met with the office of President Buhari
to discuss a fast rollout of our program within his country. In
South Africa, we have recently secured a local partner who will
provide a channel for government funding and access to its
underserved student population. These partnerships have put us on
the world stage of democratizing on-line higher education through a
unique model, which brings accessibility and local support to
on-line students who otherwise would not have the life-changing
benefits of participating in higher education.”
“And finally, we transformed our Mediasite Events offering into
Video Solutions that launched in November. Video Solutions
incorporates many of the services previously offered under the
umbrella of our Mediasite Events business, but it is targeted at
the much broader enterprise market. Video Solutions addresses
the challenges that organizations are facing when it comes to their
video strategy and infrastructure. Our technical capabilities and
knowledgeable project managers can design a customized distribution
and engagement strategy that helps customers derive maximum value
from the content they produce.”
“I am proud of what our team has accomplished this year, and
highly optimistic about the road ahead. Given the strengths of our
current team and the rich landscape of opportunities for our new
ventures, I am confident that Sonic Foundry has a bright future in
pioneering advances for video, AI technology, and global
education.”
Fiscal Fourth Quarter 2022 Operating Results:
Service revenue, which included support, cloud services, events,
and professional services, was $4.8 million for the fiscal quarter
ended September 30, 2022, compared to prior-year-quarter service
revenue of $5.6 million. Product revenue was $1.7 million compared
to $3.1 million during the same period last year. Cloud services
revenue, which also includes event-related cloud services,
decreased 8% to $1.7 million in the fourth quarter of 2022 compared
to $1.9 million in the same quarter last year. Event revenue in the
fourth quarter of 2022 was $940 thousand, compared with $1.4
million reported in the comparable year-ago quarter. Gross margin
was $3.9 million for the fourth quarter of fiscal 2022, compared
with $5.9 million in the same period of the prior fiscal year.
Selling, General and Administrative Expenses (SG&A) were
$6.4 million, compared with $6.6 million in the fourth quarter last
year.
Net loss attributable to common stockholders was $2.7 million,
or a loss of $0.25 per diluted share, for the fourth quarter of
fiscal 2022, compared with net income attributable to common
stockholders of $458 thousand, or $0.06 per diluted share, for the
same period of the prior fiscal year.
Fiscal Year 2022 Operating Results
Service revenue, which included support, cloud services, events,
and professional services, was $19.3 million for fiscal year 2022,
compared to $24.7 million in the prior fiscal year. Product revenue
was $8.1 million, compared to $10.5 million during the same period
last year. Cloud services revenue decreased 15% to $7.0 million,
compared to $8.3 million last fiscal year. Event revenue decreased
30% to $4.5 million versus $6.4 million last fiscal year.
Gross margin was 68% for fiscal year 2022, compared with 71% in
last fiscal year. The decrease in gross margin was primarily due to
a decrease in service revenue without a decrease in cost of goods
sold expense in cost centers that support services revenue.
Selling, general, administrative, and other expenses (SG&A)
was $25.7 million for fiscal year 2022 compared with $24.1 million
in the prior fiscal year.
Net loss attributable to common stockholders was $7.1 million or
a loss of $0.72 per diluted share, for fiscal year 2022, compared
with a net income attributable to common stockholders of $3.1
million (including forgiveness of a PPP loan of $2.3 million), or
$0.36 per diluted share, for the same period of the prior fiscal
year.
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, and
severance and subtracts gain from debt forgiveness 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 fourth quarter ended September
30, 2022, and 2021 are included in the release.
About Sonic Foundry
Founded in 1991 and headquartered in Madison, Wis., Sonic
Foundry (NASDAQ: SOFO) is dedicated to transforming how the world
works and learns through innovative and scalable technology
solutions. We help customers maximize the value of their video
initiatives and infrastructure while leveraging our expertise and
global footprint to help unlock a smarter, more connected world for
learners, workers, and entrepreneurs everywhere. Sonic Foundry’s
family of brands includes Mediasite®, Video Solutions, Vidable™ and
Global Learning Exchange™ which are trusted by thousands of
educational institutions, corporations, and health care
organizations in dozens of countries around the world. For more
information on how Sonic Foundry’s solutions can empower you and
your organization to seize today’s opportunities as well as those
of the future, visit www.sonicfoundry.com.
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.
Sonic Foundry, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except for
share data)
(Unaudited)
September 30,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
3,299
$
9,989
Accounts receivable, net of allowances of
$53 and $236
4,923
5,167
Inventories, net
1,462
442
Investment in sales-type lease,
current
281
294
Capitalized commissions, current
224
360
Prepaid expenses and other current
assets
945
1,153
Total current assets
11,134
17,405
Property and equipment:
Leasehold improvements
1,460
1,111
Computer equipment
9,274
8,527
Furniture and fixtures
1,405
1,528
Total property and equipment
12,139
11,166
Less accumulated depreciation and
amortization
8,705
8,368
Property and equipment, net
3,434
2,798
Other assets:
Investment in sales-type lease,
long-term
221
490
Capitalized commissions, long-term
42
76
Right-of-use assets under operating
leases
2,053
2,441
Deferred tax asset
275
48
Software development
2,445
—
Other long-term assets
296
757
Total assets
$
19,900
$
24,015
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
1,904
1,072
Accrued liabilities
1,521
2,522
Current portion of unearned revenue
8,599
9,413
Current portion of finance lease
obligations
10
79
Current portion of operating lease
obligations
1,147
930
Current portion of warrant debt
565
—
Total current liabilities
13,746
14,016
Long-term portion of unearned revenue
1,140
1,614
Long-term portion of finance lease
obligations
15
26
Long-term portion of operating lease
obligations
975
1,583
Long-term portion of notes payable and
warrant debt
356
556
Derivative liability, at fair value
—
53
Other liabilities
90
27
Total liabilities
16,322
17,875
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 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
25,000,000 shares; 10,905,649 and 9,064,821 shares issued,
respectively and 10,892,933 and 9,052,105 shares outstanding,
respectively
109
91
Additional paid-in capital
218,145
213,278
Accumulated deficit
(213,525
)
(206,442
)
Accumulated other comprehensive loss
(982
)
(618
)
Treasury stock, at cost, 12,716 shares
(169
)
(169
)
Total stockholders’ equity
3,578
6,140
Total liabilities and stockholders’
equity
$
19,900
$
24,015
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except for
share and per share data)
(Unaudited)
Years Ended September
30,
Quarters Ended September
30,
2022
2021
2022
2021
Revenue:
Product and other
$
8,135
$
10,473
$
1,728
$
3,067
Services
19,331
24,694
4,777
5,563
Total revenue
27,466
35,167
6,505
8,630
Cost of revenue:
Product and other
3,054
4,042
878
1,204
Services
5,599
6,252
1,682
1,482
Total cost of revenue
8,653
10,294
2,560
2,686
Gross margin
18,813
24,873
3,945
5,944
Operating expenses:
Selling and marketing
12,264
11,970
3,076
3,205
General and administrative
5,933
4,870
1,428
1,514
Product development
7,539
7,226
1,922
1,871
Total operating expenses
25,736
24,066
6,426
6,590
Income (Loss) from operations
(6,923
)
807
(2,481
)
(646
)
Non-operating expenses:
Interest expense, net
(31
)
(44
)
(9
)
(2
)
Gain on debt forgiveness
—
2,325
—
—
Other income (expense), net
(364
)
4
(174
)
12
Total non-operating income (expense)
(395
)
2,285
(183
)
10
Income (loss) before income taxes
(7,318
)
3,092
(2,664
)
(636
)
Income tax benefit (expense)
235
(15
)
(48
)
178
Net income (loss)
$
(7,083
)
$
3,077
$
(2,712
)
$
(458
)
Dividends on preferred stock
—
—
—
—
Net income (loss) attributable to
common stockholders
$
(7,083
)
$
3,077
$
(2,712
)
$
(458
)
Income (loss) per common share:
Basic net income (loss) per common
share
$
(0.72
)
$
0.37
$
(0.25
)
$
(0.06
)
Diluted net income (loss) per common
share
$
(0.72
)
$
0.36
$
(0.25
)
$
(0.06
)
Weighted average common shares – Basic
9,899,724
8,230,100
10,868,723
8,086,331
– Diluted
9,899,724
8,650,384
10,868,723
8,086,331
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Years Ended
September 30,
2022
2021
Operating activities
Net Income (Loss)
$
(7,083
)
$
3,077
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Amortization of other intangibles
31
49
Depreciation and amortization of property
and equipment
1,305
1,263
Deferred income taxes
(235
)
—
Loss on sale of fixed assets
36
37
Loss on impairment of fixed assets
328
—
Provision for doubtful accounts
(50
)
25
(Recovery of ) Provision for inventory
reserve
—
(16
)
Stock-based compensation expense related
to stock options
747
487
Stock issued for board of director's
fees
49
70
Remeasurement gain on derivative
liability
(53
)
(13
)
Gain on debt forgiveness
—
(2,325
)
Changes in operating assets and
liabilities:
Accounts receivable
(37
)
821
Inventories
(1,034
)
734
Investment in sales-type lease
143
(452
)
Capitalized commissions
170
104
Prepaid expenses and other current
assets
12
(121
)
Right-of-use assets under operating
leases
222
(387
)
Operating lease obligations
(213
)
445
Other long-term assets
365
(438
)
Accounts payable and accrued
liabilities
530
(989
)
Other long-term liabilities
90
(110
)
Unearned revenue
(881
)
(1,015
)
Net cash used in operating activities
(5,558
)
1,246
Investing activities
Purchases of property and equipment
(2,596
)
(1,482
)
Capitalization of software development
costs
(2,445
)
—
Net cash used in investing activities
(5,041
)
(1,482
)
Financing activities
Proceeds from notes payable
441
—
Payments on notes payable
—
(935
)
Proceeds from issuance of common stock,
net of issuance costs
3,967
3,447
Proceeds from exercise of common stock
options
122
263
Payments on finance lease obligations
(75
)
(120
)
Net cash provided by (used in) financing
activities
4,455
2,655
Changes in cash and cash equivalents due
to changes in foreign currency
(546
)
(49
)
Net decrease in cash and cash
equivalents
(6,690
)
2,370
Cash and cash equivalents at beginning of
year
9,989
7,619
Cash and cash equivalents at end of
year
$
3,299
$
9,989
Supplemental cash flow information:
Interest paid
$
2
$
32
Income taxes paid, foreign
88
97
Non-cash financing and investing
activities:
Property and equipment financed by finance
lease or accounts payable
73
152
Sonic Foundry, Inc.
Consolidated Non-GAAP Adjusted
EBITDA Reconciliation
(in thousands)
Years Ended September
30,
Quarters Ended September
30,
2022
2021
2022
2021
Net income (loss)
$
(7,083
)
$
3,077
$
(2,712
)
$
(458
)
Add:
Depreciation and amortization
1,305
1,263
444
255
Income tax expense (benefit)
(235
)
15
49
(178
)
Interest expense (income)
31
44
9
2
Stock-based compensation expense
747
487
138
109
Severance
85
157
12
-
Subtract:
Gain from debt forgiveness
-
2,325
-
-
Adjusted EBITDA
$
(5,150
)
$
2,718
$
(2,060
)
$
(270
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221208005825/en/
Sonic Foundry Eamon Doyle 608.310.5891
eamon.doyle@sonicfoundry.com
Sonic Foundry (NASDAQ:SOFO)
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