Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted leader in video
creation and management solutions, and virtual and hybrid events,
today announced consolidated financial results for its 2023 fiscal
first quarter ended December 31, 2022.
Highlights for the First Quarter Ended December 31,
2022:
- Total revenue was $5.0 million compared to $7.3 million in the
prior-year quarter primarily due to client delays in renewals of
support contracts due to macro environment concerns, foreign
currency impact on Japanese operations, and supply chain
disruptions.
- Gross margin was 61% of revenue versus 71% of revenue in the
prior year quarter, primarily due to accelerated depreciation on
hosting infrastructure related to the AWS transition on a lower
revenue base.
- Net loss was $0.38 per diluted share compared to a net loss of
$0.17 per diluted share in the first fiscal quarter of 2022.
- Adjusted EBITDA was a negative $2.9 million compared to
negative $1.1 million in the fiscal first quarter of 2022.
- Secured $8.5 million in debt financing and raised $1.2 million
in equity agreement, November 2022.
Management Commentary:
“During the first quarter, we remained focused on executing our
strategy to transform Sonic Foundry into a high-velocity,
high-growth company. Our financial performance certainly reflected
the challenging macroeconomic environment but is critical to view
these results in the context of our overall strategic plan. We
fully expected that our Mediasite business would encounter
difficult conditions in a limited-growth market, which is why we
devoted an enormous effort in 2022 to launch multiple brand-new
initiatives that leverage our core strengths in markets that we
believe are positioned for massive growth in the years ahead.
Accordingly, the results in front of us today represent the cost of
investment in a sound, future-oriented growth strategy that we are
implementing as we speak. Our teams have been working tirelessly to
deliver genuine progress across all three of the growth brands that
we launched in 2022 – Vidable™, Global Learning Exchange™ (GLX) and
Video Solutions. I am confident that each of these businesses is
effectively transitioning from a launch phase into a growth and
expansion-focused rollout and on pace to achieve profitability
before the end of 2024,” said Sonic Foundry CEO Joe Mozden, Jr.
“Vidable, our next-gen solution that applies artificial
intelligence to transform video content, continues to impress our
Mediasite customers and is gaining wider adoption. After completing
a trial of Vidable captioning services with Mediasite customers
that resulted in 100% customer adoption, we have deployed several
other new Vidable capabilities across a wider base of Mediasite
customers. Over 75% of top U.S. Mediasite accounts are regularly
using Vidable. Additionally, we now have integrations in place that
will enable non-Mediasite customers access to the Vidable
platform.”
“January marked an important milestone for our Global Learning
Exchange, when our first students began classes in our Bahamas Hub.
We have received numerous applications in the Bahamas for
enrollments throughout 2023. In Nigeria, our partnerships with
UNESCO-REF and with public institutions including the Office of the
Senior Special Assistant to the President of Nigeria are beginning
to bear fruit. We currently have a lengthy list of prospective
students, and we are excited to deliver online higher education
through our unique model to Nigerian students, who otherwise would
not have the life-changing benefits of participating in higher
education. Nigeria is an especially exciting prospect based on its
size and the persistent supply/demand imbalance in its local higher
education market. According to statistics from Oxford University,
UNESCO, and The World Bank, over 75% of higher education applicants
in Nigeria are denied admission on an annual basis – not because
they lack the qualifications but because institutions in the region
are at capacity. This imbalance translates to a target market of
over 1.5 million students annually, and we believe that we have the
right solution to win this market.”
“Our Video Solutions team is setting new standards of simplicity
and reliability in the event content services market. Through a
partnership with CTI Meeting Technology announced in January, we
will provide event planners and organizers with a world-class,
end-to-end content solution that allows them to manage all their
content – including abstracts, presentations, graphic assets, and
video—through a single integrated pipeline. Additionally, the
innovative workflow that our team has developed with CTI will allow
us to turn around high-quality on-demand video in one hour - a
first for the events industry and a direct response to a specific,
widespread pain point for event organizers. It is through carefully
targeted innovations like this one that we expect to overcome
market challenges and accelerate the long-term growth trajectory
that I have outlined here and in previous communications.”
“And finally, the results of our core Mediasite business
reflected ongoing uncertainty in the events market, as we
anticipated. The environment in Japan was especially difficult.
Previously, we had a thriving events business there, but
unfavorable currency exchange rates and in-country COVID
restrictions continued to have a negative impact on our business.
These challenges reinforced our intense focus on executing our new
growth opportunities and we expect these measures to begin showing
meaningful traction over the next several quarters. As previously
stated, our goal is to make these new business units profitable
before we exit 2024. While there is still significant work ahead, I
am confident in our team’s ability to execute, and we are excited
about Sonic Foundry’s bright future,” concluded Mozden.
Fiscal First Quarter 2023 Operating Results:
Service revenue, which included support, cloud services, events,
and professional services, was $4.1 million for the fiscal first
quarter ended December 31, 2022, compared to prior-year-quarter
service revenue of $5.2 million. Product revenue was $878 thousand
compared to $2.0 million during the same period last year. Cloud
services revenue, which also included event-related cloud services,
decreased 16% to $1.7 million in the fiscal first quarter of 2022
compared to $1.8 million in the same quarter last year. Event
revenue in the fiscal first quarter of 2022 was $1.1 million,
compared with $1.4 million reported in the comparable year-ago
quarter. Gross margin was $3.0 million for the fiscal first quarter
of fiscal 2023, compared with $5.1 million in 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 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 first
quarters ended December 31, 2022, and 2021 are included in the
release.
About Sonic Foundry®, Inc.
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.
© 2023 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 estimates, projections, statements
relating to our business plans, objectives, expected operating
results and other statements that are forward-looking statements
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, prospects for growth and profitability of new
product initiatives, and any statements we make about the company’s
future. These forward-looking statements generally are identified
by the words "believe," "project," "expect," "anticipate,"
"estimate," "intend," "strategy," "future," "opportunity," "plan,"
"may," "should," "will," "would," "will be," "will continue," "will
likely result," and similar expressions. Forward-looking statements
are based on current expectations and assumptions that are subject
to risks and uncertainties that may cause actual results to differ
materially. These statements are based upon our current plans and
strategies and reflect our current assessment of the risks and
uncertainties related to our business and are made as of the date
of this report. These statements are inherently subject to known
and unknown risks and uncertainties. There may be events in the
future that we are not able to accurately predict, or control and
our actual results may differ materially from the expectations we
describe in our forward-looking statements. Factors that could
cause actual results to differ materially from those currently
anticipated include the following:
- Uncertainties relating to our ability to successfully implement
our evolving business strategy in new lines of business;
- The impact of competition, customer adoption of our products
and services, and the importance of video.
- Our capital needs, ability to raise capital in the future and
ability to meet debt covenants;
- The ongoing effect and impact of public health crises, such as
the coronavirus ("COVID-19") pandemic in particular as it impacts
our events business;
- The impact of global economic conditions, currency exchange
rates, supply chain and other geopolitical developments on our
business;
- The effect of competition in the markets for our products;
- Our financial condition and liquidity;
- The occurrence of cybersecurity incidents, attacks or other
breaches to our information technology systems and the efforts to
transition our leased data centers to the public cloud; and
- Potential long-lived asset impairments.
Any forward-looking statements should be considered in context
of the risks and other factors described above and disclosed in our
periodic reports on Form 10-Q and Form 10-K, including the "Risk
Factors" sections in such filings, 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.
We undertake no obligation to update or revise publicly any
forward-looking statements, whether because of new information,
future events, or otherwise.
Sonic Foundry, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except for
share data)
(Unaudited)
December 31,
September 30,
2022
2022
Assets
Current assets:
Cash and cash equivalents
$
7,981
$
3,299
Accounts receivable, net of allowances of
$151 & $53
3,436
4,923
Inventories
2,550
1,462
Investment in sales-type lease,
current
274
281
Capitalized commissions, current
218
224
Prepaid expenses and other current
assets
1,269
945
Total current assets
15,728
11,134
Property and equipment:
Leasehold improvements
1,391
1,460
Computer equipment
9,458
9,274
Furniture and fixtures
1,487
1,405
Total property and equipment
12,336
12,139
Less accumulated depreciation and
amortization
9,160
8,705
Property and equipment, net
3,176
3,434
Other assets:
Investment in sales-type lease,
long-term
210
221
Capitalized commissions, long-term
41
42
Right-of-use assets under operating
leases
1,816
2,053
Deferred tax asset
164
275
Software development, net of
amortization
3,194
2,445
Other long-term assets
333
296
Total assets
$
24,662
$
19,900
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
1,775
$
1,904
Accrued liabilities
1,668
1,521
Current portion of unearned revenue
7,932
8,599
Current portion of finance lease
obligations
10
10
Current portion of operating lease
obligations
1,182
1,147
Current portion of notes payable and
warrant debt, net of discounts
609
565
Current portion of notes payable due to
related parties
1,988
—
Total current liabilities
15,164
13,746
Long-term portion of unearned revenue
1,214
1,140
Long-term portion of finance lease
obligations
13
15
Long-term portion of operating lease
obligations
702
975
Long-term portion of notes payable and
warrant debt, net of discounts
381
356
Long-term portion of notes payable due to
related parties
6,168
—
Other liabilities
98
90
Total liabilities
23,740
16,322
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
—
—
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; 12,083,370 and 10,905,649 shares issued,
respectively and 12,070,654 and 10,892,933 shares outstanding,
respectively
121
109
Additional paid-in capital
219,816
218,145
Accumulated deficit
(217,913
)
(213,525
)
Accumulated other comprehensive loss
(933
)
(982
)
Treasury stock, at cost, 12,716 shares
(169
)
(169
)
Total stockholders’ equity
922
3,578
Total liabilities and stockholders’
equity
$
24,662
$
19,900
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except for
share and per share data)
(Unaudited)
Three Months Ended December
31,
2022
2021
Revenue:
Product and other
$
878
$
2,009
Services
4,136
$
5,244
Total revenue
5,014
7,253
Cost of revenue:
Product and other
337
861
Services
1,633
1,244
Total cost of revenue
1,970
2,105
Gross margin
3,044
5,148
Operating expenses:
Selling and marketing
2,928
3,091
General and administrative
1,620
1,798
Product development
2,788
1,774
Total operating expenses
7,336
6,663
Loss from operations
(4,292
)
(1,515
)
Non-operating income
(expenses):
Interest expense, net
(146
)
5
Other expense, net
187
(19
)
Total non-operating income (expense)
41
(14
)
Loss before income taxes
(4,251
)
(1,529
)
Income tax benefit (expense)
(137
)
1
Net loss
$
(4,388
)
$
(1,528
)
Dividends on preferred stock
—
—
Net loss attributable to common
stockholders
$
(4,388
)
$
(1,528
)
Loss per common share
– basic
$
(0.38
)
$
(0.17
)
– diluted
$
(0.38
)
$
(0.17
)
Weighted average common shares
– basic
11,482,256
9,077,492
– diluted
11,482,256
9,077,492
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
December 31,
2022
2021
Operating activities
Net (loss)
$
(4,388
)
$
(1,528
)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Amortization of software development
costs
6
—
Amortization of warrant debt, debt
discount and debt issuance costs
21
8
Depreciation and amortization of property
and equipment
480
252
Deferred income taxes
126
—
Loss on sale of fixed assets
—
167
Provision for doubtful accounts
(89
)
(63
)
Stock-based compensation expense related
to stock options
319
221
Remeasurement (gain) on derivative
liability
—
(27
)
Changes in operating assets and
liabilities:
Accounts receivable
1,703
(171
)
Inventories
(1,077
)
(279
)
Investment in sales-type lease
64
60
Capitalized commissions
7
20
Prepaid expenses and other current
assets
(254
)
(34
)
Right-of-use assets under operating
leases
278
(371
)
Operating lease obligations
(282
)
404
Other long-term assets
(6
)
(21
)
Accounts payable and accrued
liabilities
(113
)
(177
)
Other long-term liabilities
(1
)
95
Unearned revenue
(733
)
(1,122
)
Net cash used in operating activities
(3,939
)
(2,566
)
Investing activities
Purchases of property and equipment
(204
)
(616
)
Capitalization of software development
costs
(755
)
(328
)
Net cash used in investing activities
(959
)
(944
)
Financing activities
Proceeds from notes payable
8,500
—
Payments on notes payable
(10
)
—
Payment on debt issuance costs
(193
)
—
Proceeds from issuance of common stock and
warrants
1,200
—
Proceeds from exercise of common stock
options
1
58
Payments on finance lease obligations
(3
)
(23
)
Net cash provided by (used in) financing
activities
9,495
35
Changes in cash and cash equivalents due
to changes in foreign currency
85
7
Net increase (decrease) in cash and cash
equivalents
4,682
(3,468
)
Cash and cash equivalents at beginning of
year
3,299
9,989
Cash and cash equivalents at end of
period
$
7,981
$
6,521
Supplemental cash flow information:
Interest paid
$
132
$
2
Income taxes paid, foreign
19
28
Non-cash financing and investing
activities:
Equity warrant issued in conjunction with
notes payable due to related parties
163
—
Property and equipment financed by finance
lease or accounts payable
16
253
Sonic Foundry, Inc.
Consolidated Non-GAAP Adjusted
EBITDA Reconciliation
(in thousands)
Three Months Ended December
31,
2022
2021
Net income (loss)
$
(4,388
)
$
(1,528
)
Add:
Depreciation and amortization
480
252
Income tax expense (benefit)
137
(1
)
Interest expense (income)
146
(5
)
Stock-based compensation expense
319
221
Severance
407
-
Adjusted EBITDA
$
(2,899
)
$
(1,061
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230209005087/en/
Media: Eamon Doyle, Sonic Foundry media@sonicfoundry.com
608-310-5891 Investors: Margaret Boyce, Financial Profiles
mboyce@finprofiles.com 310-622-8247
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