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
second quarter ended March 31, 2023.
Executive Summary:
In the second quarter, there was a substantial lift in Mediasite
renewals and hardware sales. This resulted in Mediasite billings
increasing 40% over the first quarter, revenue increasing nearly
15% over the first quarter and a 32% sequential increase in
recurring billings from contract renewals. We anticipate this
growth in Mediasite recurring billings should translate into
meaningful revenue growth in upcoming quarters. In addition, the
company’s new strategic initiatives continued to demonstrate
progress. These initiatives provide the runway for Sonic Foundry’s
accelerated growth plan and the company will continue to invest
resources to realize their full potential in the high-growth
markets they address. Sonic Foundry anticipates these investments
will continue to impact near-term profitability yet over the longer
term generate strong returns and value creation. “As I shared in
our annual shareholder meeting, we knew turning the ship towards
our new high growth areas would negatively impact our profitability
and to some extent our Mediasite growth, however we believe our
growth strategy coupled with our persistent focus on recurring SaaS
revenue and long-term contracts has positioned us for stable,
predictable future Mediasite revenue growth as we simultaneously
pursue our high growth strategy,” said Sonic Foundry CEO Joe
Mozden, Jr.
Highlights for the Second Quarter Ended March 31,
2023:
- Second quarter billings from combined business lines increased
50% over the prior-year quarter.
- Total revenue was $5.7 million compared to $7.2 million in the
prior-year quarter due in large part to foreign exchange in Japan
and COVID’s continued impact on events in Japan.
- Gross margin was 57% of revenue versus 71% of revenue in the
prior year quarter, primarily due to accelerated depreciation on
hosting infrastructure and other transition costs as we migrate our
cloud instance.
- Net loss was $3.4 million, or $0.28 per share, compared to a
net loss of $1.3 million, or $0.15 per share, in the second fiscal
quarter of 2022.
- Adjusted EBITDA was a negative $2.0 million compared to
negative $787 thousand million in the fiscal second quarter of
2022.
Year-to-Date Financial Highlights:
- Total year-to-date revenues of $10.8 million compared to $14.5
million in the same period of 2022, a $3.7 million decrease.
- Year-to-date gross margin was 59% of revenue versus 71% of
revenue in the prior year quarter, primarily due to short-term
transition costs related to our move to a public cloud environment
with the remainder to support growth expectations from our events
business.
- Year-to-date net loss of $7.8 million, or $0.66 per share,
compared to a net loss of $2.9 million or $0.35 per share, in the
same period of 2022.
- Year-to-date adjusted EBITDA was a negative $4.9 million
compared to negative $1.8 million, in the same year-to-date period
of 2022.
Management Commentary:
“At the close of the second quarter of 2023, we are pleased to
report substantive progress in our Mediasite business. We saw a
substantial lift in both Mediasite hardware sales and contract
renewals in the second quarter, which resulted in Mediasite
billings increasing 40% over the first quarter, with a 32% increase
in recurring billings. Although earnings were down, this was
expected due to planned investments in our new strategic
initiatives. Overall, we see a cluster of positive developments in
the video business. First, post-pandemic, it’s still a video-first
world and Mediasite customers are embracing a broader vision for
content and its applications as it continues to evolve into a
driver of key business objectives. Second, the restoration of
federal funding in Japan following a sustained period of
Covid-related reductions, in addition to a more favorable currency
exchange rate, resulted in Mediasite Japan billings more than
doubling over the first quarter. Third, our increase in recurring
revenue demonstrates the success we are seeing as we make the turn
from hardware sales to annualized license products bundled with our
SaaS business, generating more consistent monthly revenue. To that
end, we are making strong progress migrating our on-premises
customers to the Mediasite cloud and are maximizing the efficiency
of our cloud investment by moving our infrastructure to the AWS
Cloud, which will improve the hosting environment and limit
long-term capital investment,” said Sonic Foundry CEO Joe Mozden,
Jr.
“We built our global reputation on Mediasite, and we will
continue to leverage that strength both independently and as the
principal go-to-market vector for Vidable™, our next-gen solution
that applies artificial intelligence to transform video content.
The outstanding accuracy and performance of our captioning solution
has generated rave reviews and positioned us on the ground floor of
what AI and machine learning can deliver for our customers.
High-quality speech-to-text data provides the essential foundation
for accessibility, searchability, and advanced engagement
capabilities, which are the three key characteristics that we
expect will shape the future of video in enterprise and learning
environments. To capitalize on the continued or strong demand in
these areas, we have plans to deploy translations, AI-generated
metadata, and an early version of an AI-powered engagement
analytics platform by the end of Q3. The enormous potential of
Vidable is unfolding every day—we have already sold about half a
million hours of video transformation and have an additional
600,000+ hours in the sales pipeline. We continue to believe that
AI-transformed video is an emerging market that we have the right
to win, and we are moving aggressively to secure the traction
necessary for a rapid expansion.”
“The in-person events business continues its strong recovery
from the pandemic, and we expect our Video Solutions team to secure
around 300 events in 2023. The partnership we announced last
quarter with CTI Meeting Technology has provided us with a direct
channel to dozens of CTI customers, including several of the
world’s leading research organizations, and the innovative workflow
that our teams have developed together will allow us to turn around
high-quality on-demand video from live content in one hour—a first
for the events industry. We are currently in discussions with other
major event and A/V providers and hope to announce at least one new
channel partnership by the end of Q3."
“Our recent engagements in the events market have reinforced our
confidence in the growing appetite for a more comprehensive and
value-driven approach to event video services, which represents
another opportunity to deploy and monetize Vidable. Event
professionals are eager to incorporate AI-powered tools into their
video production and distribution processes and the hands-on
relationship that we have established through our Video Solutions
team will allow us to deliver Vidable-powered services with a high
level of quality control, as well as direct access to the processed
data. Accordingly, we are expanding the short-term go-to-market
strategy for Vidable to include the events business, where we can
gain traction and achieve high-volume utilization quickly while
generating immediate revenue via enhancements to existing Video
Solutions contracts and through channel-enabled deals.”
“Global Learning Exchange™ (GLX), is also gaining traction. Our
GLX Hub in the Bahamas is experiencing a steady upswing in
inquiries, applications, and student enrollments. Our partnership
with UNESCO-REF has accelerated access to countries, students, and
government officials in Africa and we plan to open GLX Hubs in
Nigeria and South Africa this summer. Both countries are high on
our priority list due to their sizeable populations, growing
economies, and supply/demand imbalance in higher education. We have
also continued to expand our roster of higher education partners.
In the past two months, we announced partnerships with EC-Council
University, a leader in cyber security education and technical
certification, and Colorado State University Global, which offers
an extensive roster of fully online, internationally recognized,
career-focused degrees and certification programs. Together with
all our university partners, we offer accredited degrees and
certifications that can change the lives of students and their
families while contributing to the advancement of their nation’s
economy.”
“The progress we’ve made over the past quarter has significantly
reinforced our optimism about Sonic Foundry’s future. Our financial
performance reflects the steps we have taken to shore up our
traditional Mediasite business and invest in all three of our
growth initiatives – Vidable, Video Solutions, and Global Learning
Exchange – which are gaining traction as we speak. As previously
stated, our goal is to make these new business units profitable
before we exit 2024. While there is still significant work ahead,
we are confident in our direction and ability to execute our plan,
and we expect more positive updates are right around the corner,”
concluded Mozden.
Fiscal Second Quarter 2023 Operating Results:
Service revenue, which included support, cloud services, events,
and professional services, was $4.1 million for the fiscal second
quarter ended March 31, 2023, compared to the prior-year-quarter
service revenue of $5.1 million due to non-repeatable integration
projects which took place in 2022. Product revenue was $1.6 million
compared to $2.2 million during the same period last year. Cloud
services revenue, which also included event-related cloud services,
decreased 3% to $1.7 million in the fiscal second quarter of 2023
compared to $1.8 million in the same quarter last year. Event
revenue in the fiscal second quarter of 2023 was $945 thousand,
compared with $998 thousand reported in the comparable year-ago
quarter. Gross margin was $3.3 million for the fiscal second
quarter of fiscal 2023, compared with $5.2 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 year to
date and second quarter ended March 31, 2023, and 2022 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.
- Uncertainty over our ability to successfully implement
management’s plan to improve liquidity.
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)
March 31,
September 30,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
2,702
$
3,299
Accounts receivable, net of allowances of
$151 & $53
5,618
4,923
Inventories
2,814
1,462
Investment in sales-type lease,
current
272
281
Capitalized commissions, current
216
224
Prepaid expenses and other current
assets
1,574
945
Total current assets
13,196
11,134
Property and equipment:
Leasehold improvements
1,387
1,460
Computer equipment
9,527
9,274
Furniture and fixtures
1,496
1,405
Total property and equipment
12,410
12,139
Less accumulated depreciation and
amortization
9,704
8,705
Property and equipment, net
2,706
3,434
Other assets:
Software development, net of
amortization
3,922
2,445
Investment in sales-type lease,
long-term
173
221
Capitalized commissions, long-term
43
42
Right-of-use assets under operating
leases
1,604
2,053
Deferred tax asset
—
275
Other long-term assets
316
296
Total assets
$
21,960
$
19,900
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
1,681
$
1,904
Accrued liabilities
1,373
1,521
Current portion of unearned revenue
8,593
8,599
Current portion of finance lease
obligations
9
10
Current portion of operating lease
obligations
1,121
1,147
Current portion of notes payable and
warrant debt, net of discounts
315
565
Current portion of notes payable due to
related parties
2,833
—
Total current liabilities
15,925
13,746
Long-term portion of unearned revenue
1,469
1,140
Long-term portion of finance lease
obligations
10
15
Long-term portion of operating lease
obligations
542
975
Long-term portion of notes payable and
warrant debt, net of discounts
688
356
Long-term portion of notes payable due to
related parties
5,571
—
Other liabilities
102
90
Total liabilities
24,307
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
219,931
218,145
Accumulated deficit
(221,292
)
(213,525
)
Accumulated other comprehensive loss
(938
)
(982
)
Treasury stock, at cost, 12,716 shares
(169
)
(169
)
Total stockholders’ equity
(2,347
)
3,578
Total liabilities and stockholders’
equity
$
21,960
$
19,900
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except for
share and per share data)
(Unaudited)
Three Months Ended March
31,
Six Months Ended March
31,
2023
2022
2023
2022
Revenue:
Product and other
$
1,607
$
2,162
$
2,485
$
4,171
Services
4,131
$
5,081
8,267
$
10,325
Total revenue
5,738
7,243
10,752
14,496
Cost of revenue:
Product and other
772
748
1,109
1,609
Services
1,690
1,331
3,323
2,575
Total cost of revenue
2,462
2,079
4,432
4,184
Gross margin
3,276
5,164
6,320
10,312
Operating expenses:
Selling and marketing
2,664
3,233
5,592
6,324
General and administrative
1,017
1,268
2,637
3,066
Product development
2,377
1,918
5,165
3,692
Total operating expenses
6,058
6,419
13,394
13,082
Loss from operations
(2,782
)
(1,255
)
(7,074
)
(2,770
)
Non-operating income (expenses):
Interest expense, net
(494
)
(10
)
(640
)
(5
)
Other expense, net
9
(17
)
196
(36
)
Total non-operating income (expense)
(485
)
(27
)
(444
)
(41
)
Loss before income taxes
(3,267
)
(1,282
)
(7,518
)
(2,811
)
Income tax benefit (expense)
(112
)
(54
)
(249
)
(53
)
Net loss
$
(3,379
)
$
(1,336
)
$
(7,767
)
$
(2,864
)
Loss per common share
– basic
$
(0.28
)
$
(0.15
)
$
(0.66
)
$
(0.35
)
– diluted
$
(0.28
)
$
(0.15
)
$
(0.66
)
$
(0.35
)
Weighted average common shares
– basic
12,075,832
9,114,451
11,775,782
9,095,810
– diluted
12,075,832
9,114,451
11,775,782
9,095,810
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
March 31
2023
2022
Operating activities
Net (loss)
$
(7,767
)
$
(2,864
)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Amortization of software development
costs
17
—
Amortization of warrant debt, debt
discount and debt issuance costs
277
15
Depreciation and amortization of property
and equipment
1,025
534
Deferred income taxes
290
—
Loss on sale of fixed assets
—
167
Provision for doubtful accounts
(88
)
(83
)
Stock-based compensation expense related
to stock options
430
409
Remeasurement (gain) on derivative
liability
—
(30
)
Changes in operating assets and
liabilities:
Accounts receivable
(481
)
654
Inventories
(1,342
)
(689
)
Investment in sales-type lease
96
87
Capitalized commissions
7
80
Prepaid expenses and other current
assets
(558
)
(63
)
Right-of-use assets under operating
leases
485
(16
)
Operating lease obligations
(498
)
27
Other long-term assets
6
358
Accounts payable and accrued
liabilities
(519
)
176
Other long-term liabilities
4
94
Unearned revenue
179
(2,349
)
Net cash used in operating activities
(8,437
)
(3,493
)
Investing activities
Purchases of property and equipment
(245
)
(1,017
)
Capitalization of software development
costs
(1,494
)
(954
)
Net cash used in investing activities
(1,739
)
(1,971
)
Financing activities
Proceeds from notes payable
8,838
—
Payments on notes payable
(332
)
—
Payment on debt issuance costs
(193
)
—
Proceeds from issuance of common stock and
warrants
1,203
20
Proceeds from exercise of common stock
options
2
105
Payments on finance lease obligations
(7
)
(43
)
Net cash provided by (used in) financing
activities
9,511
82
Changes in cash and cash equivalents due
to changes in foreign currency
68
(196
)
Net increase (decrease) in cash and cash
equivalents
(597
)
(5,578
)
Cash and cash equivalents at beginning of
year
3,299
9,989
Cash and cash equivalents at end of
period
$
2,702
$
4,411
Supplemental cash flow information:
Interest paid
$
301
$
2
Income taxes paid, foreign
30
41
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
234
Sonic Foundry, Inc.
Consolidated Non-GAAP Adjusted
EBITDA Reconciliation
(in thousands)
Three Months Ended March
31,
Six Months Ended March
31,
2023
2022
2023
2022
Net loss
$
(3,379
)
$
(1,336
)
$
(7,767
)
$
(2,864
)
Add:
Depreciation and amortization
545
281
1,025
534
Income tax expense
112
54
249
53
Interest expense
494
10
640
5
Stock-based compensation expense
115
188
434
409
Severance
66
16
473
16
Adjusted EBITDA
$
(2,047
)
$
(787
)
$
(4,946
)
$
(1,847
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005152/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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