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
third quarter ended June 30, 2023.
Highlights for the Third Quarter Ended June 30, 2023:
- Total revenue was $5.8 million compared to $6.5 million in the
prior year quarter primarily reflecting customers shifting from
hardware devices to other means of video capture.
- Gross margin was 57% of revenue versus 71% of revenue in the
prior year quarter, primarily due to short-term transition costs to
complete the ongoing migration of our hosting infrastructure to the
public cloud as well as other non-recurring costs associated with
scrap material for our hardware devices.
- Net loss was $7.9 million, or $0.65 per share, compared to a
net loss of $1.5 million, or $0.14 per share, in the third fiscal
quarter of 2022. The current period net loss included a non-cash
and non-recurring impairment charge of approximately $3.8 million
to the carrying value of software development. The quarter ended
June 30, 2022, included capitalization of approximately $700
thousand of software development while no amounts were capitalized
in the current quarter.
- Adjusted EBITDA was a negative $2.9 million compared to
negative $1.3 million in the fiscal third quarter of 2022.
Year-to-Date Financial Highlights:
- Revenue of $16.5 million compared to $21.0 million in the same
period of 2022, a $4.4 million decrease.
- Gross margin was 58% 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 more resources for events delivery.
- Net loss of $15.6 million, or $1.31 per share, compared to a
net loss of $4.4 million or $0.46 per share for the comparable
period of 2022.
- Adjusted EBITDA was a negative $7.9 million compared to
negative $3.1 million, for the comparable period of 2022.
Management Commentary:
“Our results for the third quarter of 2023 are consistent with
expectations as we continue to focus on our long-term strategy of
transforming Sonic Foundry into a high-growth enterprise. When I
came onboard, we recognized that our traditional Mediasite business
faced growth limitations in the absence of major market
consolidation initiatives. Accordingly, we began looking at new
ways to make this core business dynamically relevant to the
evolving demand for video management technology. To that end, we
developed and launched Vidable®, a next-gen solution that applies
AI and machine learning to transform and monetize video content,
and Global Learning Exchange™, a revolutionary model for delivering
high-quality online learning programs on a global scale. Over the
past several quarters, our team has successfully forged strong
foundations for each of these new ventures,” said Sonic Foundry CEO
Joe Mozden, Jr.
“During this ongoing transformative phase, a number of factors
have impacted our quarterly financial results. These factors
include ancillary effects of our strategic shift from a
hardware-centric business to a SAAS-oriented model, investments to
modernize our cloud infrastructure, and accelerated depreciation of
assets in our former data center. While these factors have
temporarily impacted our recent earnings, they align with our
long-term strategy for growth and value creation, and we remain
confident that our expansion into new markets will yield positive
results in upcoming quarters.
“Encouragingly, our Mediasite business shows promising trends,
with a significant increase in customers transitioning to
multi-year contracts. This shift increases the total value of
contracts, contributes to a growing stream of recurring revenue,
and underscores our customers’ ongoing commitment to Mediasite as a
core element of their video strategy.
“We are seeing strong customer demand and enthusiasm for
Vidable, and we have already sold over 750,000 hours of video
transformation, which translates to a 320% increase in Vidable
sales quarter-over-quarter. While we are pleased with the progress
that we’ve made, we are eager to accelerate the development and
rollout of our Vidable offerings and we have adjusted our
go-to-market strategy and brought in new talent to support that
goal.
“As we announced in June, our Vidable and Video Solutions
businesses have combined resources and are currently in the process
of rolling out a new slate of event-oriented video services in
partnership with one of the world’s leading event technology
providers. The logic behind this strategy is simple: the active,
hands-on nature of our relationship with Video Solutions customers
offers a controlled environment to deploy several of Vidable’s
capabilities that are fully operational, but still a few months
away from independent general availability.“
Mozden continued, “Our Global Learning Exchange™ (GLX) business
is expanding rapidly. In August, we launched three new Hub
facilities —two in Nigeria and another in South Africa – that will
anchor our presence in Africa, where we are attracting attention
and support from both educators and governments. The launch of our
Hub in the Bahamas in 2022 produced many valuable insights and gave
us a deeper understanding of the key barriers to participation that
face prospective students in other markets, principally those
related to entry qualifications and affordability. Accordingly, we
have established partnerships with several new learning providers
that will enable us to shape our offerings for greater
affordability and a more streamlined set of admissions standards. I
believe these actions will position us to scale the GLX business as
we begin to leverage the massive untapped demand for affordable
higher education in Africa.
“In conclusion, we remain confident in the strategy we laid out
two years ago and our team continues to achieve milestones in
alignment with that strategy. Right now, we are heads’ down on
execution to produce the results that we know our stakeholders are
expecting. While this transformation period has been a bumpier ride
than we had hoped, we see several encouraging signs that we have a
long runway ahead of us. While it is not easy being an innovator
and disrupter, we have a fully dedicated and talented team, who are
firing on all cylinders and making real progress, and we expect
that observers will begin to see that progress reflected in our
financial performance over the next several quarters.”
Fiscal Third Quarter 2023 Operating Results:
Service revenue, which included support, cloud services, events,
and professional services, was $4.2 million for the fiscal third
quarter ended June 30, 2023, compared to the prior-year-quarter
service revenue of $4.2 million. Product revenue was $1.5 million
compared to $2.2 million during the same period last year. Cloud
services revenue, which also included event-related cloud services
was $1.7 million in the fiscal third quarter of 2023 compared to
$1.7 million in the same quarter last year. Event revenue in the
fiscal third quarter of 2023 was $850 thousand, compared with $1.1
million reported in the comparable period. Gross margin was $3.3
million for the third quarter of fiscal 2023, compared with $4.6
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,
severance, and impairment on capitalized software development costs
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 third
quarter ended June 30, 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 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
- Potential long-lived asset impairments; and
- 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)
June 30,
September 30,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
2,142
$
3,299
Accounts receivable, net of allowances of
$332 & $53
5,062
4,923
Inventories
2,526
1,462
Investment in sales-type lease,
current
250
281
Capitalized commissions, current
321
224
Prepaid expenses and other current
assets
1,403
945
Total current assets
11,704
11,134
Property and equipment:
Leasehold improvements
1,369
1,460
Computer equipment
5,960
9,274
Furniture and fixtures
1,434
1,405
Total property and equipment
8,763
12,139
Less accumulated depreciation and
amortization
6,651
8,705
Property and equipment, net
2,112
3,434
Other assets:
Software development costs, net of
accumulated amortization and impairment
142
2,445
Investment in sales-type lease,
long-term
95
221
Capitalized commissions, long-term
57
42
Right-of-use assets under operating
leases
1,887
2,053
Deferred tax asset
—
275
Hardware receivable, long-term
265
—
Other long-term assets
281
296
Total assets
$
16,543
$
19,900
Liabilities and stockholders’ equity
(deficit)
Current liabilities:
Accounts payable
$
1,938
$
1,904
Accrued liabilities
1,333
1,521
Current portion of unearned revenue
8,717
8,599
Current portion of finance lease
obligations
9
10
Current portion of operating lease
obligations
1,168
1,147
Current portion of notes payable and
warrant debt, net of discounts
307
565
Current portion of notes payable due to
related parties
3,704
—
Total current liabilities
17,176
13,746
Long-term portion of unearned revenue
1,547
1,140
Long-term portion of finance lease
obligations
8
15
Long-term portion of operating lease
obligations
798
975
Long-term portion of notes payable and
warrant debt, net of discounts
605
356
Long-term portion of notes payable due to
related parties
6,378
—
Other liabilities
92
90
Total liabilities
26,604
16,322
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; none issued
—
—
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; 12,136,229 and 10,905,649 shares issued,
respectively and 12,123,513 and 10,892,933 shares outstanding,
respectively
121
109
Additional paid-in capital
220,047
218,145
Accumulated deficit
(229,157
)
(213,525
)
Accumulated other comprehensive loss
(903
)
(982
)
Treasury stock, at cost, 12,716 shares
(169
)
(169
)
Total stockholders’ equity (deficit)
(10,061
)
3,578
Total liabilities and stockholders’
equity (deficit)
$
16,543
$
19,900
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except for
share and per share data)
(Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
2023
2022
2023
2022
Revenue:
Product and other
$
1,549
$
2,238
$
4,034
$
6,409
Services
4,233
4,227
12,500
14,552
Total revenue
5,782
6,465
16,534
20,961
Cost of revenue:
Product and other
875
657
1,984
2,266
Services
1,600
1,250
4,923
3,825
Total cost of revenue
2,475
1,907
6,907
6,091
Gross margin
3,307
4,558
9,627
14,870
Operating expenses:
Selling and marketing
2,612
2,865
8,203
9,189
General and administrative
1,105
1,439
3,743
4,505
Product development
3,058
1,924
8,223
5,616
Impairment of capitalized software
development
3,769
—
3,769
—
Total operating expenses
10,544
6,228
23,938
19,310
Loss from operations
(7,237
)
(1,670
)
(14,311
)
(4,440
)
Non-operating income (expenses):
Interest expense, net
(493
)
(9
)
(1,133
)
(22
)
Other income (expense), net
(155
)
(161
)
41
(189
)
Total non-operating income (expense)
(648
)
(170
)
(1,092
)
(211
)
Loss before income taxes
(7,885
)
(1,840
)
(15,403
)
(4,651
)
Income tax benefit (expense)
20
337
(229
)
284
Net loss
$
(7,865
)
$
(1,503
)
$
(15,632
)
$
(4,367
)
Loss per common share
– basic
$
(0.65
)
$
(0.14
)
$
(1.31
)
$
(0.46
)
– diluted
$
(0.65
)
$
(0.14
)
$
(1.31
)
$
(0.46
)
Weighted average common shares
– basic
12,121,460
10,528,156
11,891,008
9,573,231
– diluted
12,121,460
10,528,156
11,891,008
9,573,231
Sonic Foundry, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
June 30,
2023
2022
Operating activities
Net (loss)
$
(15,632
)
$
(4,367
)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Amortization of software development
costs
28
—
Amortization of warrant debt, debt
discount and debt issuance costs
458
23
Depreciation and amortization of property
and equipment
1,633
861
Impairment of capitalized software
development
3,769
—
Deferred income taxes
290
(400
)
Loss on sale of fixed assets
9
166
Provision for doubtful accounts
(273
)
(50
)
Stock-based compensation expense related
to stock options
504
609
Stock issued for board of director
fees
42
49
Remeasurement (gain) on derivative
liability
—
(51
)
Changes in operating assets and
liabilities:
Accounts receivable
228
(177
)
Inventories
(1,072
)
(634
)
Investment in sales-type lease
166
128
Capitalized commissions
(112
)
75
Prepaid expenses and other current
assets
(425
)
(241
)
Right-of-use assets under operating
leases
133
124
Operating lease obligations
(124
)
(100
)
Hardware receivable, long-term
(265
)
—
Other long-term assets
17
386
Accounts payable and accrued
liabilities
(68
)
410
Other long-term liabilities
2
91
Unearned revenue
463
(1,991
)
Net cash used in operating activities
(10,229
)
(5,089
)
Investing activities
Purchases of property and equipment
(369
)
(2,337
)
Capitalization of software development
costs
(1,494
)
(1,681
)
Net cash used in investing activities
(1,863
)
(4,018
)
Financing activities
Proceeds from notes payable
338
—
Proceeds from notes payable due to related
parties
10,000
—
Payments on notes payable
(367
)
—
Payment on debt issuance costs
(193
)
—
Proceeds from issuance of common stock and
warrants
1,203
3,948
Proceeds from exercise of common stock
options
2
107
Payments on finance lease obligations
(9
)
(62
)
Net cash provided by financing
activities
10,974
3,993
Changes in cash and cash equivalents due
to changes in foreign currency
(39
)
(434
)
Net decrease in cash and cash
equivalents
(1,157
)
(5,548
)
Cash and cash equivalents at beginning of
year
3,299
9,989
Cash and cash equivalents at end of
period
$
2,142
$
4,441
Supplemental cash flow information:
Interest paid
$
625
$
2
Income taxes paid, foreign
19
78
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
120
Sonic Foundry, Inc.
Consolidated Non-GAAP Adjusted
EBITDA Reconciliation
(in thousands)
Three Months Ended June
30,
Nine Months Ended June
30,
2023
2022
2023
2022
Net income (loss)
$
(7,865
)
$
(1,503
)
$
(15,632
)
$
(4,367
)
Add:
Depreciation and amortization
608
327
1,633
861
Income tax expense (benefit)
(20)
(337)
229
(284)
Interest expense
493
9
1,133
22
Stock-based compensation expense
70
200
504
609
Severance
2
54
475
73
Impairment of capitalized software
development
3,769
-
3,769
-
Adjusted EBITDA
$
(2,943
)
$
(1,250
)
$
(7,889
)
$
(3,086
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230810158457/en/
Investors and Media: Eamon Doyle, Sonic Foundry
media@sonicfoundry.com 608-310-5891
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