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Sonic Foundry Announces Second Fiscal Quarter 2022 Financial Results

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 fiscal 2022 second quarter ended March 31, 2022.

Highlights for the Second Quarter Ended March 31, 2022:

  • Total revenue was $7.2 million compared to $8.7 million in the prior year quarter primarily due to deferred customer support revenue related to COVID and economic weakness in Japan.
  • Gross margin was 71% of sales versus 70% of sales in the comparable quarter, the slight change being due primarily to a shift in revenue mix during the quarter.
  • Net loss attributable to common stockholders was $0.15 per share compared to net income of $0.03 per diluted share in the second fiscal quarter of 2021, reflecting investments made to enter new markets per previously disclosed strategy.
  • Adjusted EBITDA was a negative $787 thousand compared to positive $852 thousand in the second fiscal quarter of 2021.

Year-to-date Financial Highlights

  • Total year-to-date revenues of $14.5 million compared to $17.9 million in the same period of 2021, a $3.4 million or 19 percent decrease.
  • Year-to-date gross margin was $10.3 million, or 71 percent of sales, compared to $12.9 million, or 72 percent of sales, in the same period of 2021.
  • Year-to-date net loss attributable to common stockholders of $2.9 million, or $0.35 per share, compared to net income of $889 thousand or $0.11 per share, in the same period of 2021.
  • Year-to-date adjusted EBITDA was a loss of $1.8 million compared to $2.2 million, in the same year-to-date period of 2021.

Management Commentary:

“While our second quarter financial results were sub-optimal, they were in line with our expectations for multiple reasons. First, even with the world gradually returning to in-person meetings and conferences, our events business continued to reflect slower demand than we experienced pre-pandemic. Second, sales for Mediasite enterprise systems declined as increased economic uncertainty began motivating organizations to closely evaluate variable expenses. As I said in my first quarter commentary, we can assume these disruptions to our base video business will eventually be resolved, and when they are, we’ll see a lift in its revenues and profitability,” said Joe Mozden, Jr., CEO of Sonic Foundry.

“Regardless of factors currently dampening our core business, we recognized two years ago that Mediasite products and services had growth and scale limitations even in the best of times. It was at that point that I joined Sonic Foundry and built a new leadership team to disrupt our own company. Through the test-and-learn process of design theory, we are charting a new course that will lead us to substantial and untapped market opportunities. It is important to understand that Mediasite provides the foundation of our transformation, and we are now unlocking its embedded value as a recognized leader in video creation and management solutions.”

“To give you context on how our legacy business is the springboard for our new ventures, I’ll start with Vidable™, which is a next-gen software solution for video, beyond Mediasite’s hardware capabilities. Vidable™ sits at the intersection of video editing, enterprise video, and AI and addresses a $15 billion target market. With Vidable™, we have the world’s most complete collection of AI for video that can deliver instant, comprehensive, and automated video transformation at scale. Our Mediasite Cloud delivers a tremendous data advantage in Vidable’s creation—over 2 petabytes (2,000 terabytes…very big) of video that resides in our cloud. We plan to scale it across our 1,600+ existing customers and attract new customers with its strong value proposition—ease-of-use, providing significant reduction in human labor and agnostic to all enterprise video platforms. Vidable™ is real and we are already using its technology to enhance customer’s video content. Today we live in a world of video creation and consumption, and this is the future of video.”

“Our second major initiative is Global Learning Exchange™, which will enable students in emerging countries to attain first-class higher education in a flexible, cost-effective, locally supported environment. This is a groundbreaking solution that creates access to educational opportunity, which is a known driver of social mobility. Higher education has always been a strong vertical for Sonic Foundry, and we are leveraging our long-term relationships with universities to launch Global Learning Exchange™. As previously announced, we have begun construction on our first GLX hub in the Bahamas in partnership with the Bahamas Institute of Business and Technology. We have numerous memos of understanding with other institutions who are searching for solutions to address declining enrollment while at the same time advancing their mission to educate and prepare tomorrow’s leaders.”

“Transformation is never easy but it’s absolutely necessary in order to create sustainable value for all our stakeholders. To fund our new businesses, we successfully raised $4.3 million in gross proceeds through a public offering in April. I am very pleased with the progress our team is making and we are completely aligned in our mission to transform a 30-year-old company with a modest growth profile into a modern, high-growth enterprise. I’m confident that we are bringing passion, purpose, and strengths to the table,” concluded Mozden.

Fiscal Second Quarter 2022 Operating Results:

Service revenue, which included support, cloud services, events, and professional services was $5.1 million for fiscal quarter ended March 31, 2022, compared to prior year quarter service revenue of $6.1 million. Product revenue was $2.2 million compared to $2.6 million during the same period last year. Event revenue in the second quarter of 2022 was $1 million, compared with $1.3 million reported in the comparable year-ago quarter. Gross margin was $5.2 million for the second quarter of fiscal 2022, compared with $6.1 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 year to date and second quarter ended March 31, 2022, and 2021 are included in the release.

About Sonic Foundry®, Inc.

Sonic Foundry (NASDAQ: SOFO) is the global leader for video capture, management and streaming solutions as well as virtual and hybrid events. Trusted by thousands of educational institutions, corporations, health organizations and government entities in over 65 countries, Sonic Foundry’s solutions include Mediasite®, Vidable™ and Global Learning Exchange™. Learn more at www.sonicfoundry.com.

© 2022 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. 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.

Consolidated Balance Sheets

(in thousands, except for share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

March 31,

 

 

September 30,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,411

 

 

$

9,989

 

Accounts receivable, net of allowances of $20 and $236

 

 

4,434

 

 

 

5,167

 

Inventories, net

 

 

1,125

 

 

 

442

 

Investment in sales-type lease, current

 

 

278

 

 

 

294

 

Capitalized commissions, current

 

 

287

 

 

 

360

 

Prepaid expenses and other current assets

 

 

1,160

 

 

 

1,153

 

Total current assets

 

 

11,695

 

 

 

17,405

 

Property and equipment:

 

 

 

 

 

 

 

 

Leasehold improvements

 

 

1,100

 

 

 

1,111

 

Computer equipment

 

 

9,177

 

 

 

8,527

 

Furniture and fixtures

 

 

1,620

 

 

 

1,528

 

Total property and equipment

 

 

11,897

 

 

 

11,166

 

Less accumulated depreciation and amortization

 

 

8,597

 

 

 

8,368

 

Property and equipment, net

 

 

3,300

 

 

 

2,798

 

Other assets:

 

 

 

 

 

 

 

 

Investment in sales-type lease, long-term

 

 

376

 

 

 

490

 

Capitalized commissions, long-term

 

 

69

 

 

 

76

 

Right-of-use assets under operating leases

 

 

2,390

 

 

 

2,441

 

Other long-term assets

 

 

1,354

 

 

 

805

 

Total assets

 

$

19,184

 

 

$

24,015

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

2,043

 

 

 

1,072

 

Accrued liabilities

 

 

1,756

 

 

 

2,522

 

Current portion of unearned revenue

 

 

6,973

 

 

 

9,413

 

Current portion of finance lease obligations

 

 

41

 

 

 

79

 

Current portion of operating lease obligations

 

 

1,128

 

 

 

930

 

Total current liabilities

 

 

11,941

 

 

 

14,016

 

Long-term portion of unearned revenue

 

 

1,577

 

 

 

1,614

 

Long-term portion of finance lease obligations

 

 

20

 

 

 

26

 

Long-term portion of operating lease obligations

 

 

1,338

 

 

 

1,583

 

Long-term portion of notes payable and warrant debt

 

 

541

 

 

 

556

 

Derivative liability, at fair value

 

 

23

 

 

 

53

 

Other liabilities

 

 

111

 

 

 

27

 

Total liabilities

 

 

15,551

 

 

 

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; 9,139,282 and 9,064,821 shares issued, respectively and 9,126,566 and 9,052,105 shares outstanding, respectively

 

 

91

 

 

 

91

 

Additional paid-in capital

 

 

213,812

 

 

 

213,278

 

Accumulated deficit

 

 

(209,306

)

 

 

(206,442

)

Accumulated other comprehensive loss

 

 

(795

)

 

 

(618

)

Treasury stock, at cost, 12,716 shares

 

 

(169

)

 

 

(169

)

Total stockholders’ equity

 

 

3,633

 

 

 

6,140

 

Total liabilities and stockholders’ equity

 

$

19,184

 

 

$

24,015

 

Sonic Foundry, Inc.

Consolidated Statements of Operations

(in thousands, except for share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

Six Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product and other

 

$

2,162

 

 

$

2,586

 

 

$

4,171

 

 

$

4,747

 

Services

 

 

5,081

 

 

 

6,125

 

 

 

10,325

 

 

 

13,129

 

Total revenue

 

 

7,243

 

 

 

8,711

 

 

 

14,496

 

 

 

17,876

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product and other

 

 

748

 

 

 

951

 

 

 

1,609

 

 

 

1,764

 

Services

 

 

1,331

 

 

 

1,624

 

 

 

2,575

 

 

 

3,222

 

Total cost of revenue

 

 

2,079

 

 

 

2,575

 

 

 

4,184

 

 

 

4,986

 

Gross margin

 

 

5,164

 

 

 

6,136

 

 

 

10,312

 

 

 

12,890

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

3,233

 

 

 

2,895

 

 

 

6,324

 

 

 

5,905

 

General and administrative

 

 

1,268

 

 

 

1,055

 

 

 

3,066

 

 

 

2,253

 

Product development

 

 

1,918

 

 

 

1,731

 

 

 

3,692

 

 

 

3,472

 

Total operating expenses

 

 

6,419

 

 

 

5,681

 

 

 

13,082

 

 

 

11,630

 

Income (Loss) from operations

 

 

(1,255

)

 

 

455

 

 

 

(2,770

)

 

 

1,260

 

Non-operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(10

)

 

 

(23

)

 

 

(5

)

 

 

(52

)

Other expense, net

 

 

(17

)

 

 

(38

)

 

 

(36

)

 

 

(27

)

Total non-operating expense

 

 

(27

)

 

 

(61

)

 

 

(41

)

 

 

(79

)

Income (Loss) before income taxes

 

 

(1,282

)

 

 

394

 

 

 

(2,811

)

 

 

1,181

 

Income tax expense

 

 

(54

)

 

 

(137

)

 

 

(53

)

 

 

(292

)

Net income (loss)

 

$

(1,336

)

 

$

257

 

 

$

(2,864

)

 

$

889

 

Dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

(1,336

)

 

$

257

 

 

$

(2,864

)

 

$

889

 

Income (Loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per common share

 

$

(0.15

)

 

$

0.03

 

 

$

(0.35

)

 

$

0.11

 

Diluted net income (loss) per common share

 

$

(0.15

)

 

$

0.03

 

 

$

(0.35

)

 

$

0.11

 

Weighted average common shares – Basic

 

 

9,114,451

 

 

 

8,040,513

 

 

 

9,095,810

 

 

 

8,001,723

 

– Diluted

 

 

9,114,451

 

 

 

8,557,788

 

 

 

9,095,810

 

 

 

8,451,913

 

Sonic Foundry, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

 

 

 

Six Months Ended

 

 

 

March 31

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

(2,864

)

 

$

889

 

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

 

 

 

 

 

 

 

 

Amortization of warrant debt, debt discount and debt issuance costs

 

 

15

 

 

 

33

 

Depreciation and amortization of property and equipment

 

 

534

 

 

 

539

 

Loss on sale of fixed assets

 

 

167

 

 

 

5

 

Provision for doubtful accounts

 

 

(83

)

 

 

3

 

Stock-based compensation expense related to stock options

 

 

409

 

 

 

283

 

Remeasurement (gain) loss on derivative liability

 

 

(30

)

 

 

19

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

654

 

 

 

925

 

Inventories

 

 

(689

)

 

 

71

 

Investment in sales-type lease

 

 

87

 

 

 

63

 

Capitalized commissions

 

 

80

 

 

 

154

 

Prepaid expenses and other current assets

 

 

(63

)

 

 

(45

)

Right-of-use assets under operating leases

 

 

(16

)

 

 

655

 

Operating lease obligations

 

 

27

 

 

 

(665

)

Other long-term assets

 

 

358

 

 

 

(93

)

Accounts payable and accrued liabilities

 

 

176

 

 

 

(1,628

)

Other long-term liabilities

 

 

94

 

 

 

17

 

Unearned revenue

 

 

(2,349

)

 

 

(2,495

)

Net cash used in operating activities

 

 

(3,493

)

 

 

(1,270

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,017

)

 

 

(448

)

Capitalization of software development costs

 

 

(954

)

 

 

 

Net cash used in investing activities

 

 

(1,971

)

 

 

(448

)

Financing activities

 

 

 

 

 

 

 

 

Payments on notes payable

 

 

 

 

 

(618

)

Proceeds from exercise of common stock

 

 

20

 

 

 

10

 

Proceeds from exercise of common stock options

 

 

105

 

 

 

209

 

Payments on capital lease and financing arrangements

 

 

(43

)

 

 

(76

)

Net cash provided by (used in) financing activities

 

 

82

 

 

 

(475

)

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

 

 

(196

)

 

 

(1

)

Net decrease in cash and cash equivalents

 

 

(5,578

)

 

 

(2,194

)

Cash and cash equivalents at beginning of year

 

 

9,989

 

 

 

7,619

 

Cash and cash equivalents at end of year

 

$

4,411

 

 

$

5,425

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

2

 

 

$

31

 

Income taxes paid, foreign

 

 

41

 

 

 

44

 

Non-cash financing and investing activities:

 

 

 

 

 

 

 

 

Property and equipment financed by finance lease or accounts payable

 

 

234

 

 

 

 

Sonic Foundry, Inc.

Consolidated Non-GAAP Adjusted EBITDA Reconciliation

(in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

Six Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

(1,336

)

 

$

257

 

 

$

(2,864

)

 

$

889

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

281

 

 

 

270

 

 

 

534

 

 

 

539

 

Income tax expense

 

 

54

 

 

 

137

 

 

 

53

 

 

 

292

 

Interest expense

 

 

10

 

 

 

23

 

 

 

5

 

 

 

52

 

Stock-based compensation expense

 

 

188

 

 

 

165

 

 

 

409

 

 

 

283

 

Severance

 

 

16

 

 

 

-

 

 

 

16

 

 

 

101

 

Adjusted EBITDA

 

$

(787

)

 

$

852

 

 

$

(1,847

)

 

$

2,156

 

 

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