Sonic Foundry Announces Fiscal Second Quarter 2023 Financial Results
Executive Summary:
In the second quarter, there was a substantial lift in Mediasite renewals and hardware sales. This resulted in Mediasite billings increasing
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
compared to$5.7 million in the prior-year quarter due in large part to foreign exchange in$7.2 million Japan and COVID’s continued impact on events inJapan . -
Gross margin was
57% of revenue versus71% 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
, or$3.4 million per share, compared to a net loss of$0.28 , or$1.3 million per share, in the second fiscal quarter of 2022.$0.15 -
Adjusted EBITDA was a negative
compared to negative$2.0 million million in the fiscal second quarter of 2022.$787 thousand
Year-to-Date Financial Highlights:
-
Total year-to-date revenues of
compared to$10.8 million in the same period of 2022, a$14.5 million decrease.$3.7 million -
Year-to-date gross margin was
59% of revenue versus71% 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
, or$7.8 million per share, compared to a net loss of$0.66 or$2.9 million per share, in the same period of 2022.$0.35 -
Year-to-date adjusted EBITDA was a negative
compared to negative$4.9 million , in the same year-to-date period of 2022.$1.8 million
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
“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
“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
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
© 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 |
|
|
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, |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Common stock, |
|
|
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
Source: Sonic Foundry, Inc.