Sonic Foundry Announces Third Fiscal Quarter 2022 Financial Results
Sonic Foundry, Inc. (NASDAQ: SOFO) reported Q3 fiscal 2022 results, revealing total revenue of $6.5 million, down from $8.7 million year-over-year due to a decline in event sizes and delays in contract renewals. The gross margin improved to 71%. The net loss was $0.14 per share, compared to net income of $0.31 per share in the previous year. Year-to-date revenue decreased by 21% to $21.0 million. Management highlighted ongoing challenges in the Events business and operations in Japan, although optimism surrounds growth initiatives like Vidable and the Global Learning Exchange.
- Gross margin improved to 71%, indicating efficient cost management.
- Significant progress in growth initiatives like Vidable and the Global Learning Exchange.
- Exciting new partnerships with institutions recognized under the Global Learning Exchange model.
- Total revenue decreased by 25% in Q3 compared to the prior year.
- Net loss attributable to common stockholders increased to $4.4 million year-to-date.
- Cloud services revenue down 16%, indicating weakening demand.
Highlights for the Third Quarter Ended
-
Total revenue was
compared to$6.5 million in the prior-year quarter primarily due to a reduction in the number and size of events as customers began to go back to in-person events, client delays in renewals of support contracts due to macro environment concerns, foreign currency impact on Japanese operations, and a lower base of deferred revenue at the start of the quarter.$8.7 million -
Gross margin was
71% of sales versus70% of sales in the comparable quarter, primarily due to a shift in revenue mix during the quarter. -
Net loss attributable to common stockholders was
per share compared to net income of$0.14 per diluted share in the third fiscal quarter of 2021, reflecting investments made to enter new markets per previously disclosed strategy.$0.31 -
Adjusted EBITDA was a negative
compared to positive$1.3 million in the third fiscal quarter of 2021.$606 thousand
Year-to-date Financial Highlights
-
Total year-to-date revenues of
compared to$21.0 million in the same period of 2021, a$26.5 million or$5.6 million 21% decrease. -
Year-to-date gross margin was
, or$14.9 million 71% of sales, compared to , or$18.9 million 71% of sales, in the same period of 2021. -
Year-to-date net loss attributable to common stockholders of
, or$4.4 million per diluted share, compared to net income of$0.46 , or$3.5 million per diluted share, in the same period of 2021.$0.42 -
Year-to-date Adjusted EBITDA was a loss of
compared to$3.1 million gain, in the same year-to-date period of 2021.$2.8 million
Management Commentary:
“In our core Mediasite® business, conditions remained consistent with what we saw in the first half of the fiscal year. Two main issues continued to pressure our revenues and profits—our Events business and our operations in
“We believe the Mediasite business will gradually improve, and we have optimized our structure for this growth and as such we’ll be prepared when it happens. In the meantime, we have been focused on executing our high-growth, multi-brand strategy. We are well ahead of our business plan for these services and there has been exciting news on several fronts. First, on
Mozden continued, “We are also making great progress with Vidable™, our other major initiative. Vidable is a next-gen software solution that sits at the intersection of video editing, enterprise video and AI and addresses a
“Sonic Foundry now has three brands—Global Learning Exchange™, Vidable™ and Mediasite®—and we are confident that these brands will transform us into a high velocity, high growth company. To support our ongoing transformation, we recently announced organizational changes that will give each of the three business units a dedicated General Manager.
“Finally, I want to thank our shareholders for their patience. When a company announces a transformation, however necessary, there is always a ‘show-me’ element. We are confident that our strategy is a solid path to long-term sustainable growth, and I hope you are as excited as I am about the future of Sonic Foundry,” concluded Mozden.
Fiscal Third Quarter 2022 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 and subtracts gain from debt forgiveness from the
About Sonic Foundry®, Inc.
© 2022
Forward-Looking Statements
This news release contains forward-looking statements about the products and services of
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(in thousands, except for share data) |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|
|
|
||
|
|
2022 |
|
|
2021 |
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,441 |
|
|
$ |
9,989 |
|
Accounts receivable, net of allowances of |
|
|
5,165 |
|
|
|
5,167 |
|
Inventories, net |
|
|
1,065 |
|
|
|
442 |
|
Investment in sales-type lease, current |
|
|
281 |
|
|
|
294 |
|
Capitalized commissions, current |
|
|
286 |
|
|
|
360 |
|
Prepaid expenses and other current assets |
|
|
1,251 |
|
|
|
1,153 |
|
Total current assets |
|
|
12,489 |
|
|
|
17,405 |
|
Property and equipment: |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
1,382 |
|
|
|
1,111 |
|
Computer equipment |
|
|
9,665 |
|
|
|
8,527 |
|
Furniture and fixtures |
|
|
1,558 |
|
|
|
1,528 |
|
Total property and equipment |
|
|
12,605 |
|
|
|
11,166 |
|
Less accumulated depreciation and amortization |
|
|
8,797 |
|
|
|
8,368 |
|
Property and equipment, net |
|
|
3,808 |
|
|
|
2,798 |
|
Other assets: |
|
|
|
|
|
|
|
|
Investment in sales-type lease, long-term |
|
|
268 |
|
|
|
490 |
|
Capitalized commissions, long-term |
|
|
75 |
|
|
|
76 |
|
Right-of-use assets under operating leases |
|
|
2,182 |
|
|
|
2,441 |
|
Deferred tax asset |
|
|
400 |
|
|
|
— |
|
Other long-term assets |
|
|
2,014 |
|
|
|
805 |
|
Total assets |
|
$ |
21,236 |
|
|
$ |
24,015 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
1,488 |
|
|
|
1,072 |
|
Accrued liabilities |
|
|
1,915 |
|
|
|
2,522 |
|
Current portion of unearned revenue |
|
|
7,463 |
|
|
|
9,413 |
|
Current portion of finance lease obligations |
|
|
22 |
|
|
|
79 |
|
Current portion of operating lease obligations |
|
|
1,165 |
|
|
|
930 |
|
Current portion of warrant debt |
|
|
221 |
|
|
|
— |
|
Total current liabilities |
|
|
12,274 |
|
|
|
14,016 |
|
Long-term portion of unearned revenue |
|
|
1,274 |
|
|
|
1,614 |
|
Long-term portion of finance lease obligations |
|
|
17 |
|
|
|
26 |
|
Long-term portion of operating lease obligations |
|
|
1,102 |
|
|
|
1,583 |
|
Long-term portion of notes payable and warrant debt |
|
|
294 |
|
|
|
556 |
|
Derivative liability, at fair value |
|
|
2 |
|
|
|
53 |
|
Other liabilities |
|
|
97 |
|
|
|
27 |
|
Total liabilities |
|
|
15,060 |
|
|
|
17,875 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Common stock, |
|
|
109 |
|
|
|
91 |
|
Additional paid-in capital |
|
|
217,973 |
|
|
|
213,278 |
|
Accumulated deficit |
|
|
(210,809 |
) |
|
|
(206,442 |
) |
Accumulated other comprehensive loss |
|
|
(928 |
) |
|
|
(618 |
) |
|
|
|
(169 |
) |
|
|
(169 |
) |
Total stockholders’ equity |
|
|
6,176 |
|
|
|
6,140 |
|
Total liabilities and stockholders’ equity |
|
$ |
21,236 |
|
|
$ |
24,015 |
|
|
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(in thousands, except for share and per share data) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and other |
|
$ |
2,238 |
|
|
$ |
2,659 |
|
|
$ |
6,409 |
|
|
$ |
7,406 |
|
Services |
|
|
4,227 |
|
|
|
6,002 |
|
|
|
14,552 |
|
|
|
19,131 |
|
Total revenue |
|
|
6,465 |
|
|
|
8,661 |
|
|
|
20,961 |
|
|
|
26,537 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and other |
|
|
657 |
|
|
|
1,074 |
|
|
|
2,266 |
|
|
|
2,838 |
|
Services |
|
|
1,250 |
|
|
|
1,548 |
|
|
|
3,825 |
|
|
|
4,770 |
|
Total cost of revenue |
|
|
1,907 |
|
|
|
2,622 |
|
|
|
6,091 |
|
|
|
7,608 |
|
Gross margin |
|
|
4,558 |
|
|
|
6,039 |
|
|
|
14,870 |
|
|
|
18,929 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
2,865 |
|
|
|
2,860 |
|
|
|
9,189 |
|
|
|
8,765 |
|
General and administrative |
|
|
1,439 |
|
|
|
1,103 |
|
|
|
4,505 |
|
|
|
3,356 |
|
Product development |
|
|
1,924 |
|
|
|
1,883 |
|
|
|
5,616 |
|
|
|
5,355 |
|
Total operating expenses |
|
|
6,228 |
|
|
|
5,846 |
|
|
|
19,310 |
|
|
|
17,476 |
|
Income (Loss) from operations |
|
|
(1,670 |
) |
|
|
193 |
|
|
|
(4,440 |
) |
|
|
1,453 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(9 |
) |
|
|
10 |
|
|
|
(22 |
) |
|
|
(42 |
) |
Other expense, net |
|
|
(161 |
) |
|
|
19 |
|
|
|
(189 |
) |
|
|
(8 |
) |
Gain on debt forgiveness |
|
|
— |
|
|
|
2,325 |
|
|
|
— |
|
|
|
2,325 |
|
Total non-operating expense |
|
|
(170 |
) |
|
|
2,354 |
|
|
|
(211 |
) |
|
|
2,275 |
|
Income (loss) before income taxes |
|
|
(1,840 |
) |
|
|
2,547 |
|
|
|
(4,651 |
) |
|
|
3,728 |
|
Income tax benefit (expense) |
|
|
337 |
|
|
|
99 |
|
|
|
284 |
|
|
|
(193 |
) |
Net income (loss) |
|
$ |
(1,503 |
) |
|
$ |
2,646 |
|
|
$ |
(4,367 |
) |
|
$ |
3,535 |
|
Dividends on preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) attributable to common stockholders |
|
$ |
(1,503 |
) |
|
$ |
2,646 |
|
|
$ |
(4,367 |
) |
|
$ |
3,535 |
|
Income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share |
|
$ |
(0.14 |
) |
|
$ |
0.33 |
|
|
$ |
(0.46 |
) |
|
$ |
0.44 |
|
Diluted net income (loss) per common share |
|
$ |
(0.14 |
) |
|
$ |
0.31 |
|
|
$ |
(0.46 |
) |
|
$ |
0.42 |
|
Weighted average common shares – Basic |
|
|
10,528,156 |
|
|
|
8,060,036 |
|
|
|
9,573,231 |
|
|
|
8,021,852 |
|
– Diluted |
|
|
10,528,156 |
|
|
|
8,545,156 |
|
|
|
9,573,231 |
|
|
|
8,480,856 |
|
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(in thousands) |
||||||||
(Unaudited) |
||||||||
|
|
Nine Months Ended |
|
|||||
|
|
|
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,367 |
) |
|
$ |
3,535 |
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization of other intangible |
|
|
— |
|
|
|
42 |
|
Amortization of warrant debt, debt discount and debt issuance costs |
|
|
23 |
|
|
|
— |
|
Depreciation and amortization of property and equipment |
|
|
861 |
|
|
|
773 |
|
Deferred income taxes |
|
|
(400 |
) |
|
|
— |
|
Loss on sale of fixed assets |
|
|
166 |
|
|
|
6 |
|
Provision for doubtful accounts |
|
|
(50 |
) |
|
|
— |
|
Stock-based compensation expense related to stock options |
|
|
609 |
|
|
|
375 |
|
Stock issued for board of director fees |
|
|
49 |
|
|
|
40 |
|
Remeasurement (gain) on derivative liability |
|
|
(51 |
) |
|
|
(3 |
) |
Gain on debt forgiveness |
|
|
— |
|
|
|
(2,325 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(177 |
) |
|
|
592 |
|
Inventories |
|
|
(634 |
) |
|
|
712 |
|
Investment in sales-type lease |
|
|
128 |
|
|
|
1 |
|
Capitalized commissions |
|
|
75 |
|
|
|
171 |
|
Prepaid expenses and other current assets |
|
|
(241 |
) |
|
|
114 |
|
Right-of-use assets under operating leases |
|
|
124 |
|
|
|
(792 |
) |
Operating lease obligations |
|
|
(100 |
) |
|
|
795 |
|
Other long-term assets |
|
|
386 |
|
|
|
(395 |
) |
Accounts payable and accrued liabilities |
|
|
410 |
|
|
|
(2,042 |
) |
Other long-term liabilities |
|
|
91 |
|
|
|
(106 |
) |
Unearned revenue |
|
|
(1,991 |
) |
|
|
(2,290 |
) |
Net cash used in operating activities |
|
|
(5,089 |
) |
|
|
(797 |
) |
Investing activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(2,337 |
) |
|
|
(619 |
) |
Capitalization of software development costs |
|
|
(1,681 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(4,018 |
) |
|
|
(619 |
) |
Financing activities |
|
|
|
|
|
|
|
|
Payments on notes payable |
|
|
— |
|
|
|
(935 |
) |
Proceeds from exercise of common stock |
|
|
3,948 |
|
|
|
10 |
|
Proceeds from exercise of common stock options |
|
|
107 |
|
|
|
247 |
|
Payments on capital lease and financing arrangements |
|
|
(62 |
) |
|
|
(98 |
) |
Net cash provided by (used in) financing activities |
|
|
3,993 |
|
|
|
(776 |
) |
Changes in cash and cash equivalents due to changes in foreign currency |
|
|
(434 |
) |
|
|
18 |
|
Net decrease in cash and cash equivalents |
|
|
(5,548 |
) |
|
|
(2,174 |
) |
Cash and cash equivalents at beginning of year |
|
|
9,989 |
|
|
|
7,619 |
|
Cash and cash equivalents at end of year |
|
$ |
4,441 |
|
|
$ |
5,445 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
2 |
|
|
$ |
32 |
|
Income taxes paid, foreign |
|
|
78 |
|
|
|
84 |
|
Non-cash financing and investing activities: |
|
|
|
|
|
|
|
|
Property and equipment financed by finance lease or accounts payable |
|
|
120 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Consolidated Non-GAAP Adjusted EBITDA Reconciliation |
||||||||||||||||
(in thousands) |
||||||||||||||||
|
|
Three Months
|
|
|
Nine Months Ended
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) |
|
$ |
(1,503 |
) |
|
$ |
2,646 |
|
|
$ |
(4,367 |
) |
|
$ |
3,535 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
327 |
|
|
|
246 |
|
|
|
861 |
|
|
|
784 |
|
Income tax expense (benefit) |
|
|
(337 |
) |
|
|
(99 |
) |
|
|
(284 |
) |
|
|
193 |
|
Interest expense (income) |
|
|
9 |
|
|
|
(10 |
) |
|
|
22 |
|
|
|
42 |
|
Stock-based compensation expense |
|
|
200 |
|
|
|
92 |
|
|
|
609 |
|
|
|
375 |
|
Severance |
|
|
54 |
|
|
|
56 |
|
|
|
73 |
|
|
|
157 |
|
Subtract: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from debt forgiveness |
|
|
- |
|
|
|
2,325 |
|
|
|
- |
|
|
|
2,325 |
|
Adjusted EBITDA |
|
$ |
(1,250 |
) |
|
$ |
606 |
|
|
$ |
(3,086 |
) |
|
$ |
2,761 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20220811005137/en/
Media:
media@sonicfoundry.com
608-310-5891
Investors:
mboyce@finprofiles.com
310-622-8247
Source:
FAQ
What were Sonic Foundry's SOFO earnings results for Q3 2022?
How did Sonic Foundry's revenue change compared to the previous year?
What are the key challenges Sonic Foundry is facing?