GlobeNewswire Inc | Dec 22, 2020 06:08PM EST

December 22, 2020

MADISON, Wis., Dec. 22, 2020 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, as well as virtual and hybrid events, today announced consolidated financial results for its fiscal 2020 fourth quarter and fiscal year ended September 30, 2020.

Fiscal 2020 Fourth Quarter Highlights

-- Billings of $11 million in the fourth quarter of 2020, a $1.2 million increase over the same quarter last year -- Total revenues of $10.2 million compared to $9.2 million in the fourth quarter of 2019, a 10 percent increase -- Gross margin was $7.3 million, or 72 percent in the fourth quarter of 2020 compared to $6.5 million, or 70 percent in the fourth quarter of 2019 -- Net income attributable to common stockholders of $439,000, or $0.06 per share, compared to a net loss of $(179,000), or $(0.03) per share, in the fourth quarter of 2019, an improvement of $618,000 -- Adjusted EBITDA of $1.6 millionforthe fourth quarter of 2020 compared to $744,000 in the same quarter last year, a 115% improvement -- Unearned revenue was $12.1 million as of September 30, 2020 and $11.5 million as of September 30, 2019

Fiscal 2020 Year-EndHighlights

-- Billingstotaled$35.4million in fiscal 2020 compared to$35.1million in the prioryear -- Revenue remained flat year over year at $34.8 milliondespite impacts from COVID-19 -- Gross margin declined slightly from 73percent in fiscal 2019 to 72 percent in fiscal 2020 -- Net loss attributable to common stockholders of$(179,000), or$(0.02) per share compared toa net loss of$(3.7) million, or $(0.64) per share in fiscal 2019 -- Adjusted EBITDA was $2.4 million for the year compared to $(450,000) in the prior year. The company adjusts EBITDA for non-cash stock compensationexpense and severance expense

Fiscal 2020 Fourth Quarter Review

Product billings were$2.9 millionduring thefourthquarter of 2020 compared to$3.7 millionin the same quarter last year. Service billings, including support, hosting,eventsand installs were$8 million, compared to$6.1millionin the prior year. Notably, billings related to hosting increased 86percentin thefourth quarter of 2020compared to the same quarter last year. These increases in services areindicative of the acceleration in video content creation across the globe. The company expects to recognize$4.1millionof the current unearned revenue in the first quarter of fiscal2021. Recurring revenue of$6.8 millionwas67 percentof total revenue in thefourthquarter of2020, compared to$5.9 million, or64 percentof total revenue, in thefourthquarter of2019.

It has been incredibly exciting for me to join Sonic Foundry at this pivotal point inits30-year history, said Joe Mozden Jr., CEO, Sonic Foundry.Every organization across the world has been impacted by COVID-19 inaprofound way. Wehavehad the sincere privilege of being positioned to help our customers navigate unchartered waters new users likeNorland Collegein the United KingdomandHamid Bin Khalifa University, part of the Qatar Foundation, and longtimeclientslike Florida Atlantic University and Texas A&M University. Oursolutionsare helpingthem continue, if not grow their businesses, bykeeping theirclasses, trainings, work and eventsgoingvirtually, despite distance.

Mozden continued:Whether its migrating a health organizations in-person conference to a virtual platform to ensure they continue toexchange vital informationwiththousands ofusers, orenabling teachers to connect with their students inmorethoughtful and engaging ways,were proud to be a lifeline to our customersin this new video-centric world.

Weare rapidly adapting our businessto the trends that we are seeing, and are accelerating our investmentsandfocus on high value-add marketswhich we believe will grow ina postCOVIDworld. Increased demand for hosting, our virtual events platform andourvideo content managementcapabilitiesreflect significantopportunitiesfor Sonic Foundryand arethe basis for changes we are making in our business. I am extremely proud of our team for quickly pivoting to meet our customers needs during this difficult year. Weare beginninga newjourneywith greater emphasis onproduct orientation coupled withourhistoricalcustomer-centric focus. A great example of thatistheinnovationswe are driving forin the newhybrid worldforthe classroom, the office, and the events industry, he concluded.

Non-GAAP Financial InformationTo supplement and enhance the readers 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 as well as severance expense 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 loss to adjusted EBITDA for the fourth quarter ended September 30, 2020, and 2019 are included in the release.

About Sonic Foundry, Inc.Sonic Foundry (OTC Pink Sheets: SOFO) is theglobal leader for video capture, management and streaming solutions. Trusted by more than 5,200 educational institutions, corporations, health organizations and government entities in over 65 countries, itsMediasite Video Platformquickly and cost-effectively automates the capture, management, delivery and search of live and on-demand streaming videos. Learn more atwww.sonicfoundry.com.

2020 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.

Forward Looking StatementsThis 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 companys 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 companys 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.

Contact:Nicole Wise, Director of Communications920.226.0269nicolew@sonicfoundry.com

Sonic Foundry, Inc.Consolidated Balance Sheets(in thousands, except for share data)(Unaudited)

September 30, 2020 2019 Assets Current assets: Cash and cash equivalents $ 7,619 $ 4,295 Accounts receivable, net of allowances of $236 6,250 6,532 and $135Inventories 1,167 558 Investment in sales-type lease, current 275 163 Capitalized commissions, current 440 464 Prepaid expenses and other current assets 1,065 972 Total current assets 16,816 12,984 Property and equipment: Leasehold improvements 1,128 1,121 Computer equipment 7,960 5,610 Furniture and fixtures 1,366 1,233 Total property and equipment 10,454 7,964 Less accumulated depreciation and amortization 7,295 6,396 Property and equipment, net 3,159 1,568 Other assets: Investment in sales-type lease, long-term 76 134 Capitalized commissions, long-term 100 106 Right-of-use assets under operating leases 2,081 ? Other long-term assets 397 388 Total assets $ 22,629 $ 15,180 Liabilities and stockholders? equity (deficit) Current liabilities: Accounts payable 2,689 843 Accrued liabilities 2,565 2,216 Unearned revenue 10,402 9,610 Current portion of finance lease obligations 119 194 Current portion of operating lease obligations 1,425 ? Current portion of notes payable and warrant 1,104 968 debt, net of discountsTotal current liabilities 18,304 13,831 Long-term portion of unearned revenue 1,736 1,842 Long-term portion of finance lease obligations 89 179 Long-term portion of operating lease obligations 665 ? Long-term portion of notes payable and warrant 2,673 5,429 debt, net of discountsDerivative liability, at fair value 66 9 Other liabilities 144 143 Total liabilities 23,677 21,433 Commitments and contingencies Stockholders? equity (deficit): Preferred stock, $.01 par value, authorized ? ? 500,000 shares; none issued9% Preferred stock, Series A, voting, cumulative,convertible, $.01 par value (liquidationpreference of $1,000 per share), authorized 4,500 ? ? shares; zero shares issued and outstanding, atamounts paid in5% Preferred stock, Series B, voting, cumulative,convertible, $.01 par value (liquidation ? ? preference at par), authorized 1,000,000 shares,none issuedCommon stock, $.01 par value, authorized10,000,000 shares; 7,965,325 and 6,749,359 shares 80 67 issued and 7,952,609 and 6,736,643 sharesoutstandingAdditional paid-in capital 209,022 203,735 Accumulated deficit (209,519 ) (209,340 )Accumulated other comprehensive loss (462 ) (546 )Treasury stock, at cost, 12,716 shares (169 ) (169 )Total stockholders? equity (deficit) (1,048 ) (6,253 )Total liabilities and stockholders? equity $ 22,629 $ 15,180 (deficit)

Sonic Foundry, Inc.Consolidated Statements of Operations(in thousands, except for share and per share data)(Unaudited)

Quarters Ended September Years Ended September 30, 30, 2020 2019 2020 2019 Revenue: Product and $ 2,727 $ 3,863 $ 10,339 $ 11,631 otherServices 7,427 5,351 24,414 23,150 Total revenue 10,154 9,214 34,753 34,781 Cost of revenue:Product and 1,243 1,534 4,430 4,387 otherServices 1,638 1,219 5,204 4,893 Total cost of 2,881 2,753 9,634 9,280 revenueGross margin 7,273 6,461 25,119 25,501 Operating expenses:Selling and 3,591 3,163 13,025 14,727 marketingGeneral and 1,408 1,437 5,055 5,929 administrativeProduct 1,703 1,736 6,303 7,353 developmentTotal operating 6,702 6,336 24,383 28,009 expensesIncome/(loss) 571 125 736 (2,508 )from operationsNon-operatingincome (expenses):Interest (37 ) (240 ) (658 ) (897 )expense, netOther expense, 41 (51 ) (109 ) (117 )netTotalnon-operating 4 (291 ) (767 ) (1,014 )expensesLoss before 575 (166 ) (31 ) (3,522 )income taxesIncome tax (136 ) (13 ) (148 ) (90 )provisionNet loss $ 439 $ (179 ) $ (179 ) $ (3,612 )Dividends on ? ? ? (122 )preferred stockNet lossattributable to $ 439 $ (179 ) $ (179 ) $ (3,734 )commonstockholdersLoss per common share:Basic net lossper common $ 0.06 $ (0.03 ) $ (0.02 ) $ (0.64 )shareDiluted netloss per common $ 0.05 $ (0.03 ) $ (0.02 ) $ (0.64 )shareWeightedaverage common 7,940,480 6,736,285 7,216,135 5,833,301 shares ? Basic 8,346,877 6,736,285 7,216,135 5,833,301 ? Diluted

Sonic Foundry, Inc.Consolidated Statements of Cash Flows(in thousands)(Unaudited)

Years Ended September 30, 2020 2019 Operating activities Net loss $ (179 ) $ (3,612 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Amortization of other intangibles 231 307 Depreciation and amortization of property and 889 970 equipmentLoss on sale of fixed assets ? 8 Provision for doubtful accounts - including 111 116 financing receivablesProvision for inventory reserve 122 ? Loss on conversion of related party debt to equity 26 ? Stock-based compensation expense related to stock 158 177 options and warrantsStock issued for board of director?s fees 63 246 Deferred loan interest to related party 317 259 Remeasurement gain on derivative liability 57 (8 )Changes in operating assets and liabilities: Accounts receivable 268 950 Financing receivables ? 293 Inventories (729 ) 472 Investment in sales-type lease (48 ) 120 Capitalized commissions 30 123 Prepaid expenses and other current assets (57 ) 15 Right-of-use assets under operating leases 492 ? Operating lease obligations (528 ) ? Other long-term assets ? ? Accounts payable and accrued liabilities 1,503 (204 )Other long-term liabilities (2 ) (68 )Unearned revenue 617 (900 )Net cash used in operating activities 3,341 (736 )Investing activities Purchases of property and equipment (1,736 ) (433 )Net cash used in investing activities (1,736 ) (433 )Financing activities Proceeds from notes payable 3,157 5,500 Proceeds from lines of credit ? 9,199 Payments on notes payable (1,358 ) (833 )Payments on lines of credit ? (10,098 )Payments of debt issuance costs ? (110 )Payments to settle put on term debt ? ? Proceeds from issuance of preferred stock and common 73 873 stockPayments on capital lease and financing arrangements (202 ) (250 )Net cash provided by financing activities 1,670 4,281 Changes in cash and cash equivalents due to changes 49 (6 )in foreign currencyNet increase (decrease) in cash and cash equivalents 3,324 3,106 Cash and cash equivalents at beginning of year 4,295 1,189 Cash and cash equivalents at end of year $ 7,619 $ 4,295 Supplemental cash flow information: Interest paid $ 148 $ 618 Income taxes paid, foreign 154 99 Non-cash financing and investing activities: Property and equipment financed by finance lease or 724 186 accounts payableDebt discount and warrant ? 679 Preferred stock dividend paid in additional shares ? 122 Conversion of preferred shares to common shares ? 1,773 Conversion of related party debt to common shares 5,005 ?

Sonic Foundry, Inc.Consolidated Non-GAAP Adjusted EBITDA Reconciliation(in thousands)

Quarters Ended Years Ended September September 30, 30, 2020 2019 2020 2019 Net income (loss) $ 439 $ (179 ) $ (179 ) $ (3,612 )Add: Depreciation and 235 228 883 977 amortizationIncome tax expense 136 13 148 90 Interest expense 37 240 658 897 Stock-basedcompensation 55 (25 ) 158 175 expenseSeverance 705 467 705 1,023 Adjusted EBITDA $ 1,607 $ 744 $ 2,373 $ (450 )