GlobeNewswire Inc | Aug 13, 2020 05:05PM EDT

August 13, 2020

MADISON, Wis., Aug. 13, 2020 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2020 third quarter ended June 30, 2020.

Fiscal 2020 Third Quarter Highlights

-- Billings of $7.7 million in the third quarter of 2020, bringing total billings for the year to $24.3 million which is $300,000 ahead of last year -- Total revenues of $7.9 million compared to $10.1 million in the third quarter of 2019, and $24.6 million total revenue year-to-date compared to $25.6 million last year -- Gross margin remained consistent at 73 percent for the third quarter in both 2020 and 2019 -- Net income attributable to common stockholders of $107,000, or $.01 per share, compared to a net loss of $(159,000), or $(0.03) per share, in the third quarter of 2019, an improvement of $266,000 -- Adjusted EBITDA of $353,000 forthe third quarter of 2020, bringing year-to-date adjusted EBITDA to $767,000, which is $2 million ahead of last year -- Unearned revenue was $11.3 million as of June 30, 2020 and $11.5 million as of September 30, 2019

Fiscal 2020 Third Quarter Review

Due to supply chain interruptions caused by COVID-19, product billings were$2.5 millionduring thethirdquarter of 2020 compared to$4 millionin the same quarter last year. Service billings, including support, hosting, events and installs were$5.2 million, compared to$6.5 millionin the prior year. Events billings, particularly with MSKK, our Japanese subsidiary, were negatively impacted by cancellations due to COVID-19. The company expects to recognize$4.6 millionof the current unearned revenue in the fourth quarter of fiscal2020. Recurring revenue of$5.6 millionwas70 percentof total revenue in thethirdquarter of2020, compared to$6.3 million, or63 percentof total revenue, in thethirdquarter of2019.

In this new video-centric world, Sonic Foundry is well positioned to help schools and organizations react quickly to meet their expanding communication needs with Mediasite. I am proud of how the team has innovated to launch additional products and services that are in high demand. We expect that Mediasite Mosaic, our new personal capture app, and our expanded Zoom integration will be integral to hybrid back-to-school plans around the world. Our Mediasite Events team pivoted almost overnight to a complete virtual event offering that grew out of our 15-year history of creating dynamic online experiences a business segment we expect to grow as the long-reaching effects of the pandemic on in-person conferences continues into next year, said Michael Norregaard, CEO, Sonic Foundry.

Norregaard continued: We are reminded daily that our customers continue to navigate uncertain budgets and back-to-school plans during these unprecedented times. As we welcome new customers, such as Edgecombe Community College and Kansas State Lottery into the Mediasite fold, and help our current customers expand their existing footprint, we are honored to be their trusted solution to help them recover faster and emerge stronger than ever.

We appreciate Michael Norregaards contributions to the company in terms of efficiencies he implemented that led us to improved profitability, said Mark Burish, chairman, Sonic Foundry. Now as we face new demands for virtual learning and enterprise communication brought on by the pandemic, we believe a focus on sales growth is critical to maximizing shareholder value. We believe that Joe Mozden, with his proven experience in building sustainable growth, is the right person to lead this initiative when he takes the reins next month.

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 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 third quarter ended June 30, 2020, and 2019 are included in the release.

About Sonic Foundry, Inc.Sonic Foundry (OTC: 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 and @mediasite.

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.

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

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

June 30, September 2020 30, 2019Assets Current assets: Cash and cash equivalents $ 6,442 $ 4,295 Accounts receivable, net of allowances of $159 & $135 5,438 6,532 Inventories 544 558 Investment in sales-type lease, current 147 163 Capitalized commissions, current 354 464 Prepaid expenses and other current assets 1,111 972 Total current assets 14,036 12,984 Property and equipment: Leasehold improvements 1,122 1,121 Computer equipment 6,644 5,610 Furniture and fixtures 1,326 1,233 Total property and equipment 9,092 7,964 Less accumulated depreciation and amortization 7,056 6,396 Property and equipment, net 2,036 1,568 Other assets: Investment in sales-type lease, long-term 13 134 Capitalized commissions, long-term 89 106 Right-of-use assets under operating leases 2,335 ? Other long-term assets 413 388 Total assets $ 18,922 $ 15,180 Liabilities and stockholders? deficit Current liabilities: Accounts payable $ 1,544 $ 843 Accrued liabilities 1,122 2,216 Unearned revenue 9,558 9,610 Current portion of finance lease obligations 137 194 Current portion of operating lease obligations 1,364 ? Current portion of notes payable and warrant debt, net 1,255 968 of discountsTotal current liabilities 14,980 13,831 Long-term portion of unearned revenue 1,760 1,842 Long-term portion of finance lease obligations 110 179 Long-term portion of operating lease obligations 989 ? Long-term portion of notes payable and warrant debt, 2,485 5,429 net of discountsDerivative liability, at fair value 125 9 Other liabilities 141 143 Total liabilities 20,590 21,433 Commitments and contingencies Stockholders? deficit: Preferred stock, $.01 par value, authorized 500,000 ? ? shares; none issued9% Preferred stock, Series A, voting, cumulative,convertible, $.01 par value (liquidation preference of ? ? $1,000 per share), authorized 4,500 shares; zero sharesissued and outstanding, at amounts 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, authorized 10,000,000shares; 7,934,760 and 6,749,359 shares issued, 79 67 respectively and 7,922,044 and 6,736,643 sharesoutstanding, respectivelyAdditional paid-in capital 208,914 203,735 Accumulated deficit (209,958 ) (209,340 )Accumulated other comprehensive loss (534 ) (546 )Treasury stock, at cost, 12,716 shares (169 ) (169 )Total stockholders? deficit (1,668 ) (6,253 )Total liabilities and stockholders? deficit $ 18,922 $ 15,180

See accompanying notes to the condensed consolidated financial statements.

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

Three Months Ended June Nine Months Ended June 30, 30, 2020 2019 2020 2019Revenue: Product and other $ 2,744 $ 4,221 $ 7,612 $ 7,768 Services 5,173 5,847 16,987 17,799 Total revenue 7,917 10,068 24,599 25,567 Cost of revenue: Product and other 1,199 1,558 3,188 2,854 Services 971 1,123 3,566 3,673 Total cost of revenue 2,170 2,681 6,754 6,527 Gross margin 5,747 7,387 17,845 19,040 Operating expenses: Selling and marketing 2,980 3,785 9,433 11,564 General and 1,030 1,609 3,647 4,492 administrativeProduct development 1,511 1,849 4,600 5,617 Total operating expenses 5,521 7,243 17,680 21,673 Income (loss) from 226 144 165 (2,633 )operationsNon-operating expenses: Interest expense, net (140 ) (276 ) (621 ) (657 )Other expense, net (106 ) (63 ) (150 ) (66 )Total non-operating (246 ) (339 ) (771 ) (723 )expensesIncome (loss) before (20 ) (195 ) (606 (3,356 )income taxesIncome tax benefit 127 36 (12 ) (77 )(expense)Net income (loss) $ 107 $ (159 ) $ (618 ) $ (3,433 )Dividends on preferred ? (24 ) (122 )stockNet income (loss)attributable to common $ 107 $ (183 ) $ (618 ) $ (3,555 )stockholdersIncome (loss) per common share? basic $ 0.01 $ (0.03 ) $ (0.09 ) $ (0.64 )? diluted $ 0.01 $ (0.03 ) $ (0.09 ) $ (0.64 )Weighted average common shares? basic 7,399,545 6,122,098 6,972,924 5,528,999 ? diluted 7,830,293 6,122,098 6,972,924 5,528,999

See accompanying notes to the condensed consolidated financial statements

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

Nine Months Ended June 30, 2020 2019Operating activities Net loss $ (618 ) $ (3,433 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Amortization of other intangibles 204 170 Depreciation and amortization of property and equipment 644 748 Loss on sale of fixed assets ? 8 Provision for doubtful accounts - including financing 31 31 receivablesProvision for inventory reserve 90 ? Loss on conversion of related party debt to equity 26 ? Stock-based compensation expense related to stock options 104 203 and warrantsStock issued for board of director fees 61 246 Deferred loan interest to related party 322 ? Remeasurement loss (gain) on derivative liability 116 (12 )Changes in operating assets and liabilities: Accounts receivable 1,077 660 Financing receivables ? 87 Inventories (76 ) 75 Investment in sales-type lease 136 ? Capitalized commissions 127 138 Prepaid expenses and other current assets (128 ) 280 Right-of-use assets under operating leases 208 ? Operating lease obligations (234 ) ? Other long-term assets (24 ) ? Accounts payable and accrued liabilities (749 ) (294 )Other long-term liabilities (2 ) (46 )Unearned revenue (153 ) (1,339 )Net cash provided by (used in) operating activities 1,162 (2,478 )Investing activities Purchases of property and equipment (683 ) (373 )Net cash used in investing activities (683 ) (373 )Financing activities Proceeds from notes payable 2,778 5,500 Proceeds from lines of credit ? 9,199 Payments on notes payable (984 ) (583 )Payments on lines of credit ? (9,636 )Payment of debt issuance costs ? (110 )Proceeds from issuance of preferred stock and common stock 2 864 Proceeds from exercise of common stock options 18 ? Payments on finance lease obligations (162 ) (193 )Net cash provided by (used in) financing activities 1,652 5,041 Changes in cash and cash equivalents due to changes in 16 8 foreign currencyNet increase (decrease) in cash and cash equivalents 2,147 2,198 Cash and cash equivalents at beginning of year 4,295 1,189 Cash and cash equivalents at end of period $ 6,442 $ 3,387 Supplemental cash flow information: Interest paid $ 114 $ 425 Income taxes paid, foreign 141 237 Non-cash financing and investing activities: Property and equipment financed by finance lease or 478 45 accounts payableDebt discount and warrant ? 679 Preferred stock dividends paid in additional shares ? 122 Conversion of preferred shares to common shares ? 1,772 Conversion of related party debt to common shares 5,005 ?

See accompanying notes to the condensed consolidated financial statements.

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

Three Months Ended Nine Months Ended June 30, June 30, 2020 2019 2020 2019 Net income (loss) $ 107 $ (159 ) $ (618 ) $ (3,433 )Add: Depreciation and amortization 215 240 648 748 Income tax (benefit) expense (127 ) (36 ) 12 77 Interest expense 140 276 621 657 Stock-based compensation expense 18 (17 ) 104 203 Severance ? 436 ? 562 Adjusted EBITDA $ 353 $ 740 $ 767 $ (1,186 )