GlobeNewswire Inc | Aug 12, 2021 04:05PM EDT

August 12, 2021

MADISON, Wis., Aug. 12, 2021 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation, management solutions as well as virtual and hybrid events, today announced consolidated financial results for its fiscal 2021 third quarter ended June 30, 2021.

Fiscal 2021 Third Quarter Highlights

-- Total revenues of $8.7 million, 9 percent increase compared to the $7.9 million revenue in the third quarter of 2020. -- Gross margin was $6.0 million, or 70 percent of sales, compared to $5.7 million, or 73 percent of sales, in the third quarter of 2020. -- Net income attributable to common stockholders of $2.6 million, comprised of $2.3 million from forgiveness of the Payroll Protection Program loan, and $0.3 million from operations. Net income per share was $0.33, compared to net income of $107 thousand, or $0.01 per share in the third quarter of 2020. -- Adjusted EBITDA was $606 thousand compared to $353 thousand in the third quarter of 2020.

Year-to-date Financial Highlights

-- Total year-to-date revenues of $26.5 million compared to $24.6 million through the third quarter of 2020, a $1.9 million or 8 percent increase. -- Gross margin was $18.9 million, or 71 percent of sales, compared to $17.8 million, or 73 percent of sales, year-to-date through the third quarter of 2020. -- Year-to-date net income attributable to common stockholders of $3.5 million, or $0.44 per share, compared to net loss of $(618) thousand, or $(0.09) per share, year-to-date through the third quarter of 2020. -- Year-to-date adjusted EBITDA was $2.7 million compared to $767 thousand, year-to-date through the third quarter of 2020.

Fiscal 2021 Third Quarter Review

Service revenue, including support, cloud services events, and installs were$6.0 million, a cv16 percent increase compared to prior year revenue of $5.2 million in the same period. Product revenue remains consistent compared to prior year revenue at $2.7 million during thesame period of fiscal year2021. Cloud services revenue increased 18 percent in the third quarter of 2021 compared to the same quarter last year. The increase reflects the companys strategy to invest and execute services in the cloud services product offering. Event revenue is $1.7 million, a substantial increase from $893 thousand at third quarter of 2020.

Year-to-date Financial Review

Service revenue, including support, cloud services, events, and professional services were $19.1 million year to date on June 30, 2021, compared to $17.0 million in the prior year. Product revenue was $7.4 million year to date through the third quarter of 2021 compared to $7.6 million during the same period last year. Notably, year-to-date revenue related to cloud services increased 34 percent as of the third quarter of 2021 compared to the same period last year. Event revenue increased by 17 percent at nine months ended on June 30, 2021, compared to the same period last year. The company expects to recognize $3.2 million of the current unearned revenue in the fourth quarter of fiscal 2021.

This has been a big quarter for us as we continue to achieve our growth plan, said Joe Mozden Jr., CEO, Sonic Foundry. Im pleased to once again say that our quarter delivered strong results across several key financial metrics and weve made some exciting progress including acquiring several new investors with a lead investment by the Roumell Opportunistic Value Fund which is run by James Roumell, a highly acclaimed Chevy Chase, MD money manager. Additionally, we secured a new line of credit with U.S. Bank for $3 million. These new contributions allow us to continue to create substantial growth by investing in new markets and providing new working capital that we can invest in future projects.

While presentation spaces such as classrooms and training rooms will continue to play a key role in our success in the future, we made the strategic decision at the start of the pandemic to focus more on two new large growth opportunities cloud video services and hybrid events. Weve made tremendous progress in these areas over the past months, increasing events and cloud services 17 percent and 34 percent respectively. Were encouraged by the overall growth from both of these areas and we believe they will continue to be contributors to our growth going forward.

Mr. Mozden continued: Weve also taken huge strides towards accelerating innovation, including our latest release launched in Q3, Mediasite 8. This transformational release builds upon our focus to deliver simple, reliable and flexible technology that supports a digital-first world. Mediasite 8 is the foundation of a reimagined video platform with a design-first user experience at the forefront.

COVID continues to be an unpredictable force, but we know higher-education, business and event professionals will continue to leverage video. Mediasite is playing a key role in delivering educational and institutional knowledge in a way that transcends time and distance, virtual or in-person. Mediasite has helped companies stay connected with their employees, customers and partners with unparalleled ability to unite people in real-time all over the world and I am proud of the progress weve made as a business.

Non-GAAP Financial Information

To 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, severance, and gain from debt forgiveness 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 third quarter ended June 30, 2021 and 2020 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 as well as virtual and hybrid events. 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.

2021 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 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:Media:Jaimee Pitt, Communications608.216.7592jaimee.pitt@sonicfoundry.com

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

June 30, September 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 5,445 $ 7,619 Accounts receivable, net of allowances of $236 5,448 6,250 and $159Inventories 449 1,167 Investment in sales-type lease, current 148 275 Capitalized commissions, current 300 440 Prepaid expenses and other current assets 930 1,065 Total current assets 12,720 16,816 Property and equipment: Leasehold improvements 1,113 1,128 Computer equipment 8,377 7,960 Furniture and fixtures 1,549 1,366 Total property and equipment 11,039 10,454 Less accumulated depreciation and amortization 8,066 7,295 Property and equipment, net 2,973 3,159 Other assets: Investment in sales-type lease, long-term 189 76 Capitalized commissions, long-term 69 100 Right-of-use assets under operating leases 2,853 2,081 Other long-term assets 769 397 Total assets $ 19,573 $ 22,629 Liabilities and stockholders? equity (deficit) Current liabilities: Accounts payable $ 724 $ 2,689 Accrued liabilities 2,387 2,565 Current portion of unearned revenue 7,947 10,402 Current portion of finance lease obligations 83 119 Current portion of operating lease obligations 1,150 1,425 Current portion of notes payable and warrant ? 1,104 debt, net of discountsTotal current liabilities 12,291 18,304 Long-term portion of unearned revenue 1,850 1,736 Long-term portion of finance lease obligations 26 89 Long-term portion of operating lease obligations 1,721 665 Long-term portion of notes payable and warrant 552 2,673 debt, net of discountsDerivative liability, at fair value 63 66 Other liabilities 31 144 Total liabilities 16,534 23,677 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; 8,104,185 and 7,965,325 shares 81 80 issued, respectively and 8,086,331 and 7,952,609shares outstanding, respectivelyAdditional paid-in capital 209,693 209,022 Accumulated deficit (205,984 ) (209,519 )Accumulated other comprehensive loss (582 ) (462 )Treasury stock, at cost, 12,716 shares. (169 ) (169 )Total stockholders? equity (deficit) 3,039 (1,048 )Total liabilities and stockholders? equity $ 19,573 $ 22,629 (deficit)

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

Three Months Ended June 30, Nine Months Ended June 30, 2021 2020 2021 2020 Revenue: Product and $ 2,659 $ 2,744 $ 7,406 $ 7,612 otherServices 6,002 5,173 19,131 16,987 Total revenue 8,661 7,917 26,537 24,599 Cost of revenue:Product and 1,074 1,199 2,838 3,188 otherServices 1,548 971 4,770 3,566 Total cost of 2,622 2,170 7,608 6,754 revenueGross margin 6,039 5,747 18,929 17,845 Operating expenses:Selling and 2,860 2,980 8,765 9,433 marketingGeneral and 1,103 1,030 3,356 3,647 administrativeProduct 1,883 1,511 5,355 4,600 developmentTotal operating 5,846 5,521 17,476 17,680 expensesIncome from 193 226 1,453 165 operationsNon-operatingincome (expenses):Interest 10 (140 ) (42 ) (621 )expense, netOther expense, 19 (106 ) (8 ) (150 )net Gain on debt 2,325 ? 2,325 ? forgivenessTotalnon-operating 2,354 (246 ) 2,275 (771 )income(expenses)Income (loss)before income 2,547 (20 ) 3,728 (606 )taxesIncome taxbenefit 99 127 (193 ) (12 )(expense)Net income $ 2,646 $ 107 $ 3,535 $ (618 )(loss)Dividends on ? ? ? ? preferred stockNet income(loss)attributable to $ 2,646 $ 107 $ 3,535 $ (618 )commonstockholdersIncome (loss)per common share? basic $ 0.33 $ 0.01 $ 0.44 $ (0.09 )? diluted $ 0.31 $ 0.01 $ 0.42 $ (0.09 )Weightedaverage common shares? basic 8,060,036 7,399,545 8,021,852 6,972,924 ? diluted 8,545,156 7,830,293 8,480,856 6,972,924

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

Nine Months Ended June 30, 2021 2020 Operating activities Net Income (loss) $ 3,535 $ (618 )Adjustments to reconcile net income(loss) to net cash provided by (used in) operating activities:Amortization of other intangible 42 204 Depreciation and amortization of property and 773 644 equipmentLoss on sale of fixed assets 6 ? Provision for doubtful accounts - including financing ? 31 receivablesProvision for inventory reserve ? 90 Loss on conversion of related party debt to equity ? 26 Stock-based compensation expense related to stock 375 104 options and warrantsStock issued for board of director fees 40 61 Deferred loan interest to related party ? 322 Remeasurement loss (gain) on derivative liability (3 ) 116 Gain on debt forgiveness (2,325 ) ? Changes in operating assets and liabilities: Accounts receivable 592 1,077 Inventories 712 (76 )Investment in sales-type lease 1 136 Capitalized commissions 171 127 Prepaid expenses and other current assets 114 (128 )Right-of-use assets under operating leases (792 ) 208 Operating lease obligations 795 (234 )Other long-term assets (395 ) (24 )Accounts payable and accrued liabilities (2,042 ) (749 )Other long-term liabilities (106 ) (2 )Unearned revenue (2,290 ) (153 )Net cash (used in) provided by operating activities (797 ) 1,162 Investing activities Purchases of property and equipment (619 ) (683 )Net cash used in investing activities (619 ) (683 )Financing activities Proceeds from notes payable ? 2,778 Payments on notes payable (935 ) (984 )Proceeds from issuance of preferred stock and common 10 2 stockProceeds from exercise of common stock options 247 18 Payments on finance lease obligations (98 ) (162 )Net cash (used in) provided by financing activities (776 ) 1,652 Changes in cash and cash equivalents due to changes in 18 16 foreign currencyNet (decrease) increase in cash and cash equivalents (2,174 ) 2,147 Cash and cash equivalents at beginning of year 7,619 4,295 Cash and cash equivalents at end of period $ 5,445 $ 6,442 Supplemental cash flow information: Interest paid $ 32 $ 114 Income taxes paid, foreign 84 141 Non-cash financing and investing activities: Property and equipment financed by finance lease or ? 478 accounts payableConversion of related party debt to common shares ? 5,005

Sonic Foundry, Inc.Consolidated Non-GAAP Adjusted EBITDA Reconciliation(in thousands) Three Months Ended June 30, Nine Months Ended June 30, 2021 2020 2021 2020 Net income $ 2,646 $ $ $ )(loss) 107 3,535 (618Add: Depreciationand 246 215 784 648 amortizationIncome taxexpense (99 ) (127 ) 193 12 (income)Interest (10 ) 140 42 621 expenseStock-based compensation 92 18 375 104 expenseSeverance 56 ? 157 ? Subtract: Gain fromdebt 2,325 ? 2,325 ? forgivenessAdjusted $ 606 $ $ $ EBITDA 353 2,761 767