GlobeNewswire Inc | Dec 9, 2021 04:05PM EST

December 09, 2021

MADISON, Wis., Dec. 09, 2021 (GLOBE NEWSWIRE) -- Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader in video creation, management solutions, and virtual and hybrid events, today announced consolidated financial results for its fiscal year 2021 and fourth quarter for the year ended September 30, 2021.

Highlights for the Fiscal Year Ended September 30, 2021

-- Total revenue increased 1.4% to $35.2 million compared to $34.7 million in the prior year. Exceeded fiscal 2021 revenue goal mainly due to growth in cloud and event businesses which offset pressures on traditional products. -- Gross margin was 71% of sales compared to 72% of sales in the prior year, reflecting investment in cloud infrastructure to support recurring revenue growth. -- Net income attributable to common stockholders was $0.36 per diluted share, compared to a net loss of $0.02 per diluted share in fiscal year 2020. Net income included the forgiveness of $2.3 million of debt associated with the PPP program. -- Adjusted EBITDA was $2.7 million, compared to $2.4 million in fiscal year 2020.

Highlights for the Fiscal Quarter Ended September 30, 2021

-- Total revenue was $8.6 million, compared to $10.2 million in the prior year quarter due to the $1.3 million impact of a one-time project to migrate a significant on-premises deployment to the Mediasite Cloud. -- Gross margin was 69% of sales, compared to 72% of sales in the prior year quarter, reflecting investments in cloud infrastructure to support recurring revenue growth. -- Net loss attributable to common stockholders was $0.05 per diluted share, compared to a net income of $0.06 per diluted share in the fourth fiscal quarter of 2020, reflecting new investments made in product development and marketing to address new markets. -- Adjusted EBITDA was a negative $270 thousand, compared to $1.6 million in the fourth fiscal quarter of 2020.

Management Commentary

During fiscal 2021, we made substantial progress on transforming our business into the next-gen Sonic Foundry. When I assumed the role of CEO, I laid out a plan to apply my past success energizing companies to achieve high- revenue growth by stabilizing and growing the current business while simultaneously entering new markets. We are hitting our stride on executing that plan, beginning with having the right team in place. I am proud that we attracted top talent to our senior leadership and board of directors. This new team successfully reversed a long-standing revenue decline in just seven months while significantly improving profitability and strengthening the balance sheet. I am equally energized by our strategic investments in innovation to ensure our Mediasite platform continues to lead the industry in powering video access for our customers anytime, anywhere and on any device, said Joe Mozden Jr., CEO, Sonic Foundry.

I believe that the greatest opportunity in our 30-year history lies just ahead. The pandemic accelerated how content is delivered and consumed, and we have optimized our platform to capitalize on this powerful and permanent shift in how people work and learn. Every day, we work with customers to adopt a new paradigm that makes any event or classroomwhether virtual, hybrid or in personmore engaging, more personalized, and more impactful. We are expanding our cloud capabilities to better support our customers as they adapt to a digital-first world. At the same time, we are moving from primarily a hardware provider to a SaaS service provider, which will ultimately generate more recurring revenue.

I am particularly excited about the R&D projects we are undertaking that will address tomorrows needs. We are developing a set of AI-based video solutions that will enhance the value of our customers content. The target for our innovation is every video that exists in the enterprise, regardless of origin, in order to save content owners valuable time in their challenge to meet the heightened expectations of their audiences. In addition, we are innovating new solutions to bridge the higher education gap in developing economies where a supply and demand imbalance exists. I look forward to sharing exciting updates on these initiatives as we pursue the aggressive goals we have laid out for the year ahead.

We are actively investing in the future of our company and are rigorously disciplined when it comes to generating long-term value for our stakeholders. Our business is now right-sized, with a plan to execute future growth initiatives in exciting new markets. We have a solid foundation, a 30-year history of industry leadership, a large installed base of amazing customers, and an energized management team focused on creating value. With the highly fragmented enterprise video market expected to grow at a CAGR of 11.6% to $33 billion in the next five years, we have considerable potential to gain market share in areas where we have earned the right to win, concluded Mozden.

Fiscal Year 2021 Operating Results

Service revenue, which included support, cloud services, events, and professional services, was $24.7 million for fiscal year 2021, compared to $24.4 million in the prior fiscal year. Product revenue was $10.5 million, compared to $10.3 million during the same period last year. Cloud services revenue increased 20% to $8.3 million, compared to $6.9 million last fiscal year. Event revenue increased 8% to $6.4 million versus $5.9 million last fiscal year.

Gross margin was 71% for fiscal year 2021, compared with 72% in last fiscal year. The decrease in gross margin was primarily attributable to significant investment in new cloud infrastructure critical to driving future growth.

Selling, general, administrative, and other expenses (SG&A) was $24.1 million for fiscal year 2021, compared with $24.4 million in the prior fiscal year. While SG&A decreased from last year reflecting headcount reductions in late fiscal 2020, the Company invested heavily in new systems and resources in the latter half of fiscal 2021 to drive future growth.

Net income attributable to common stockholders was $3.1 million (including forgiveness of a PPP loan of $2.3 million), or $0.36 per diluted share, for fiscal year 2021, compared with a net loss attributable to common stockholders of $179 thousand, or a loss $0.02 per diluted share, for the same period of the prior fiscal year.

Fiscal Fourth Quarter 2021 Operating Results

Service revenue, which included support, cloud services, events, and installations was $5.6 million, compared to prior year service revenue of $7.4 million, which included a $1.3 million customer data center migration. Product revenue was $3.0 million compared to $2.7 in the fourth quarter last year. Cloud services revenue decreased due to the $1.5 million impact of a one-time project to migrate a significant on-premises deployment to the Mediasite Cloud.

Gross margin was $5.9 million for the fourth quarter of fiscal 2021, compared with $7.3 million in the same period of the prior fiscal year. The decrease again reflects a large one-time transaction in the prior year to migrate a customer to the Mediasite Cloud.

Selling, general, administrative, and other expenses (SG&A) was $6.6 million for the fourth quarter of fiscal 2021, compared with $6.7 million in the prior year.

Net loss attributable to common stockholders was $458 thousand, or a loss of $0.06 per diluted share, for the fourth quarter of fiscal 2021, compared with net income attributable to common stockholders of $439 thousand, or $0.06 per diluted share, for the same period of the prior fiscal year.

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, and severance, and subtracts 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 fourth quarter ended September 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 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.

ContactsMedia:Maggie HabibMPR, Inc. for Sonic Foundry310.916.6934maggie@mpublicrelations.com

Investors:Margaret Boyce310-622-8247mboyce@finprofiles.com

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

September 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 9,989 $ 7,619 Accounts receivable, net of allowances of $261 5,167 6,250 and $236Inventories, net 442 1,167 Investment in sales-type lease, current 294 275 Capitalized commissions, current 360 440 Prepaid expenses and other current assets 1,153 1,065 Total current assets 17,405 16,816 Property and equipment: Leasehold improvements 1,111 1,128 Computer equipment 8,527 7,960 Furniture and fixtures 1,528 1,366 Total property and equipment 11,166 10,454 Less accumulated depreciation and amortization 8,368 7,295 Property and equipment, net 2,798 3,159 Other assets: Investment in sales-type lease, long-term 490 76 Capitalized commissions, long-term 76 100 Right-of-use assets under operating leases 2,441 2,081 Other long-term assets 805 397 Total assets $ 24,015 $ 22,629 Liabilities and stockholders? equity (deficit) Current liabilities: Accounts payable 1,072 2,689 Accrued liabilities 2,522 2,565 Current portion of unearned revenue 9,413 10,402 Current portion of finance lease obligations 79 119 Current portion of operating lease obligations 930 1,425 Current portion of notes payable and warrant ? 1,104 debt, net of discountsTotal current liabilities 14,016 18,304 Long-term portion of unearned revenue 1,614 1,736 Long-term portion of finance lease obligations 26 89 Long-term portion of operating lease obligations 1,583 665 Long-term portion of notes payable and warrant 556 2,673 debt, net of discountsDerivative liability, at fair value 53 66 Other liabilities 27 144 Total liabilities 17,875 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, authorized15,000,000 shares; 9,064,821 and 7,965,325 shares 91 80 issued and 9,052,105 and 7,952,609 sharesoutstandingAdditional paid-in capital 213,278 209,022 Accumulated deficit (206,442 ) (209,519 )Accumulated other comprehensive loss (618 ) (462 )Treasury stock, at cost, 12,716 shares (169 ) (169 )Total stockholders? equity (deficit) 6,140 (1,048 )Total liabilities and stockholders? equity $ 24,015 $ 22,629 (deficit)

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

Years Ended September 30, Quarters Ended September 30, 2021 2020 2021 2020 Revenue: Product and $ 10,473 $ 10,339 $ 3,067 $ 2,727 otherServices 24,694 24,414 5,563 7,427 Total revenue 35,167 34,753 8,630 10,154 Cost of revenue:Product and 4,042 4,430 1,204 1,243 otherServices 6,252 5,204 1,482 1,638 Total cost of 10,294 9,634 2,686 2,881 revenueGross margin 24,873 25,119 5,944 7,273 Operating expenses:Selling and 11,970 13,025 3,205 3,591 marketingGeneral and 4,870 5,055 1,514 1,408 administrativeProduct 7,226 6,303 1,871 1,703 developmentTotal operating 24,066 24,383 6,590 6,702 expensesIncome (Loss) 807 736 (646 ) 571 from operationsNon-operatingincome (expenses):Interest (44 ) (658 ) (2 ) (37 )expense, netGain on debt 2,325 ? ? ? forgivenessOther income 4 (109 ) 12 41 (expense), netTotalnon-operating 2,285 (767 ) 10 4 income(expense)Income (Loss)before income 3,092 (31 ) (636 ) 575 taxesIncome taxbenefit (15 ) (148 ) 178 (136 )(expense)Net income $ 3,077 $ (179 ) $ (458 ) $ 439 (loss)Dividends on ? ? ? ? preferred stockNet income(loss)attributable to $ 3,077 $ (179 ) $ (458 ) $ 439 commonstockholdersIncome (Loss)per common share:Basic netincome (loss) $ 0.37 $ (0.02 ) $ (0.06 ) $ 0.06 per commonshareDiluted netincome (loss) $ 0.36 $ (0.02 ) $ (0.05 ) $ 0.05 per commonshareWeightedaverage common 8,230,100 7,216,135 8,086,331 7,940,480 shares ? Basic? Diluted 8,650,384 7,216,135 8,952,750 8,346,877

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

Years Ended September 30, 2021 2020 Operating activities Net Income (Loss) $ 3,077 $ (179 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Amortization of other intangibles 49 231 Depreciation and amortization of property and 1,263 889 equipmentLoss on sale of fixed assets 37 ? Provision for doubtful accounts 25 111 (Recovery of) Provision for inventory reserve (16 ) 122 Loss on conversion of related party debt to equity ? 26 Stock-based compensation expense related to stock 487 158 optionsStock issued for board of director's fees 70 63 Deferred loan interest to related party ? 317 Remeasurement (gain) loss on derivative liability (13 ) 57 Gain on debt forgiveness (2,325 ) ? Changes in operating assets and liabilities: Accounts receivable 821 268 Inventories 734 (729 )Investment in sales-type lease (452 ) (48 )Capitalized commissions 104 30 Prepaid expenses and other current assets (121 ) (57 )Right-of-use assets under operating leases (387 ) 492 Operating lease obligations 445 (528 )Other long-term assets (438 ) ? Accounts payable and accrued liabilities (989 ) 1,503 Other long-term liabilities (110 ) (2 )Unearned revenue (1,015 ) 617 Net cash provided by (used in) operating activities 1,246 3,341 Investing activities Purchases of property and equipment (1,482 ) (1,736 )Net cash used in investing activities (1,482 ) (1,736 )Financing activities Proceeds from notes payable ? 3,157 Payments on notes payable (935 ) (1,358 )Proceeds from issuance of common stock 3,710 73 Payments on capital lease and financing arrangements (120 ) (202 )Net cash provided by financing activities 2,655 1,670 Changes in cash and cash equivalents due to changes (49 ) 49 in foreign currencyNet increase (decrease) in cash and cash equivalents 2,370 3,324 Cash and cash equivalents at beginning of year 7,619 4,295 Cash and cash equivalents at end of year $ 9,989 $ 7,619 Supplemental cash flow information: Interest paid $ 32 $ 148 Income taxes paid, foreign 97 154 Non-cash financing and investing activities: Property and equipment financed by finance lease or 152 724 accounts payableCommon stock issued for extinguishment of related ? 5,005 party debt

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

Years Ended September Quarters Ended 30, September 30, 2021 2020 2021 2020 Net income (loss) $ 3,077 $ (179 ) $ (458 ) $ 439 Add: Depreciation and 1,263 889 255 235 amortizationIncome tax expense 15 148 (178 ) 136 (benefit)Interest expense 44 658 2 37 Stock-based 487 158 109 55 compensation expenseSeverance 157 705 - 705 Subtract: Gain on debt 2,325 - - - forgivenessAdjusted EBITDA $ 2,718 $ 2,379 $ (270 ) $ 1,607