Sonic Foundry Reports First Quarter 2008 Results
MADISON, Wis., Feb. 7 /PRNewswire-FirstCall/ -- Sonic Foundry, Inc.
(Nasdaq: SOFO), the recognized market leader for rich media communications and
knowledge management, today announced fiscal first quarter results:
-- Revenues were $2.5 million, down 27 percent from fiscal Q1 2007
-- GAAP net loss of $3.5 million or $0.10 per diluted share
-- Non-GAAP net loss of $3.1 million or $0.09 per diluted share
-- Billings of $2.7 million
-- Service revenues of $1.6 million, up 82 percent from fiscal Q1 2007
Non-GAAP net loss primarily excludes all non-cash related expenses of
stock compensation, depreciation and amortization. A reconciliation between GAAP
and non-GAAP results is provided at the end of this press release.
At December 31, 2007, an accumulated $3.2 million of unearned revenue was
billed and deferred, of which the company expects to realize $1.4 million in the
upcoming quarter. Total gross margins for the first quarter of fiscal 2008 were
75 percent of revenues compared to 78 percent in the previous year.
As reported in January, new product updates currently being released in
the fiscal second quarter for the education market coupled with slowing licensed
software sales to the corporate market contributed to weaker first quarter
results. The company is experiencing a significant transition in its business
activity, with education and training applications expected to drive the
company's sales activities going forward. Likewise, Sonic Foundry expects that
weakening economic conditions will expand market demand for more outsourced
services versus licensed sales within both the corporate and education sectors.
Over the last two years, the company has made extensive capital and technology
investments to advance its services model with comprehensive hosting, content
processing and e-commerce capabilities that position Sonic Foundry well to
deliver more diversified business services.
By concentrating on markets with the greatest potential, the company was
also able to initiate measures that are expected to reduce its operating costs
by an estimated $4 million annually. Confirming previous guidance, Sonic Foundry
anticipates the newly introduced cost saving measures to advance the pace of
achieving profitability during fiscal 2008. In addition, given the expected
longer-term impact, greater operating leverage is now expected for fiscal 2009
and beyond.
While higher education accounts historically represented approximately
half of the company's sales pipeline activity, the education sales pipeline is
now over 60 percent and expected to climb. Sonic Foundry is accelerating its
product and service offerings to address accelerating demand from the
convergence of technology and education. The company recently unveiled its
Mediasite 4.3 release, the first announcement under the company's
next-generation education initiative, designed to expand the company's footprint
in higher education markets.
The 4.3 release reflects the company's collaboration with Microsoft Corp.
to add support for Microsoft Silverlight. Silverlight is a cross-browser,
cross-platform plug-in that supports rich media experiences on the web. Its
seamless and quick installation provides a consistent Mediasite experience for
both Windows and Macintosh users on a variety of browsers including Microsoft
Internet Explorer, Firefox and Safari. With this latest release of the company's
award-winning and patented webcasting and knowledge management platform, Sonic
Foundry has taken the first steps in designing a next generation multimedia
solution to simplify and enhance the playing of rich media applications,
particularly for the multi-device environment of the modern college campus.
Additional highlights of the first quarter fiscal 2008 include multiple
awards for the company and its Mediasite platform including:
-- Frost & Sullivan 2007 Global Market Leadership Award with 41 percent
share of the world lecture capture and broadcast solutions market
-- Datamonitor acknowledgement as "Innovative Vendor" and "Early Market
Leader" for lecture capture in higher education
-- Bersin & Associates 2007 Learning Leader award for Best Tool in the
Vendor Innovation category
-- Finalist for reader-nominated Best of 2007 Elearning! Magazine
awards for Best Presentation Tool
-- Top 10 Best Products and a 4-Star Rating from Training Media Review
"Our continued efforts to build the business for maximum scale and
efficiency while targeting the right customer base required us to make some
tough decisions in the short term. It was also necessary to establish the proper
operating infrastructure to enable a greater mix of products and services that
in turn will align our business to education and training applications. Given
the current market uptake for our newly introduced product offerings and our
constant attention to where market demand lies, we now resume our growth
objectives to advance our overall market share," said Rimas Buinevicius,
chairman and CEO of Sonic Foundry.
Sonic Foundry will host a corporate webcast today for analysts and
investors to discuss its first quarter fiscal 2008 results at 3:30 p.m. CT/4:30
p.m. ET. It will use its patented rich media communications system, Mediasite,
to webcast the presentation for both live and on-demand viewing. To access the
presentation, go to http://www.sonicfoundry.com/q1. An archive of the webcast
will be available for 30 days.
EXPLANATION OF NON-GAAP MEASURES
To supplement our financial results presented on a GAAP basis, we use the
measure of non-GAAP net loss in our financial presentation, which exclude
certain non-cash costs. These costs include stock-based compensation which we
believe is helpful in understanding our past financial performance and our
future results. Our non-GAAP financial measure is not meant to be considered in
isolation or as a substitute for comparable GAAP measures, and should be read
only in conjunction with our consolidated financial statements prepared in
accordance with GAAP. Our management regularly uses our supplemental non-GAAP
financial measures internally to understand, manage and evaluate our business
and make operating decisions. These non-GAAP measures are among the factors
management uses in planning for and forecasting future periods. Our non-GAAP
financial measures reflect adjustments based on the following items, as well as
the related income tax effects:
-- Stock-based compensation expenses: We adopted FASB Statement No.
123R, Share-Based Payments, on October 1, 2005, under the modified
prospective method. Statement 123R requires us to record non-cash
operating expenses associated with stock option awards at their
estimated fair values. Prior to our Statement 123R adoption, we were
required to record stock-based compensation expenses at intrinsic
value, which was zero since we only issue stock options at the
market price of our stock on the date issued. In accordance with the
modified prospective method, our financial statements for prior
periods have not been restated to reflect, and do not include, the
changes in methodology to expense options at fair values in
accordance with Statement 123R. Stock-based compensation is a key
incentive offered to our employees. We believe such compensation
contributed to the revenues earned during the periods presented and
also believe it will contribute to the generation of future period
revenues. As a result, we continue to evaluate our business
performance excluding stock-based compensation expenses.
-- Depreciation and amortization of intangible and other assets
expenses: We have excluded the effect of depreciation and
amortization of assets from our pro-forma net loss. Amortization of
intangible assets expense varies in amount and frequency and it is
significantly affected by the timing and size of our acquisitions.
Depreciation and amortization of asset costs is a non-cash expense
that includes the periodic write-off of tooling, product design and
other assets that contributed to revenues earned during the periods
presented and will contribute to future period revenues as well.
Amortization expenses will recur in future periods.
About Sonic Foundry(R), Inc.
Founded in 1991, Sonic Foundry (NASDAQ: SOFO, http://www.sonicfoundry.com)
is the recognized market leader for rich media communications and knowledge
management, providing enterprise solutions and services that link an
information-driven world. Based in Madison, Wisconsin, the company has received
numerous awards including the 2007 Frost & Sullivan Global Market Leadership
Award, Ziff Davis Media's Baseline Magazine's sixth fastest-growing software
company with sales under $150 million and Deloitte's Technology Fast 500. Named
a Bersin & Associates 2007 Learning Leader, Sonic Foundry's webcasting and
knowledge management solutions are trusted by education institutions, Fortune
500 companies and government agencies for a variety of critical communication
needs. Sonic Foundry is changing the way organizations communicate via the web
and how people around the globe receive vital information needed for education,
business, professional advancement and safety. Product and service names
mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective
owners.
Certain statements contained in this news release regarding matters that
are not historical facts may be forward-looking statements. Because such
forward-looking statements include risks and uncertainties, actual results may
differ materially from those expressed in or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, uncertainties pertaining to continued market
acceptance for Sonic Foundry's products, its ability to succeed in capturing
significant revenues from media services and/or systems, the effect of new
competitors in its market, integration of acquired business and other risk
factors identified from time to time in its filings with the Securities and
Exchange Commission.
Sonic Foundry, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
(Unaudited)
December 31, September 30,
2007 2007
Assets
Current assets:
Cash and cash equivalents $ 6,167 $ 8,008
Accounts receivable, net of allowances
of $190 and $270 2,346 5,001
Inventories 664 204
Prepaid expenses and other current assets 724 975
Total current assets 9,901 14,188
Property and equipment:
Leasehold improvements 975 975
Computer equipment 2,300 2,267
Furniture and fixtures 461 461
Total property and equipment 3,736 3,703
Less accumulated depreciation 1,688 1,520
Net property and equipment 2,048 2,183
Other assets:
Goodwill and other intangibles, net of
amortization of $1,659 and $1,656 7,607 7,610
Total assets $ 19,556 $ 23,981
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 948 $ 1,512
Accrued liabilities 602 1,023
Unearned revenue 3,203 3,314
Current portion of notes payable 333 333
Current portion of capital lease obligation 63 66
Total current liabilities 5,149 6,248
Long-term portion of notes payable 473 556
Long-term portion of capital lease obligations 57 69
Other liabilities 325 348
Total liabilities 6,004 7,221
Stockholders' equity:
Preferred stock, $.01 par value, authorized
5,000,000 shares; none issued and outstanding -- --
5% preferred stock, Series B, voting,
cumulative, convertible, $.01 par value
(liquidation preference at par), authorized
10,000,000 shares, none issued and outstanding -- --
Common stock, $.01 par value, authorized
100,000,000 shares; 35,695,003 and 35,684,503
shares issued and 35,567,836 and 35,557,336
shares outstanding 357 357
Additional paid-in capital 183,860 183,528
Accumulated deficit (170,470) (166,930)
Receivable for common stock issued (26) (26)
Treasury stock, at cost, 127,167 shares (169) (169)
Total stockholders' equity 13,552 16,760
Total liabilities and stockholders' equity $ 19,556 $ 23,981
Sonic Foundry, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data)
(Unaudited)
Three Months Ended
December 31,
2007 2006
Revenue:
Product $ 942 $ 2,586
Services 1,558 878
Other 20 9
Total revenue 2,520 3,473
Cost of revenue:
Product 510 773
Services 112 --
Total cost of revenue 622 773
Gross margin 1,898 2,700
Operating expenses:
Selling and marketing expenses 3,546 2,504
General and administrative expenses 978 970
Product development expenses 946 675
Total operating expenses 5,470 4,149
Loss from operations (3,572) (1,449)
Other income, net 32 20
Net loss $ (3,540) $ (1,429)
Net loss per common share:
- basic and diluted $ (0.10) $ (0.04)
Weighted average common shares
- basic and diluted 35,561,814 32,362,612
Non-GAAP Consolidated Statements of Operations
(in thousands)
Fiscal Quarter Ended Fiscal Quarter Ended
December 31, 2007 December 31, 2006
GAAP Adj(1) Non-GAAP GAAP Adj(1) Non-GAAP
Revenues $ 2,520 -- $ 2,520 $ 3,473 -- $ 3,473
Cost of revenue 622 -- 622 773 (53) 720
Total Operating
expenses 5,470 (442) 5,028 4,149 (305) 3,844
Loss from
operations (3,572) 442 (3,130) (1,449) (358) (1,091)
Other income 32 -- 32 20 -- 20
Net loss $ (3,540) $ 442 $ (3,098) $ (1,429) $ (358) $ (1,071)
Diluted net loss
per common
share $ (0.10) $ 0.01 $ (0.09) $ (0.04) $ 0.01 $ (0.04)
(1)Adjustments
consist of the
following:
Amortization
(in COGS) -- 53
Depreciation
(in G&A) 171 156
Stock-based
compensation(2) 271 149
Total non-GAAP
adjustments 442 358
(2) Stock-based
compensation is
included in the
following GAAP
operating expenses:
Selling and
marketing 172 95
General and
administrative 38 19
Research and
development 61 35
Total
stock-based
compensation 271 149
SOURCE Sonic Foundry Inc.