Exhibit 99.1
PRESS RELEASE
Sonic Foundry Reports Second Quarter 2008 Results
MADISON, Wis., May 1 /PRNewswire-FirstCall/ -- Sonic Foundry, Inc.
(Nasdaq: SOFO), the recognized market leader for rich media webcasting and
knowledge management, today announced financial results for its fiscal 2008
second quarter:
* Revenues totaled $3.9 million, up 3 percent from fiscal Q2 2007
* GAAP net loss of $2.3 million or $0.06 per diluted share
* Non-GAAP net loss of $1.6 million or $0.04 per diluted share
* Total billings reached $4.5 million, 9 percent growth year-over-year
* Service revenues of $1.7 million, up 88 percent from the second
quarter last year
Non-GAAP net loss primarily excludes all non-cash related expenses of
stock compensation, depreciation and amortization and one time charges
associated with program and personnel reductions announced in January 2008. A
reconciliation between GAAP and non-GAAP results is provided at the end of this
press release.
At March 31, 2008, an accumulated $3.5 million of unearned revenue had
been billed and deferred, of which the company expects to realize $1.5 million
in the upcoming quarter. Recorder units shipped increased 42 percent while
service billings, a majority of which are deferred, were $2.0 million. As a
result, gross margins were 71 percent for the second quarter, down from 77
percent in the past year. Future recognition of service revenues is expected to
cause a rebound of gross margins to previous levels.
As previously reported, the company has recently concentrated more of its
selling efforts on the education sector and is entering the two strongest
seasons for U.S. educational buying. The company's total higher education sales
pipeline is now over 65 percent, an increase of approximately 15 percentage
points over the same quarter last year. Additionally, the company continues to
experience expanded interest and purchasing internationally due in large part to
growing demand in traditional and distance learning programs globally.
International sales accounted for 23 percent of the quarter's billings.
The company experienced expanding market demand for more outsourced
webcasting services within both the corporate and education sectors. New
customers utilizing the company's webcasting and hosting services in the second
quarter included Gulfstream Aerospace Corporation, Jackson Healthcare Systems,
Lifespan, Inc., Olympus Winter & Ibe, Winston-Salem State University and
Children's Healthcare of Atlanta. Service revenues increased from $913 thousand
to $1.7 million year over year primarily due to growth in event and hosting
services as well as an increase in support contracts and renewals. New customers
of Sonic Foundry Event Services included Aventine HealthSciences, Birmingham
City University, ESSEC Business School - France and Pitney Bowes MapInfo.
Sales to education institutions represented 51 percent of the customer mix
followed by corporations at 37 percent, government at 7 percent and health at 4
percent. Key higher education licensed sales for the second quarter of fiscal
2009 included Canadian Forces College, Columbia College of Missouri, New
Hampshire Community College, New Mexico State University, Northwestern Health
Sciences University, Sakarya University-Turkey, University of British Columbia,
University of Michigan Ross School of Business and University of New Mexico.
In January 2008, the company announced the initiation of cost savings
measures that were designed to focus its overall market scope and concentrate on
key vertical markets while positioning the company towards breakeven or better
operations. Fiscal Q2 proforma expenses included one time costs associated with
certain personnel and program reductions tied to this previous effort. The
company expects to report additional expenses for fiscal Q3 totaling at least
$425 thousand, which will also be reported on a proforma basis.
"We continue to experience expanded demand from the leading early
adopters, specifically in the business and health education markets. We believe
these sectors will remain primary areas of technology investment on a global
basis, even with a slowing economy," said Rimas Buinevicius, chairman and CEO of
Sonic Foundry. "The advantages offered by distance learning, blended learning
and webcasting services resonate strongly with economically conscious technology
buyers and having the most advanced product in the market positions us well
before our strongest buying season."
Sonic Foundry will host a corporate webcast today for analysts and
investors to discuss its second 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/q2. 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.
* Personnel and program reduction costs: We have excluded the
additional costs incurred as a result of our cost reduction plan
which was communicated in January 2008. These costs include
severance costs associated with employee reductions as we better
aligned ourselves with key vertical markets. Also included is a one
time charge associated with an early extinguishment of a lease.
About Sonic Foundry(R), Inc.
Founded in 1991, Sonic Foundry (Nasdaq: SOFO, http://www.sonicfoundry.com)
is the recognized market leader for rich media webcasting and knowledge
management, providing education and training 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)
March 31, September 30,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 3,786 $ 8,008
Accounts receivable, net of allowances
of $190 and $270 4,098 5,001
Inventories 77 204
Prepaid expenses and other current assets 623 975
Total current assets 8,584 14,188
Property and equipment:
Leasehold improvements 980 975
Computer equipment 2,367 2,267
Furniture and fixtures 461 461
Total property and equipment 3,808 3,703
Less accumulated depreciation 1,857 1,520
Net property and equipment 1,951 2,183
Other assets:
Goodwill and other intangibles, net of
amortization of $1,662 and $1,656 7,604 7,610
Total assets $ 18,139 $ 23,981
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 1,127 $ 1,512
Accrued liabilities 958 1,023
Unearned revenue 3,464 3,314
Current portion of notes payable 333 333
Current portion of capital lease obligation 59 66
Total current liabilities 5,941 6,248
Long-term portion of notes payable 389 556
Long-term portion of capital lease obligations 44 69
Other liabilities 302 348
Total liabilities 6,676 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; 35,708,837 and
35,684,503 shares issued and 35,581,670
and 35,557,336 shares outstanding 357 357
Additional paid-in capital 184,049 183,528
Accumulated deficit (172,748) (166,930)
Receivable for common stock issued (26) (26)
Treasury stock, at cost, 127,167 shares (169) (169)
Total stockholders' equity 11,463 16,760
Total liabilities and stockholders' equity $ 18,139 $ 23,981
See accompanying notes
Sonic Foundry, Inc.
Consolidated Statements of Operations
(in thousands, except for share and per share data)
(Unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2008 2007 2008 2007
Revenue:
Product $ 2,182 $ 2,898 $ 3,124 $ 5,484
Services 1,719 913 3,277 1,791
Other 28 10 48 19
Total revenue 3,929 3,821 6,449 7,294
Cost of revenue:
Product 1,030 790 1,539 1,533
Services 124 101 237 131
Total cost of
revenue 1,154 891 1,776 1,664
Gross margin 2,775 2,930 4,673 5,630
Operating expenses:
Selling and
marketing 3,330 3,043 6,876 5,547
General and
administrative 736 1,104 1,714 2,074
Product development 982 806 1,928 1,481
Total operating
expenses 5,048 4,953 10,518 9,102
Loss from
operations (2,273) (2,023) (5,845) (3,472)
Other income, net (5) 111 27 131
Net loss $ (2,278) $ (1,912) $ (5,818) $ (3,341)
Net loss per common
share:
- basic and
diluted $ (0.06) $ (0.05) $ (0.16) $ (0.10)
Weighted average
common shares
- basic and
diluted 35,572,140 35,368,667 35,566,949 33,881,848
See accompanying notes
Non-GAAP Consolidated Statements of Operations
(in thousands)
Fiscal Quarter Ended Fiscal Quarter Ended
March 31, 2008 March 31, 2007
GAAP Adj(1) Non-GAAP GAAP Adj(1) Non-GAAP
Revenues $ 3,929 -- $ 2,520 $ 3,821 -- $ 3,821
Cost of
revenue 1,154 -- 622 891 -- 891
Total
Operating
expenses 5,048 (703) 4,345 4,953 (395) 4,558
Loss from
operations (2,273) 703 (1,570) (2,023) 395 (1,628)
Other income (5) -- (5) 111 -- 111
Net loss $ (2,278) $ 703 $ (1,575) $ (1,912) $ 395 $ (1,517)
Diluted net
loss per
common
share $ (0.06) $ 0.02 $ (0.04) $ (0.05) $ 0.01 $ (0.04)
(1) Adjustments consist of the following:
Personnel and program
reduction costs 316 --
Depreciation (in G&A) 166 156
Stock-based
compensation(2) 221 239
Total non-GAAP
adjustments 703 395
(2) Stock-based compensation is included in the following GAAP operating
expenses:
Selling and marketing 141 155
General and
administrative 24 31
Research and
development 56 53
Total stock-based
compensation 221 239
SOURCE Sonic Foundry, Inc.