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.