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Sonic Foundry Reports First Quarter Fiscal 2012 Results
Jan 26, 2012 (03:01 PM EST)


MADISON, Wis., Jan. 26, 2012 /PRNewswire/ -- Sonic Foundry, Inc. (NASDAQ: SOFO), the trusted market leader for enterprise webcasting and lecture capture, today announced financial results for its fiscal 2012 first quarter ended December 31, 2011.

GAAP results include:

  • Revenues of $6.2 million, up 4 percent from the fiscal first quarter of 2011
  • Product and other revenue of $2.7 million, down 8 percent over the first quarter of fiscal 2011
  • Services revenue of $3.5 million, up 16 percent from $3.0 million in the first quarter of fiscal 2011
    • Support and maintenance revenue of $1.8 million, an increase of 10 percent over the first quarter of fiscal 2011
    • Event services and hosting revenue of $1.7 million, an increase of 22 percent over the first quarter of fiscal 2011
  • Unearned revenue balance of $5.5 million compared to $5.7 million at December 31, 2010
  • GAAP net loss of $(184) thousand or $(0.05) per basic and diluted share, compared to net income of $223 thousand or $0.06 per basic and diluted share in the fiscal first quarter of 2011
  • Gross margin of $4.5 million or 73 percent compared to $4.3 million or 72 percent for the fiscal first quarter of 2011
  • Cash decrease of $1.4 million from September 30, 2011, primarily due to a delayed payment from a distributor received after December 31, 2011.

Non-GAAP results include:

  • Billings of $5.7 million, an increase of 2 percent over the first quarter of fiscal 2011
  • Product and other billings of $2.7 million, a decrease of 8 percent over the first quarter of fiscal 2011
  • Services billings of $3.0 million, an increase of 13 percent over the first quarter of fiscal 2011
    • Support and maintenance billings of $1.5 million, a decrease of 6 percent over the first quarter of fiscal 2011
    • Event services and hosting billings of $1.6 million, an increase of 39 percent over the first quarter of fiscal 2011
  • Non-GAAP net loss of $(164) thousand or $(0.04) per basic share compared to non-GAAP net income of $287 thousand or $0.08 per basic share in the first quarter of fiscal 2011

Non-GAAP net income primarily excludes all non-cash related expenses of stock compensation, depreciation, amortization, provision for income taxes and includes the cash impact of billings not recognized as revenue. Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

At December 31, 2011, $5.5 million of revenue was deferred, of which the company expects to realize approximately $2.2 million in the quarter ending March 31, 2012. Revenue from service contracts is recognized over the life of the contract. Services revenue includes Mediasite customer support contracts as well as training, installation, rental, event and content hosting services.

Gross margin improved from 72 percent in the first quarter of fiscal 2011 to 73 percent in the first quarter of fiscal 2012 due to operational efficiencies in recorder and services costs.

International product and service billings accounted for 29 percent of overall billings, compared to 31 percent in the first quarter of fiscal 2011. During the first quarter of this fiscal year, 73 percent of billings were to preexisting customers, compared to 65 percent in first quarter fiscal 2011, with 53 percent to education customers and 39 percent to corporate.

"We are optimistic about our performance in 2012 and reaffirm our guidance of seventeen percent billings growth. Our growth of four percent in revenue over the first quarter of fiscal 2011, which contained one very significant sale to a single international education customer, is modest but nevertheless represents a strong showing in what is historically our slowest seasonal period, particularly when measured amidst lingering economic uncertainty," said Gary Weis, chief executive officer of Sonic Foundry. "We remain focused on improving the fundamentals of the company, building a solid pipeline and investing in new technology enhancements to reach our goals for both financial performance and customer value."

Sonic Foundry will host a corporate webcast today for analysts and investors to discuss its fiscal 2012 first quarter 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 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 a measure of non-GAAP net income or loss in our financial presentation, which excludes certain non-cash costs and includes certain cash billings not recognized as revenue for GAAP purposes. 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. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Our non-GAAP financial measures reflect adjustments based on the following items:

  • Billings not recorded as revenue: We have included the cash effect of billings not recorded as revenue, which are deferred for GAAP purposes, in arriving at non-GAAP net income or loss. Our services are typically billed and collected in advance of providing the service which requires minimal cost to perform in the future. Billings are a better indicator of customer activity and cash flow than revenue is, in management's opinion, and is therefore used by management as a key operational indicator.
  • Depreciation and amortization of intangible and other assets expenses: We have excluded the effect of depreciation and amortization of assets from our non-GAAP net income or 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.
  • Non-cash provision for income taxes: We have excluded the impact of the provision for income taxes from our non-GAAP net income or loss. The provision for income taxes is associated with the difference in treatment of goodwill which is not expensed for GAAP purposes but is amortized over a fifteen year life for Federal income tax purposes. The result is a non-cash expense and liability that will never be paid.
  • Stock-based compensation expenses: We maintain an employee qualified stock option plan under which we grant options to acquire common stock to eligible employees. We also maintain an employee stock purchase plan under which common stock may be issued to eligible employees at a reduced price. Stock-based compensation expenses are recorded for these plans in accordance with FASB Accounting Standards Codification subtopic 718, Compensation-Stock Compensation. Stock-based compensation expense is a non-cash expense. As a result, we have excluded the effect of stock-based compensation expenses from our non-GAAP net income or loss.

About Sonic Foundry®, Inc.

Sonic Foundry (NASDAQ: SOFO, www.sonicfoundry.com) is the trusted market leader for enterprise webcasting and lecture capture, providing video communication solutions for education, business and government. Powered by the patented Mediasite webcasting platform and Mediasite Events group, the company empowers people to transform the way they communicate online, using video webcasts to bridge time and distance, accelerate research and improve performance. 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.

Condensed Consolidated Balance Sheets

(in thousands, except for share data)

(Unaudited)


December 31, 2011


September 30, 2011

Assets




Current assets:




Cash and cash equivalents

$         4,110


$      5,515

    Accounts receivable, net of allowances of $150 and $90

5,373


5,799

Inventories

1,048


536

Prepaid expenses and other current assets

716


740

     Total current assets

11,247


12,590

Property and equipment:




Leasehold improvements

1,728


980

Computer equipment

3,737


3,586

Furniture and fixtures

703


461

Total property and equipment

6,168


5,027

Less accumulated depreciation and amortization

3,575


3,391

Net property and equipment

2,593


1,636

Other assets:




Goodwill

7,576


7,576

Other intangibles, net of amortization of $154 and $137

21


38

Total assets

$        21,437


$       21,840





Liabilities and stockholders' equity




Current liabilities:




Revolving line of credit

$                -


$              -

Accounts payable

992


1,373

Accrued liabilities

1,017


1,073

Accrued severance

354


528

Unearned revenue

5,133


5,547

Current portion of capital lease obligation

91


89

Current portion of notes payable

657


897

    Total current liabilities

8,244


9,507





Long-term portion of unearned revenue

412


471

Long-term portion of capital lease obligation

153


177

Long-term portion of notes payable

967


694

Other liabilities

510


-

Deferred tax liability

1,790


1,730

Total liabilities

11,988


12,579





Stockholders' equity:




Preferred stock, $.01 par value, authorized 500,000 shares; none issued and outstanding


5% preferred stock, Series B, voting, cumulative,  convertible, $.01 par value (liquidation preference at par), authorized 1,000,000 shares, none issued


Common stock, $.01 par value, authorized 10,000,000 shares; 3,855,364 and 3,845,531 shares issued and 3,842,648 and 3,832,815 shares outstanding

39


38

Additional paid-in capital

188,622


188,339

Accumulated deficit

(179,105)


(178,921)

Receivable for common stock issued

(26)


(26)

Treasury stock, at cost, 12,716 shares

(169)


(169)

    Total stockholders' equity

9,361


9,261

Total liabilities and stockholders' equity

$       21,437


$      21,840





Sonic Foundry, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except for share and per share data)

(Unaudited)





Three Months Ended December 31,







2011



2010









Revenue:








Product





$       2,599


$       2,844

Services





3,500


3,025

Other





86


61

Total revenue





6,185


5,930


Cost of revenue:








Product





1,261


1,350

Services





417


319

Total cost of revenue





1,678


1,669

Gross margin





4,507


4,261









Operating expenses:








Selling and marketing





2,772


2,462

General and administrative





825


619

Product development





982


834

Total operating expenses





4,579


3,915

Income (loss) from operations





(72)


346









Other expense, net





(52)


(63)

Income (loss) before income taxes





(124)


283

Provision for income taxes





(60)


(60)

Net income (loss)





$         (184)


$          223









Net income (loss) per common share:








   – basic





$         (0.05)


$         0.06

   – diluted





$         (0.05)


$         0.06









Weighted average common shares

   – basic





3,839,907


3,654,751

   – diluted





3,839,907


3,875,483













Non-GAAP Consolidated Statements of Operations

(in thousands, except for per share data)




Fiscal Quarter Ended

December 31, 2011


Fiscal Quarter Ended

December 31, 2010



GAAP


Adj(1)


Non-GAAP


GAAP


Adj(1)


Non-GAAP














Revenues


$     6,185


$    (473)


$   5,712


$     5,930


$    (347)


$   5,583

Cost of revenue


1,678



1,678


1,669



1,669

Total operating expenses


4,579


(433)


4,146


3,915


(351)


3,564

Income (loss) from operations


(72)


(40)


(112)


346


4


350


Other expense


(52)



(52)


(63)



(63)

Provision for income taxes


(60)


60



(60)


60


Net income (loss)


$        (184)


$      20


$   (164)


$         223


$      64


$    287

Basic net income (loss) per common share


$       (0.05)


$    0.01


$  (0.04)


$        0.06


$    0.02


$  0.08
















(1)Adjustments consist of the following:














Billings




$  (473)






$   (347)



Depreciation and amortization




201






172



Non-cash tax provision




60






60



Stock-based compensation(2)




232






179
















Total non-GAAP adjustments




$     20






$     64

















(2) Stock-based compensation is included in the following GAAP operating expenses:














Selling and marketing




$     157






$     122



General and administrative




14






12



Product development




61






45
















Total stock-based compensation




$    232






$    179





















SOURCE Sonic Foundry, Inc.