SONIC FOUNDRY INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 13, 2020

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Sonic Foundry Announces Fiscal 2020 First Quarter Financial Results
MADISON, Wis. - February 13, 2020 - Sonic Foundry, Inc. (OTC Pink Sheets: SOFO), the trusted leader for video creation and management solutions, today announced consolidated financial results for its fiscal 2020 first quarter ended December 31, 2019.
Fiscal 2020 First Quarter Highlights
•
Billings totaled $6.9 million in the first quarter of 2020; an increase of 15 percent compared to the same period last year
•
Total revenues of $8 million compared to $7.5 million in the first quarter of 2019, a 7 percent increase
•
Gross margin was $5.8 million, or 73 percent of sales, compared to $5.7 million, or 75 percent of sales, in the first quarter of 2019
•
Net loss attributable to common stockholders of $(820,000), or $(0.12) per share, compared to $(1.8) million, or $(0.36) per share, in the first quarter of 2019
•
Adjusted EBITDA was $(203,000) compared to $(1.2) million in the first quarter of 2019
•
Unearned revenue was $10.4 million as of December 31, 2019, down $1.1 million from September 30, 2019.

Fiscal 2020 First Quarter Review
Product billings were $2.1 million during the first quarter of fiscal year 2020 compared to $1.6 million in the same quarter last year. The prior year quarter was impacted by the company's planned reduction of distribution inventory which reduced product billings and revenue by $670,000. Service billings, including support, hosting, events and installs were $4.9 million, compared to $4.4 million in the prior year. The primary driver of this change was an increase in event services billings during the quarter. The company expects to recognize $3.7 million of the current unearned revenue in the second quarter of fiscal 2020. Recurring revenue of $6.3 million was 78 percent of total revenue in the first quarter of 2020, compared to $6.2 million, or 82 percent of total revenue, in the first quarter of 2019.
Cost reduction measures taken in the second half of the last fiscal year have resulted in a $887,000, or 12 percent, decrease in operating expenses in the first quarter of 2020 compared to the same period in 2019.
“I’m very pleased that our first quarter delivered solid results across a number of key financial metrics, particularly with the bottom line. Decisions we made during the previous two quarters have helped us reduce our costs while sustaining positive momentum across several important business segments, including Event Services and Mediasite Video Cloud,” said Michael Norregaard, CEO of Sonic Foundry.
He continued, “While we are making meaningful progress, we know we have more work to do to improve execution in our core business, drive additional revenue streams and deliver world class video and professional services as we focus on balanced top-line and bottom-line improvements.”
Non-GAAP Financial Information
To supplement and enhance the reader’s 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 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 loss to adjusted EBITDA for the first quarter ended December 31, 2019 and 2018 are included in the release.

About Sonic Foundry®, Inc.
Sonic Foundry (OTC Pink Sheets:SOFO) is the global leader for video capture, management and streaming solutions. Trusted by more than 5,200 educational institutions, corporations, health organizations and government entities in over 65 countries, its Mediasite Video Platform quickly and cost-effectively automates the capture, management, delivery and search of live and on-demand streaming videos. Learn more at www.sonicfoundry.com and @mediasite.
© 2020 Sonic Foundry, Inc. Product and service names mentioned herein are the trademarks of Sonic Foundry, Inc. or their respective owners.
Forward Looking Statements
This 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 company’s 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




company’s 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.


Contacts:
Media:
Nicole Wise, Director of Communications
920.226.0269
nicolew@sonicfoundry.com





Sonic Foundry, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
 
December 31,
2019
 
September 30,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
3,511

 
$
4,295

Accounts receivable, net of allowances of $135
5,381

 
6,532

Inventories
908

 
558

Investment in sales-type lease, current
129

 
163

Capitalized commissions, current
390

 
464

Prepaid expenses and other current assets
766

 
972

Total current assets
11,085

 
12,984

Property and equipment:
 
 
 
Leasehold improvements
1,119

 
1,121

Computer equipment
5,659

 
5,610

Furniture and fixtures
1,287

 
1,233

Total property and equipment
8,065

 
7,964

Less accumulated depreciation and amortization
6,628

 
6,396

Property and equipment, net
1,437

 
1,568

Other assets:
 
 
 
Investment in sales-type lease, long-term
133

 
134

Capitalized commissions, long-term
93

 
106

Right-of-use assets under operating leases
2,253

 
—

Other long-term assets
381

 
388

Total assets
$
15,382

 
$
15,180

Liabilities and stockholders’ deficit
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,348

 
$
843

Accrued liabilities
1,546

 
2,216

Unearned revenue
8,663

 
9,610

Current portion of finance lease obligations
173

 
194

Current portion of operating lease obligations
1,270

 
—

Current portion of notes payable and warrant debt, net of discounts
1,268

 
968

Total current liabilities
14,268

 
13,831

Long-term portion of unearned revenue
1,716

 
1,842

Long-term portion of finance lease obligations
166

 
179

Long-term portion of operating lease obligations
1,018

 
—

Long-term portion of notes payable and warrant debt, net of discounts
5,096

 
5,429

Derivative liability, at fair value
11

 
9

Other liabilities
136

 
143

Total liabilities
22,411

 
21,433

Commitments and contingencies
 
 
 
Stockholders’ deficit:
 
 
 
Preferred stock, $.01 par value, authorized 500,000 shares; none issued
—

 
—





9% Preferred stock, Series A, voting, cumulative, convertible, $.01 par value (liquidation preference of $1,000 per share), authorized 4,500 shares; zero shares issued and outstanding, at amounts paid in
—

 
—

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; 6,749,359 shares issued, respectively and 6,736,643 shares outstanding, respectively
67

 
67

Additional paid-in capital
203,787

 
203,735

Accumulated deficit
(210,160
)
 
(209,340
)
Accumulated other comprehensive loss
(554
)
 
(546
)
Treasury stock, at cost, 12,716 shares
(169
)
 
(169
)
Total stockholders’ deficit
(7,029
)
 
(6,253
)
Total liabilities and stockholders’ deficit
$
15,382

 
$
15,180





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


 
Three Months Ended December 31,
 
2019
 
2018
Revenue:
 
 
 
Product and other
$
2,055

 
$
1,751

Services
5,960

 
5,751

Total revenue
8,015

 
7,502

Cost of revenue:
 
 
 
Product and other
831

 
651

Services
1,348

 
1,191

Total cost of revenue
2,179

 
1,842

Gross margin
5,836

 
5,660

Operating expenses:
 
 
 
Selling and marketing
3,396

 
3,943

General and administrative
1,441

 
1,538

Product development
1,590

 
1,833

Total operating expenses
6,427

 
7,314

Loss from operations
(591
)
 
(1,654
)
Non-operating income (expenses):
 
 
 
Interest expense, net
(263
)
 
(154
)
Other income, net
15

 
8

Total non-operating expenses
(248
)
 
(146
)
Loss before income taxes
(839
)
 
(1,800
)
Income tax benefit
19

 
12

Net loss
$
(820
)
 
$
(1,788
)
Dividends on preferred stock
—

 
(53
)
Net loss attributable to common stockholders
$
(820
)
 
$
(1,841
)
Loss per common share
 
 
 
– basic
$
(0.12
)
 
$
(0.36
)
– diluted
$
(0.12
)
 
$
(0.36
)
Weighted average common shares
 
 
 
– basic
6,736,643

 
5,100,684

– diluted
6,736,643

 
5,100,684







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

 
Three Months Ended
December 31,
 
2019
 
2018
Operating activities
 
 
 
Net loss
$
(820
)
 
$
(1,788
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Amortization of other intangibles
94

 
46

Depreciation and amortization of property and equipment
227

 
273

Provision for doubtful accounts - including financing receivables
9

 
26

Stock-based compensation expense related to stock options and warrants
52

 
164

Deferred loan interest to related party
123

 
—

Remeasurement loss (gain) on derivative liability
2

 
(15
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
1,137

 
3,788

Financing receivables
—

 
(2
)
Inventories
(351
)
 
(381
)
Investment in lease
33

 
—

Capitalized commissions
87

 
70

Prepaid expenses and other current assets
216

 
24

Right-of-use assets under operating leases
289

 
—

Operating lease obligations
(289
)
 
—

Other long-term assets
5

 
—

Accounts payable and accrued liabilities
(136
)
 
(752
)
Other long-term liabilities
(6
)
 
(22
)
Unearned revenue
(1,090
)
 
(1,183
)
Net cash provided by (used in) operating activities
(418
)
 
248

Investing activities
 
 
 
Purchases of property and equipment
(59
)
 
(83
)
Net cash used in investing activities
(59
)
 
(83
)
Financing activities
 
 
 
Proceeds from notes payable
—

 
500

Proceeds from lines of credit
—

 
7,051

Payments on notes payable
(250
)
 
(83
)
Payments on lines of credit
—

 
(6,792
)
Payment of debt issuance costs
—

 
(10
)
Payments on finance lease obligations
(70
)
 
(73
)
Net cash provided by (used in) financing activities
(320
)
 
593

Changes in cash and cash equivalents due to changes in foreign currency
13

 
(35
)
Net increase (decrease) in cash and cash equivalents
(784
)
 
723

Cash and cash equivalents at beginning of year
4,295

 
1,189

Cash and cash equivalents at end of year
$
3,511

 
$
1,912

Supplemental cash flow information:
 
 
 
Interest paid
$
253

 
$
136

Income taxes paid, foreign
81

 
92

Non-cash financing and investing activities:
 
 
 
Property and equipment financed by finance lease or accounts payable
36

 
49

Debt discount
—

 
3

Preferred stock dividends paid in additional shares
—

 
53

Conversion of preferred shares
—

 
563









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

 
Three Months Ended December 31,
 
2019
 
2018
 
 
 
 
Net loss
$
(820
)
 
$
(1,788
)
Add:
 
 
 
   Depreciation and amortization
321

 
319

   Income tax benefit
(19
)
 
(12
)
   Interest expense
263

 
154

   Stock-based compensation expense
52

 
161

Adjusted EBITDA
$
(203
)
 
$
(1,166
)
 
 
 
 



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