December 22, 2016 (September 30, 2016) Date of Report (Date of earliest event reported) | ||||
Sonic Foundry, Inc. (Exact name of registrant as specified in its charter) | ||||
Maryland (State or other jurisdiction of incorporation) | 000-30407 (Commission File Number) | 39-1783372 (IRS Employer Identification No.) |
222 W. Washington Ave Madison, WI 53703 (Address of principal executive offices) | (608) 443-1600 (Registrant's telephone number) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
(a) | Exhibits |
99.1 | Press release concerning financial results for the fiscal quarter and year ended September 30, 2016. |
99.1 | Press release concerning financial results for the fiscal quarter and year ended September 30, 2016. |
By: | /s/ Kenneth A. Minor | |
By: | Kenneth A. Minor | |
Title: | Chief Financial Officer | |
• | Total revenues of $9.5 million, represent an increase of 4% compared to $9.1 million in the fourth quarter of 2015, growth was driven by a 32% increase in cloud hosting revenues in the quarter. |
• | Gross margin increased to $7.1 million, or 75% of sales compared to $6.5 million, or 71% of sales for the fourth quarter of 2015. |
• | Adjusted EBITDA of $4,000 represented a positive swing of $216,000 compared to a loss of $(212,000) in the fourth quarter of fiscal 2015. |
• | Net loss declined to $847,000 or $(0.19) per share compared to a net loss of $1,222,000 or $(0.28) per share in the fourth quarter of 2015. |
• | Billings totaled $9.7 million in the fourth quarter of 2016, a decline of 16% compared to last year's same period; the company billed $2.6 million to two Middle East customers in the fourth quarter of fiscal 2015 which were not repeated in the fourth quarter of fiscal 2016. |
• | Unearned revenue from services and products increased $1.4 million, or 11% and stood at $14.1 million as of September 30, 2016, compared to $12.7 million at the beginning of the year. |
• | Billings growth from individual transactions of less than $450 thousand is expected to range between five and seven percent from $39.5 million in fiscal 2016. |
• | Billings from remaining, larger transactions are inherently more complex in many ways – often requiring construction of new buildings or campuses – and may require modification to meet certain technical requirements. Our pipeline of expected large transactions is at approximately $5 million and believe we will be successful in several of those during fiscal 2017. Due to the inherent uncertainty, we cannot predict when or if we complete these transactions. Therefore we are providing guidance of between zero and $2 million in fiscal 2017. |
• | Continue gross margin improvement from 74% in fiscal 2016 to 75% or better. |
September 30, | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,794 | $ | 1,976 | |||
Accounts receivable, net of allowances of $225 and $150 | 11,646 | 12,659 | |||||
Inventories | 1,904 | 2,385 | |||||
Prepaid expenses and other current assets | 1,404 | 927 | |||||
Total current assets | 16,748 | 17,947 | |||||
Property and equipment: | |||||||
Leasehold improvements | 879 | 904 | |||||
Computer equipment | 5,837 | 5,852 | |||||
Furniture and fixtures | 825 | 837 | |||||
Total property and equipment | 7,541 | 7,593 | |||||
Less accumulated depreciation and amortization | 5,510 | 4,785 | |||||
Property and equipment, net | 2,031 | 2,808 | |||||
Other assets: | |||||||
Goodwill | 11,310 | 10,853 | |||||
Customer relationships, net of amortization of $723 and $457 | 1,882 | 1,872 | |||||
Software development costs, net of amortization of $533 and $429 | — | 104 | |||||
Product rights, net of amortization of $287 and $164 | 385 | 508 | |||||
Other intangibles, net of amortization of $236 and $190 | 76 | 112 | |||||
Other long-term assets | 726 | 599 | |||||
Total assets | $ | 33,158 | $ | 34,803 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Revolving line of credit | $ | 1,772 | $ | 1,818 | |||
Accounts payable | 961 | 2,026 | |||||
Accrued liabilities | 1,883 | 1,666 | |||||
Unearned revenue | 12,834 | 11,359 | |||||
Current portion of capital lease and financing arrangements | 283 | 211 | |||||
Current portion of notes payable and warrant debt, net of discounts | 1,567 | 1,299 | |||||
Current portion of subordinated note payable | 93 | 186 | |||||
Total current liabilities | 19,393 | 18,565 | |||||
Long-term portion of unearned revenue | 1,257 | 1,325 | |||||
Long-term portion of capital lease and financing arrangements | 231 | 196 | |||||
Long-term portion of notes payable and warrant debt, net of discounts | 871 | 2,080 | |||||
Long-term portion of subordinated note payable | — | 92 | |||||
Derivative liability, at fair value | 67 | 109 | |||||
Other liabilities | 259 | 311 | |||||
Deferred tax liability | 4,564 | 4,322 | |||||
Total liabilities | 26,642 | 27,000 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $.01 par value, authorized 500,000 shares; none issued | — | — | |||||
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; 4,424,275 and 4,376,456 shares issued and 4,411,559 and 4,363,740 shares outstanding | 44 | 44 | |||||
Additional paid-in capital | 197,064 | 195,973 | |||||
Accumulated deficit | (190,214 | ) | (186,897 | ) | |||
Accumulated other comprehensive loss | (183 | ) | (1,122 | ) | |||
Receivable for common stock issued | (26 | ) | (26 | ) | |||
Treasury stock, at cost, 12,716 shares | (169 | ) | (169 | ) | |||
Total stockholders’ equity | 6,516 | 7,803 | |||||
Total liabilities and stockholders’ equity | $ | 33,158 | $ | 34,803 |
Quarters Ended September 30, | Years Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Product | $ | 3,983 | $ | 3,854 | $ | 15,823 | $ | 15,884 | |||||||
Services | 5,377 | 5,154 | 21,734 | 20,160 | |||||||||||
Other | 95 | 48 | 418 | 415 | |||||||||||
Total revenue | 9,455 | 9,056 | 37,975 | 36,459 | |||||||||||
Cost of revenue: | |||||||||||||||
Product | 1,636 | 2,110 | 6,459 | 7,406 | |||||||||||
Services | 717 | 496 | 3,526 | 3,229 | |||||||||||
Total cost of revenue | 2,353 | 2,606 | 9,985 | 10,635 | |||||||||||
Gross margin | 7,102 | 6,450 | 27,990 | 25,824 | |||||||||||
Operating expenses: | |||||||||||||||
Selling and marketing | 4,347 | 4,513 | 17,801 | 18,016 | |||||||||||
General and administrative | 1,410 | 1,302 | 5,628 | 5,635 | |||||||||||
Product development | 1,838 | 1,543 | 6,837 | 6,265 | |||||||||||
Total operating expenses | 7,595 | 7,358 | 30,266 | 29,916 | |||||||||||
Income (loss) from operations | (493 | ) | (908 | ) | (2,276 | ) | (4,092 | ) | |||||||
Non-operating income (expenses): | |||||||||||||||
Interest expense, net | (142 | ) | (143 | ) | (594 | ) | (372 | ) | |||||||
Other income (expense), net | (213 | ) | (97 | ) | (178 | ) | 46 | ||||||||
Total non-operating income (expenses) | (355 | ) | (240 | ) | (772 | ) | (326 | ) | |||||||
Loss before income taxes | (848 | ) | (1,148 | ) | (3,048 | ) | (4,418 | ) | |||||||
Benefit (provision) for income taxes | 1 | (74 | ) | (269 | ) | (107 | ) | ||||||||
Net loss | $ | (847 | ) | $ | (1,222 | ) | $ | (3,317 | ) | $ | (4,525 | ) | |||
Loss per common share: | |||||||||||||||
Basic net loss per common share | $ | (0.19 | ) | $ | (0.28 | ) | $ | (0.76 | ) | $ | (1.04 | ) | |||
Diluted net loss per common share | $ | (0.19 | ) | $ | (0.28 | ) | $ | (0.76 | ) | $ | (1.04 | ) | |||
Weighted average common shares – Basic | 4,411,559 | 4,335,453 | 4,389,421 | 4,332,576 | |||||||||||
– Diluted | 4,411,559 | 4,335,453 | 4,389,421 | 4,332,576 |
Quarters Ended September 30, | Years Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net loss | $ | (847 | ) | $ | (1,222 | ) | $ | (3,317 | ) | $ | (4,525 | ) | |||
Add: | |||||||||||||||
Depreciation and amortization | 498 | 576 | 2,117 | 2,260 | |||||||||||
Income tax expense | (1 | ) | 74 | 269 | 107 | ||||||||||
Interest expense | 164 | 143 | 594 | 372 | |||||||||||
Stock-based compensation expense | 190 | 217 | 861 | 963 | |||||||||||
Adjusted EBITDA | $ | 4 | $ | (212 | ) | $ | 524 | $ | (823 | ) | |||||
Years Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Net loss | $ | (3,317 | ) | $ | (4,525 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Amortization of other intangibles | 652 | 669 | |||||
Depreciation and amortization of property and equipment | 1,553 | 1,599 | |||||
Loss on sale of fixed assets | 72 | — | |||||
Provision for doubtful accounts | 75 | 57 | |||||
Deferred taxes | 341 | 53 | |||||
Stock-based compensation expense related to stock options and warrants | 861 | 963 | |||||
Remeasurement gain on subordinated debt | (3 | ) | (202 | ) | |||
Remeasurement gain on derivative liability | (58 | ) | (11 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,341 | (4,379 | ) | ||||
Inventories | 514 | (344 | ) | ||||
Prepaid expenses and other current assets | (532 | ) | 169 | ||||
Accounts payable and accrued liabilities | (966 | ) | 111 | ||||
Other long-term liabilities | (60 | ) | (86 | ) | |||
Unearned revenue | 1,243 | 2,800 | |||||
Net cash provided by (used in) operating activities | 1,716 | (3,126 | ) | ||||
Investing activities | |||||||
Purchases of property and equipment | (339 | ) | (722 | ) | |||
Net cash used in investing activities | (339 | ) | (722 | ) | |||
Financing activities | |||||||
Proceeds from notes payable | 500 | 2,336 | |||||
Proceeds from line of credit | 17,845 | 8,535 | |||||
Payments on notes payable | (1,693 | ) | (2,894 | ) | |||
Payments on line of credit | (17,958 | ) | (6,727 | ) | |||
Payment of debt issuance costs | (36 | ) | (122 | ) | |||
Proceeds from issuance of common stock and warrants | 66 | 710 | |||||
Proceeds from exercise of common stock options | — | 41 | |||||
Payments on capital lease and financing arrangements | (278 | ) | (252 | ) | |||
Net cash provided by (used in) financing activities | (1,554 | ) | 1,627 | ||||
Changes in cash and cash equivalents due to changes in foreign currency | (5 | ) | (147 | ) | |||
Net decrease in cash and cash equivalents | (182 | ) | (2,368 | ) | |||
Cash and cash equivalents at beginning of period | 1,976 | 4,344 | |||||
Cash and cash equivalents at end of period | $ | 1,794 | $ | 1,976 |