Sonic Foundry, Inc. reports 4.0% revenue decline in FY2018 and 34.2 pp EBITDA Margin decline from -7.2% to -41.4%
12/21/2018 • About Sonic Foundry, Inc. (
$SOFO) • By InTwits
Sonic Foundry, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- The company operates at negative EBITDA Margin: -41.4%
- Sonic Foundry, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 0.0%. Average EBITDA Margin for the same period was -10.9%
- Sonic Foundry, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $0m in 2018, $0m in 2017, $0m in 2016, $1m in 2015, $1m in 2014
- The company has unprofitable business model: ROIC is -786.4%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.1x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Sonic Foundry, Inc.'s Revenue decreased on 4.0%. Annual revenue decline showed slowdown in FY18Q4 - revenue increased on 2.3%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 34.2 pp from -7.2% to -41.4% in FY2018.
Gross Margin decreased slightly on 0.54 pp from 72.6% to 72.0% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018.
Net Income margin dropped on 21.2 pp from -14.0% to -35.2% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.4% in FY2018. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 1.9%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2016 at 0.89% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.1x and Debt / EBITDA is . Net Debt / EBITDA didn't change in FY2018. Debt decreased on 4.5% while cash decreased slightly on 1.8%.
Sonic Foundry, Inc. has short term refinancing risk: cash is only 68.9% of short term debt.
Management team
The company's CFO is Kenneth A Minor "Ken". Kenneth A Minor "Ken" has 18 years tenure at the company.
Financial and operational results
FY ended 09/30/2018
Sonic Foundry, Inc. ($SOFO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 35.830 | 36.459 | 37.975 | 36.000 | 34.544 | -4.0% |
| Gross Profit | 25.555 | 25.824 | 27.990 | 26.133 | 24.888 | -4.8% |
| SG&A | 22.174 | 23.651 | 23.429 | 22.853 | 21.976 | -3.8% |
| EBITDA | -0.862 | -1.973 | -0.071 | -2.581 | -14.300 | |
| Net Income | -2.816 | -4.525 | -3.317 | -5.039 | -12.166 | |
Balance Sheet
|
|---|
| Cash | 4.344 | 1.976 | 1.794 | 1.211 | 1.189 | -1.8% |
| Short Term Debt | 3.266 | 3.514 | 3.639 | 3.058 | 1.726 | -43.6% |
| Long Term Debt | 1.626 | 2.368 | 1.102 | 0.367 | 1.544 | 320.7% |
Cash flow
|
|---|
| Capex | 0.862 | 0.722 | 0.339 | 0.839 | 0.840 | 0.1% |
Ratios
|
|---|
| Revenue growth | 29.1% | 1.8% | 4.2% | -5.2% | -4.0% | |
| EBITDA growth | -251.8% | 128.9% | -96.4% | 3,535.2% | 454.0% | |
|
|---|
| Gross Margin | 71.3% | 70.8% | 73.7% | 72.6% | 72.0% | -0.5% |
| EBITDA Margin | -2.4% | -5.4% | -0.2% | -7.2% | -41.4% | -34.2% |
| SG&A, % of revenue | 61.9% | 64.9% | 61.7% | 63.5% | 63.6% | 0.1% |
| Net Income Margin | -7.9% | -12.4% | -8.7% | -14.0% | -35.2% | -21.2% |
| CAPEX, % of revenue | 2.4% | 2.0% | 0.9% | 2.3% | 2.4% | 0.1% |
|
|---|
| ROIC | -17.3% | -27.1% | -18.1% | -50.6% | -786.4% | -735.8% |
| ROE | -25.6% | -47.3% | -46.3% | -120.6% | | |
Sonic Foundry, Inc. ($SOFO) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 9 | 8 | 9 | 8 | | -4.4% | -1.2% | -11.5% | 2.3% |
| EBITDA | -1 | -1 | -0 | -12 | | | | -490.6% | |
| Net Income | 0 | -1 | -1 | -10 | | | | | |
Balance Sheet
|
|---|
| Cash | 2 | 1 | 2 | 1 | | 39.5% | 38.8% | 32.6% | -1.8% |
| Short Term Debt | 3 | 3 | 3 | 2 | | -43.2% | -53.6% | -22.0% | -43.6% |
| Long Term Debt | 0 | 1 | 2 | 2 | | -53.5% | 119.3% | 332.3% | 320.7% |
Ratios
|
|---|
| Gross Margin | 72.7% | 70.1% | 73.5% | 71.8% | | 0.7% | -0.8% | -0.2% | -1.9% |
| EBITDA Margin | -6.1% | -10.3% | -4.8% | -146.8% | | 4.6% | -1.7% | -5.8% | -135.4% |
| Net Income Margin | 3.6% | -17.1% | -11.7% | -118.0% | | 19.8% | -0.1% | -6.8% | -98.9% |
Peers in Application Software
Below you can find Sonic Foundry, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Sonic Foundry, Inc. ($SOFO) | | 1.8% | 4.2% | -5.2% | -4.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| Sonic Foundry, Inc. ($SOFO) | 71.3% | 70.8% | 73.7% | 72.6% | 72.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -3.3% | -3.1% |
|---|
| Sonic Foundry, Inc. ($SOFO) | -2.4% | -5.4% | -0.2% | -7.2% | -41.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Sonic Foundry, Inc. ($SOFO) | 2.4% | 2.0% | 0.9% | 2.3% | 2.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.2% | -11.2% | -9.2% | -10.2% | -9.1% |
|---|
| Sonic Foundry, Inc. ($SOFO) | -17.3% | -27.1% | -18.1% | -50.6% | -786.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (70 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
