Sonic Foundry (SOFO) 15 May 182018 Q2 Earnings call transcript

Good afternoon, and welcome to Sonic Foundry's Second Quarter 2018 Earnings Webcast. I'm Nicole Wise, Director of Communications for Sonic Foundry. And will be moderating today's webcast. We'll begin with the safe harbor statements, followed with a presentation by Gary Weis, CEO; and Ken Minor, CFO [Operator Instructions]. In compliance with the SEC regulation regarding fair disclosure, we will be using SEC filings and public presentations, like the one you're viewing and participating in today, as the principal means of informing The Street and investors about our current and past results, financial projections or any material nonpublic information during those meetings.

projections to an analysts, not intra-quarter regarding results, continue and the provide will nonpublic quarter-to-date on material others basis financial Foundry meet those investors, with media updates information Sonic during any meetings. or but will

policy day disclosure beginning period the quarter of we the publicly the day quarter and as on each that period. month release of defines fiscal XXth a ending of Foundry's Sonic the third on quiet the results

make any press During about periods, such will not forward-looking in quiet performance financial except provide release comments nor we our guidance, form.

Exchange contain Any Finally, of the of this Act in other periodic Section forward-looking generally could results and conference risk provide. products the accounting non-GAAP statements other from our sec.gov XXXX. From will meaning context considered of of Foundry XXA forward-looking XXXX Sonic and services forward-looking Actual within of Act the various guidance from principles. materially and we factors Securities can differ statements filings of disclosed websites at or Section Sonic SEC. measures, the not in XX-K Securities measures or forms time, the Relations refers the be Foundry be filings be XXE online the should about the time department. as Investor These financial to obtained with can accessed company's defined and to XX-Q, accepted of

this believes a to of presentation. As Refer impact an this and company releases special the in operating is refer EBITDA. earnings for The understanding of EBITDA we our its useful without adjusted reconciliation results example, adjusted to information that description to items.

today the guidance, Gary no as regardless XX of information date days. now, webcast. and webcast of are any business, of And assume subsequent available or the including this our will sonicfoundry.com will and information, regarding Weis All we archive at this An events. begin disclosures be for update the given, we to change obligation make of forward-looking

Thank quarter highlight everyone. going Welcome to into Ken of you second a afternoon, few about get Nicole, quarter. remarks first then our performance second I'm half call. will make detailed and the earnings the and of the good to XXXX

XXXs the Sonic of weakness number prior the First year thing moderate the of but fiscal had and prior The in the to the Foundry compared prior Billings is increased more Probably is QX revenue of We've I Benelux, first a last RL year-to-date by increase East go decreased Japan most of XX% basis. of that than in decrease Europe. other that for the back that minis X% comparison XXXX is recognition, over over complicated recorders which comment we've you year, than year. transaction we're XX% has America for absolute on year. our by half X% in International, to More offset story the strong shipped is of adjust one prior like by on by of but little and if and performance a and of year, rest large comparable side geographies revenue that things our in year's North the Middle about story encouraged $X.X revenue the is increased of which actually revenue X% in to approximately RL the million that. the

what part and our XXs our year. might need You they're latter part recall their capture solutions last introduced to right the effort operations. sized towards of the which for RL customers are And that were minis in the of provide

revaluing year. and half decreased a of The of a basis this on that in is That We last effective When to It half so that versus first X% year, those non-cash financial really to year our other XXXX our or $X.X an in reduce not operating expense $XXX,XXX in comparable actions million we you this $X.X operating to tax the is thing did the that's due issue. million action are took million had operational the by is expense a goodwill $X.X first impact of we issue. from half. in tax due purely year loss the first the look during of credit. at improvement inclusive the

that operations. generated improvement However, by $XXX,XXX of was fact in

on turn very a quarter. I'll the over now him view to that's So Ken it half. of comment first for the to high-level second

Gary. you, Thank

I'd the First related little was to one thing actually of the tax tax in correct all, change law. credit the

was non-cash change. a So charge that's-- it again but

cash related. So it wasn't

number as billings within details that some other a the doing that the are Gary there's areas direction. said regarding of So are outperforming and

So and QX and between those have QX. changed somewhat

item support line quarter So the and $XXX,XXX. about product the by last current underperformed year for Americas

Now approximately recorder by year that they sales. The happened recorder where was QX quarter which was reverse $XXX,XXX of primarily in new first strong the also led outperformed by sales. the prior from again

have it's lesser we of of sales variable half where the multiple because recorders in the swing performance in of period And year, part a half. we our transactions first the the large in have can seasonally that second can be things. there a pretty historically been than recorders So have

the So a In and swings of make reverse difference. volume happened. those the kinds Americas big can cloud events

year saw over are quarter international after that the was subs basically we our quarter. the about the improvement So in following the And quarter. in Gary slightly this very saw of a that and doing first the in Both quarter $XXX,XXX current $XXX,XXX. overachievement was we year-over-year well. in another same an as underperformance increase And prior first mentioned

setting from in distributor with the provide positive to both stage year broader plan should partners. as really approach in year well show to doing but transition the we model than at Activity really was interest future to consistently. strong. performance a China a other us continues growth comfort for compared ahead running this the it what we last So does QX future. they're that It sole begin weaker that's one is show last year multiple performance, pretty a China for performance QX to broader didn't and much them of approach

is quarter similar happened results which Our year. the other what international really had weak current to in last

--we So that I In to in triple variable international. transactions the were I approximate are do in and were QX that mean we what because QX, they pretty believe it again will same back QX. about be can results have it's level. go hey large

year. comparison very but So saw qX to and what in expectations we similar low was very our QX, QX it's last QX to

the year-to-date behind the dollar So in other combination international level in we about last And On subs. about the in Japan We're last in we're behind ahead China. X% year category behind X% Benelux in Americas. four we're two a from $XXX,XXX now about are year. XX% of

China's prior of revenue, course by incurring terms amounts about this we certainly in to down of revenue the year year. and to much year transaction had versus service Billings In of year reduced margins in from recorder The our growth partner drove a prior a software that the change, and slightly in part lesser the over one Gross was of QXof last year increased which revenue. lesser recurring licenses services the product while that's revenue and current XX% in in customer this but the due are year which prior annual we The year large deferred. cloud from because over and software impacted was decrease were were primarily extent events the had and that X% occurred total our support quarter. Billings to increases our Billings revenues this XX% than a reduced last amount last date cloud to year and drove

what below were to Our last well operating expenses continued year. they run

better been QX. of that a again as change reflect talking significantly As which selling related. cost that reduced opposed were liability key some was And that this QX the They We And so the on due in lower said then volume or as year. little large we pretty as got year-over-year. the I'll slide. us is a pretty basis that's are on mix recorders law share because related credit what that's is the touch the large a full reduced tax The supplies change a do result that we've affected year reflected and as hit consistent our on a part change. that of that tax our the non-cash that a Gary bottom results Gary bit federal in made tax strategy. about, employee last ASP changes more policy show chart some more that rate have to deferred travel that and stats said, get a line a change a They it of price in more that related; were that and of some lion's of to does incentives, other the margin of I some books are over to XXXX. next primarily recorders

said -- in and are those people marketing. supplies as quarter current were it's reduced development. and over Again --they largely And travel period related less product less costs and prior operating were we they the so and Our similar were during in over the the related forth. related

an the Our East. current the G&A --increased And has bad were customer in a then as were of talking assets see with primarily primarily receivable, paying by represents in a charge we've and decrease increased been that's increased debt the business. which our last about in customer for sheet, seasonal a we finally slower in a result been that expense, couple well changes China in Middle balance really deferred which as accounts primarily associated in year customers was little of impacted our higher a the than that

result expecting receivable to really Goodwill distributor million. up we and our the by to like period them in assets So an as think we going accounts extended while reduced take comes China, first had. business and we $X do of were fiscal long-term it's a other their sell time and a ramp expectations for continued from down. in And quarters second less our

had books So make of we decision we the that the the on term. was revenue in did long amount unearned --that were that to the reverse

was of as accounts impact that about well as receivable receivable was the the million the as accounts account, a amount to accounts. in reduce So And that that deferred an was long-term I revenue in said. $X.X

sort broadened China, expect again. in with we we forward approach that issue a going pop multiple partners will I think that which So have up we'll see of don't

payable. have note increase did we liabilities, an an affiliate. million a current of that's accounts due of $XXX,XXX to about approximately And terms In $X

we note that occur vote stockholder I These of that were a than by at convert on Thursday to point. more that's to offset is earlier. Now going part mentioned if that that expect stock then to a the decreases preferred

charges in revenue that I deferred mentioned. it event QX a which other was charge decrease deferred term, much the obviously associated and a was the is with which decrease a offsetting So in tax pretty a those long

by revenue So long reduced from to and due credit. as China well -term were the liabilities tax unearned million $X.X the again as

through Gary, then with turn back run business over the So that who to a trends. of few I'll meeting will

Thanks.

remark I trends. are week. make schedule wise start somewhat later until Let my me our before this things This business annual meeting unusual because in we delayed year

would I well what who all about hear the the encourage details you some the so we're conference business as doing of and to And of of to on progress Thursday. of want more that join

intentionally We bit as business of a the section keeping we earnings normally are than would. shorter the part call update

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social of video streaming that be live to this Some environment, cetera. the video things year channels collaborative et which highlighting streaming our now the for Facebook are tools the we'll real-time capture supports

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June. doing be that will in we So

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We seamlessly services. conferencing of a integrate also with other video variety

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good Mediasite leverage investment in of Join. So our we're going get to out

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enough today the human-based to probably Our affordable. to generate text all capturing really doesn't of of accuracy caption captions reality closed our But voice into technology most pretty view high find without general editing. not schools available closed that expensive that option is the is process yield in of really

to Jiaotong other changed and world. see. like and in in very as we well Soft. our slide of revenue exclusively, to of the well our getting text just the those our you've that's to say but adds making Really Soft for later to - as slower became that the work partners in most and from we into strategy XX New In new integrating us Pushi candidates some commitment the product China bit the And of traditional of other with in Thursday absolutely of do very a technology Tech this the media China Pushi captured part I potential where sometimes in about customers. installed Tech is are one available closed customers at That of a China we're cities server had Tech using distributors Pushi campus China. definitely multi-year but customer universities. the see going rest I'll potential talk basis. of affiliation pretty X.X this to choose our have partners But to technology And to a in a link with about integration they actual also of presentations. shareholder see there, as meeting several substantial live-streaming need other The our the in captioning. you'd XXXX from most but applications Pushi be join XXXX China mediasite been not had The and Tech encourage what fact line. them strategy on we with off as basically help exclusive universities that's those first Watson that the team a markets for that very mediasite is they at on China. with recorders we're to is original Xi'an When spin application X rely meeting. meeting of search Western that and it So at we've in customers has base and if used and generated China. originally of And in in such our tool And on the a with commitment. penetration to developing, part generate Pushi and company mentioned that to AM. much to over IBM traditional this voice certainly inside little hence a case revenue developing off We develop to our interested partner to back China kind beginning started like university that than looking video particular as reach shareholder are develop in technology we in just not to customers can is using a adjust as to our simply New capabilities parallel you our was into inside very on of site selling a heard deploy us developing was the access Liverpool can solutions use these And way University, compensate customers technology outset is the a application, impressed that the that challenges we're that our Tech they're connect view this aggressive would ability market. is you Pushi at like support. same number part as

in just we shareholder encourage meeting. into We strategy on information And you see detail if how going more into we business annual participate interested again to you're will more evolving. be the our

ask any turn that questions. it So I to your Nicole of with over will to

in. some coming do questions Thank you We both. have

The first about the for size doing not to follow-up Mediasite? that is size as starting was grow? previous expected. for question are you Do the see the as market mentioned markets second during calls market health one market Mediasite big a a you size is you how And

me let So one. with start first the

industry time. is like. talk the both in education we and definitely by we'll evolving higher America in Europe our varies have four or anticipated probably past and would three is by about and we that with the same Sonic believe The things see has all Foundry. That grown like in years frankly competitors poses by how North the is the of past as or a Western we of detail growing exception geography view we fast and how slower market One It the that that question to market we the a And is more or of made of Benelux way the than little certainly made grow. and addressable over we've not see is is it it not to we the it would fact the at meeting unique would comments annual ago. not it but a in market, states monolith. That growing five the statement comments the as market way. true the I The most

change can't we that. So

of instead revenue other to the technology to try have We geographies other closed applications. we growth out adapt to get and of do out what most

in like results Japan well but in already And we you than unfortunately pay XXXX, The that Benelux. for do the so seeing XXXX. sometimes and XXXX start-up more to acquisitions that's takes the that time in always now that like, about we're talked and in off starting of very we've now investment us you'd something time did the when

market the the that pushing China. other have is offers We our that now we just and but the with is customers Mediasite desirable. those to not China. huge. of to Tech time. China think potential quality also parallel We've takes encouraged I China about develop are acquisitions, what continue is what potential proven Pushi it develop in market and in to very to to capability just is with The We there saw ourselves its very But customers to applications still

of The second question was? part the

are health markets doing? the How

and kind teaching where we've definitely One schools is markets into health de-comport of The pieces. both valued. definitely doctoral technology two the teaching and schools you. nursing and Mediasite the Thank succeeding is very

sessions. Our to high-end able to be four capture concurrent recorders

playback a AV live that technology general that Our make them our case else the customers our video still ability integrated our In all partners past, newest energy also but both stream the and video is sell customer. direct basically are their the has gaining we and offering for to you're we The of like where of progressing technology and sessions offering. or take have is and are in we the where be that customers customers those technology and case has general invest to great is technology activities of it been into reached factor. partner an Our --that anything education way [Nora the front-end the in in North Dorf world higher party provide through third mediasites America. the getting on really medical in to particular can to into integrate site uptake into That media in tactic education on-demand selling making we've dependent only the successful Health] to resellers time which been medical activity, a let

it going like? the But Is No. we're potential it. we with progressing we're result. about as as fast very yes, So, encouraged still

Okay.

the reorganization. Here's performing? one about reorganization is How Is as executing sales planned? it sales

a comment sales Let of reorganization. define me bit to make little

on up the customers. focusing generating I That's sales organization a the on separate think very resource organization. changing we in really the to to past well, purely customer putting rather half management to energy how operational or sell going sales sells new have care, of and focus that experience on Billings like carving and customer the and sales additional more That spent and who sales not of like and into is well. and free trying we but reach a sales out aspects pure year

more year afford services the still demonstrated mediasite Our the on under have have and development, products, work when of we to help is four our or mediasite? just customers How customer customer and as in committed that grow take just start to on their that one having we are video focus Those learned progressing we're grow recorders that customers far them is calendar top-end new already customer that or with they're sure but to entry-level customers. experience doing become we've is on that customers. value this faced their thing to more but a are to going for the buy mediasite. strategically Mediasite out what and do is is focused experience continuing a They not Mediasite That's loyalty three in at as really they on what management buy of make really get that The you getting and do we video along They need past to or customers look to evolving started committed video buy. don't very That the managing reliable committed money other to basis. and options. challenges those organization too there. capture from They you tier them two to solution. buy of video? began if into next How to strategically do

customers problem? Do this about saw you I platforms. conversions. that plans as started question mediasite to decommissioning a of customer This some other is see

the of variety most really universities. satisfy that them large that satisfy to There's can really think I it. some We when solution. customer more schools. for be a composition with video with pay like curricula try And satisfy generally to solutions pick a minute in they professional becomes for our intense and schools, less the the is that tend a the or area, They TechSmith. answer like medical can capabilities education what I'll and They can science ways the coexist willing In technology. is Typically looking what and to let variety of of question in they casual customers competitors, are schools business about schools, I a Well that. value business the schools, say with but here's video mediasite me that I our engineering direct the dominant mean. tools the the that

science providers. want up intense be will If catch liberal since driven only more price what can keep casual they of a you lower the might do. one, software schools to required meet the us or that whatever's any solution to other with enable solution look problem? it do to a our video we it's And other competitors reasons. win capability. the schools cases The of business. we solutions. where until inside anyway it's only the IT to usually Those for software question; two the had year or I cost for and I'll more usually reasons. cost go a focus by decided on now we have community Number value to customers that's have are solutions made who decisions don't arts made less at answer and do lower No, schools, by advent back I This those and tend now catch, video have and think cost

the Sonic competition reason? Foundry revenue? reason grow If Is steadily the its can't not, what is more

can't I've competition. not need to grow it fundamentally as factor our is just tell grow. itself but can we market absolutely as we I faster talked of that you we a believe is It the is fast growing the to some reason

the it in see they think do the way same I growing market we that is slowly.

their because value are think of our students, talked cause that. system technology for about frustrated I've not they technology other But Leeds, Foundry doing video integrate once that speedy enough of a earlier lost North to win market based market those Sonic growth or is its is going portion in a are can't We into the The to of like have believe fast any that for of customers, to don't just our we like we We schools customers grow believe large provider. other to still the ourselves and that grow we that accept share and compensate video faster. we're us doing are We it. to that convinced educational keep of State, competition. really leading the customer and like enough of is things once we the by the market. of competitors of We who to in believe grow so We number we not is our problem of faster. today don't the a business policy customers. Carolina simply or

in do lot management acquisition? a some space. taking to of What this players are is steps There sort of

We're improve to value. exploring shareholder opportunities possible all

some I very that we acquisitions the think demonstrated off that see four you or think nicely years ago can I two And in are made for sense. we've five the paying past that us. make

in to space the acquisitions think I are necessarily faster better be are that think growth secret it we in the results. naive would or to

you but very think with the that, flip as the of players be I side is business possibility considering combinations careful acquisitions of well. to about have other

table. All on things of are those the

We standalone the shareholders value at just keeping possible Foundry suggesting is shareholder increased value. that our as by to way all every an improve Sonic entity. looking not independent path to are We're at

this and Okay, done to final to will question. by it year cash additional Does shareholders? Sonic have raise be dilution

for are beyond. next believe we year need transaction The No. just announced the what and we as we

that's we debt that the million believe I of three was so that that ago. put we And yesterday us. stock common $XXX,XXX today equity weeks available a combination think transaction $X.X and And million additional to about a that's sufficient. facility, has announced $X drawn then together we we small that's we And announced

heard profoundly that it's would and add what would I I Ken new. so you've before, said to this And nothing is

very is for now growth. expense leverageable future Our structure

product we expense? line say for the a do flow. what we do we'll sales to challenge cash the very, grow. and team's provide to have zero the And never my a of is line. will additional with but do biggest it If top and expense, addition perspective that to That's top improved very XXX% small focus grow can that Our getting profitability is management to do almost

There more are questions. no

Instructions] [Operator

Well, free Great. thanks us meeting ask to encourage you. have. for And annual Thank connect to questions joining Again, the you afternoon. any more Thursday. on in at might to time we'd that this you feel