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Sonic Foundry Reports First Quarter Fiscal 2014 Results

February 11, 2014

Sonic Foundry, Inc., a company focusing on video management and academic, enterprise and event webcasting, announced financial results for its fiscal 2014 first quarter ended December 31, 2013.

In a release on February 6, the Company noted that GAAP results include:

-Revenues of $7.2 million, up 10 percent from the first quarter of fiscal 2013

-Product and other revenue of $2.9 million for both fiscal first quarters

-Services revenue of $4.3 million, up 19 percent from $3.6 million in the first quarter of fiscal 2013

-Support and maintenance revenue of $2.1 million, an increase of 8 percent over the first quarter of fiscal 2013

-Event services and hosting revenue of $2.2 million, an increase of 31 percent over the first quarter of fiscal 2013

-Unearned revenue balance of $7.0 million, down from $7.1 million at September 30, 2013

-GAAP net loss of $(690) thousand, including $450 thousand of acquisition transaction costs, or $(0.17) per basic share, compared to net loss of $(139) thousand or $(0.04) per basic share in the fiscal first quarter of 2013

-Gross margin of $5.4 million or 75 percent compared to $4.9 million or 74 percent for the fiscal first quarter of 2013

-Cash balance of $3.1 million at December 31, 2013

Non-GAAP results include:

-Billings of $7.1 million, an increase of 3 percent over the first quarter of fiscal 2013

-Product and other billings of $3.0 million, up 3 percent from the first quarter of fiscal 2013

-Services billings of $4.1 million, an increase of 3 percent over the first quarter of fiscal 2013

-Support and maintenance billings of $1.9 million, a decrease of 12 percent over the first quarter of fiscal 2013

-Event services and hosting billings of $2.2 million, an increase of 19 percent over the first quarter of fiscal 2013

-Non-GAAP net income of $275 thousand or $0.07 per basic share compared to non-GAAP net income of $685 thousand or $0.18 per basic share in the first quarter of fiscal 2013

Non-GAAP net income primarily excludes all non-cash related expenses of stock compensation, depreciation, acquisition costs, amortization, provision for income taxes and includes the cash impact of billings not recognized as revenue.

At December 31, 2013, $7.0 million of revenue was deferred, of which the company expects to realize approximately $2.5 million in the quarter ending March 31. 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.

During the first quarter of this fiscal year, 81 percent of billings were to existing customers, compared to 82 percent in first quarter fiscal 2013, with 50 percent to education customers and 40 percent to corporate. International product and service billings accounted for 28 percent of overall billings, compared to 30 percent in the first quarter of fiscal 2013.

We completed the acquisition of Media Mission Holding B.V. on December 16, 2013 for EUR1.1 million ($1.5 million) consisting of EUR330,000 ($458,000) cash, EUR495,000 ($680,000) subordinated note payable over three years (interest rate of 6.5 percent) and EUR275,000 ($373,000) in shares of Sonic Foundry stock. Media Mission contributed revenue of $90 thousand and net income of $43 thousand for the two week period following close of the transaction.

The acquisition of Mediasite K.K. ("MSKK") was complete effective January 14, and therefore had no impact, other than transaction costs, on the quarter ended December 31, 2013. Prior to completion of the acquisition of MSKK, the Company owned a minority interest of approximately 26 percent of MSKK. Generally Accepted Accounting Principles require that the initial investment of an acquired company be valued at the same amount as the value when control was achieved. As a result, Q2 2014 results will include a substantial non-cash gain of approximately $1.3 million in addition to the impact of the acquisition and results of their operations from January 14, through March 31.

Sonic Foundry announced that University of Leeds, one of the world's top 100 universities according to QS World University Rankings, has selected Mediasite for two strategic projects; lecture capture and enterprise video content management. Deployment of the projects is anticipated to begin in fiscal Q2, and is expected to exceed $1 million in billings in fiscal 2014.

"We're pleased with the growth trends we're seeing in our business, particularly in the international segment. Significant customer commitments such as that from University of Leeds are a validation of our global strategy and puts us one step closer to delivering on our revenue objectives. With other large deals moving forward, including several international deals that we're confident we'll win, we remain committed to our long-term strategies to build fundamental value to investors while delivering excellent products to our customers," said Gary Weis, Chief Executive Officer of Sonic Foundry.

The Company is reiterating the fiscal 2014 guidance provided earlier of $39 million of billings for its core business but is making an upward revision to the range of guidance provided for large transactions. The Company had said it expected between $300 thousand and $2.0 million from large transactions in fiscal 2014. As a result of success with University of Leeds, the Company is revising that guidance to between $1.0 million and $2.0 million. Likewise the Company is increasing the guidance provided of pre-tax income as a percentage of revenue from 4-5 percent to 7-9 percent.

Sonic Foundry is a company focused on enterprise webcasting solutions, providing video content management and distribution for education, business and government.

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