Full results can be found here, including a link to the brief 28 minute Mediasite Webcast (note: we had a few questions that would have extended the discussion, but didn't get our request in soon enough!). A few takeaways:
(1) Top-line results support our Mediasite franchise thesis: revenue of $5.6 million (+12% Y/Y) and record billings of $6.0 million (+19% Y/Y) as adoption continues. One of two slides highlighting recent customer additions from Sonic's presentation:
More organizations continue to realize the benefits of the Mediasite solution over other Webcasting services, which is fantastic and apparently accelerating. Recall the Nasdaq (NDAQ) Shareholder.com example of Microsoft's Analyst Meeting we highlighted the other day. Why not move to Mediasite for a better experience?
(2) Bottom-line profitability is what the doctor ordered: GAAP EPS of $0.06 and cash NON-GAAP EPS of $0.24, with the latter pointing to our expectation that the company could potentially deliver $1.00 of cash earnings over the next year. While the company continues to have a small net cash position -- now $839 thousand versus $1.1 million at 3/30/10 -- we think today's results confirm that Sonic Foundry is moving past the inflection point. Working capital requirements to fund growth should be met by internal cash generation (operating leverage) and/or the currently untapped $3.0 million line of credit from Silicon Valley Bank (SVB) (details in last 10-Q). Here's the management view from Sonic's presentation:
(3) Outlook/commentary calls for revenue growth of 10-40% (wide range on lumpy deal timing) over the next 12 months -- supports our thesis, but points to the low/mid point of our March earnings scenario range (+10% Y/Y = $21 million, +40% Y/Y = $27 million, midpoint = $24 million) - click to enlarge:
Deal timing remains the big swing factor and, for valuation, we'll see what the Market decides. Above, we use a 20-times P/E multiple, but -- right or wrong --higher multiples are often awarded by the Market to well-positioned, growing niche companies. Full disclosure: we will gladly oblige Market demand if multiples move beyond our estimate of fair value. As noted in our prior posts, we believe recent M&A transactions also provide relevant valuation benchmarks from a private market valuation (PMV) standpoint.
(4) Finally, don't forget about the importance of collaborating with the A/V channel to build the business, which management mentioned in discussing Sonic's presence at the recent Infocomm/Educomm show:
AND, recall what we shared in July 2009 regarding the A/V channel relationship as a barrier to entry:
- The key focal point for us remains the Mediasite franchise, which we believe continues to grow in value as customers expand footprints, new customers join the community, and -- importantly -- the global A/V channel increasingly recommends Mediasite for rich media Webcasting. We think the channel promotes Mediasite because the solution works extremely well, is reliable, and has a clear product development road-map. The growing, installed customer base, combined with brand recognition, trust, and global distribution, are all difficult for a competitor to replicate and take years to establish. In our view, these aspects mitigate the risk of rapid technological change and help secure Mediasite's leading position in the marketplace.
Lastly, as an unrelated aside, we wonder if many customers have explored placing Mediasite content on Google's (GOOG) YouTube? We happened to stumble upon this -
That said, most content no doubt remains behind firewalls and/or directly housed in continually expanding Mediasite catalogs (again, please see our post with Tweets about rapidly expanding usage from university customers). Still, interesting to watch (but a bit small and too blurry if enlarged to full screen).
Disclosure: long SOFO.
© 2010 Jeffrey Walkenhorst
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