Executive Summary

Revenue improved sequentially to $5.74M (up ~14% q/q) but declined 21% y/y; gross margin compressed to 57% on accelerated cloud migration depreciation and transition costs, driving a net loss of $3.38M and adjusted EBITDA of $(2.05)M .
Mediasite momentum inflected: combined billings +50% y/y; Mediasite billings +40% q/q; recurring billings from renewals +32% q/q, setting up forward revenue conversion as renewals flow through .
Japan turned a corner: restored federal funding and FX tailwinds more than doubled Mediasite Japan billings q/q, partly offsetting event softness and prior currency headwinds .
Liquidity actions underway: cash ended at $2.70M; company amended NBE debt to defer regular monthly payments beginning Jun-2023 for a fee, and carried ~$9.4M of debt outstanding at quarter-end .
No quantitative guidance; management reiterated goal for new growth businesses (Vidable, Video Solutions, GLX) to be profitable before end of 2024; plan targets ~300 events in 2023 and accelerated Vidable roadmap by end of Q3 .

What Went Well and What Went Wrong

What Went Well
- Mediasite upswing: “substantial lift in both Mediasite hardware sales and contract renewals” with billings +40% q/q and recurring billings +32% q/q; combined billings +50% y/y .
- AI traction: Vidable sold ~0.5M hours of video transformation with >600k hours in pipeline; strong captioning accuracy and performance reviews; expansion to translations and AI metadata planned by end of Q3 .
- Japan recovery: restored federal funding and more favorable FX drove Mediasite Japan billings to more than double q/q, aiding sequential revenue improvement .
What Went Wrong
- Revenue and margins down y/y: total revenue fell 21% y/y to $5.74M; gross margin contracted to 57% (vs 71% last year) due to accelerated depreciation/transition costs as cloud moves to AWS and service cost inflation .
- Operating loss persisted: operating loss $(2.78)M (vs $(1.26)M y/y) on elevated product development investment (Vidable) and continued services cost pressure .
- Nasdaq compliance and liquidity risk: company disclosed minimum bid price and shareholders’ equity deficiencies, and later negotiated deferral of NBE payments to manage near-term liquidity; cash declined to $2.70M .

Financial Results

Metric	Q4 2022	Q1 2023	Q2 2023
Revenue ($USD Millions)	$6.505	$5.014	$5.738
Gross Margin (%)	61%	61%	57%
Operating Income ($USD Millions)	$(2.481)	$(4.292)	$(2.782)
Net Income ($USD Millions)	$(2.712)	$(4.388)	$(3.379)
Diluted EPS ($)	$(0.25)	$(0.38)	$(0.28)
Adjusted EBITDA ($USD Millions)	$(2.060)	$(2.899)	$(2.047)

Segment/category breakdown (disaggregated revenue):

Revenue Category ($USD Millions)	Q2 2022	Q1 2023	Q2 2023
Product & Other	$2.162	$0.878	$1.607
Services Total	$5.081	$4.136	$4.131
• Support	$1.920	$1.264	$1.363
• Hosting (incl. event cloud)	$1.776	$1.702	$1.717
• Events	$0.998	$1.071	$0.945
• Installs/Training/Other	$0.387	$0.099	$0.106

KPIs and balance items:

KPI	Q4 2022	Q1 2023	Q2 2023
Cash & Equivalents ($USD Millions)	$3.299	$7.981	$2.702
Unearned Revenue Total ($USD Millions)	$9.739 (8.599+1.140)	$9.146 (7.932+1.214)	$10.062 (8.593+1.469)
Gross Margin ($USD Millions)	$3.945	$3.044	$3.276
Total Operating Expenses ($USD Millions)	$6.426	$7.336	$6.058
Total Debt Outstanding ($USD Millions)	N/A	~$9.3	~$9.4
Weighted Avg Shares – Basic (Millions)	10.869	11.482	12.076

Q2-specific billings indicators:

KPI	Q2 2023
Combined billings growth (y/y)	+50%
Mediasite billings growth (q/q)	+40%
Mediasite recurring billings growth (q/q)	+32%
Deferred revenue expected recognition next quarter	~$3.5M

Why metrics moved:

y/y revenue decline: hardware shift toward software capture; fewer/lower-size integration projects vs prior; event market normalization and FX headwinds (Japan) .
Gross margin compression: accelerated depreciation and transition costs from migration to public cloud weighed on services margin mix .
opex mix: increased product development spend supporting Vidable and growth initiatives .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Events delivered (Video Solutions)	FY 2023	N/A	“Around 300 events in 2023”	Initiated
Vidable roadmap	By end of Q3 FY23	N/A	Deploy translations, AI-generated metadata, early AI-powered engagement analytics	New initiatives
Profitability target for new growth units (Vidable, Video Solutions, GLX)	Before exit FY 2024	Stated in prior quarter	Reiterated target before end of 2024	Maintained
NBE loan servicing	Jun–Sep 2023 (and until notice)	Regular payments under original schedule	Deferral of regular monthly payments beginning Jun-1-2023 for a $20k monthly Deferral Fee; NBE may resume full payments after Sept 1, 2023 with notice	Liquidity action

Note: No quantitative revenue/EPS/margin guidance provided; management commentary focused on execution milestones and long-term profitability objectives .

Earnings Call Themes & Trends

(“Q-2” = Q4 2022; “Q-1” = Q1 2023)

Topic	Q-2 (Q4 2022)	Q-1 (Q1 2023)	Current (Q2 2023)	Trend
AI/Technology (Vidable)	Initial deployments; strong customer feedback; 100% of trial customers moved to Vidable captions	Vidable used by >75% of top U.S. Mediasite accounts; integrations for non-Mediasite access	~0.5M hours sold; >600k hours pipeline; expanding features by end of Q3	Improving
Cloud migration (AWS)	Accelerated depreciation as part of AWS transition	Transition costs weighed on margins; ongoing	Continued migration; expected to “limit long-term capital investment”	Improving long-term; near-term pressure
Events/Video Solutions	Mediasite Events rebranded “Video Solutions”	CTI partnership; 1-hour turnaround for on-demand video	Targeting ~300 events in 2023; expanding channel partnerships	Improving
GLX (Global Learning Exchange)	Bahamas hub opened; Africa plans initiated	First Bahamas enrollments; Nigeria and South Africa partnerships	Planning Nigeria and South Africa hubs this summer; expanding university roster	Improving
Macro/FX/Japan	COVID restrictions and FX pressured Japan	FX headwinds persisted	Japan funding restored; FX favorable; Japan billings >2x q/q	Improving
Liquidity/Nasdaq	N/A	Nasdaq minimum bid deficiency notice	Equity deficiency notice; debt service deferral arranged post-quarter	Stabilizing actions

Management Commentary

“Mediasite billings increasing 40% over the first quarter, with a 32% increase in recurring billings… migrating our on-premises customers to the Mediasite cloud… moving our infrastructure to the AWS Cloud” — CEO Joe Mozden, Jr. .
“We have already sold about half a million hours of video transformation and have an additional 600,000+ hours in the sales pipeline… we will deploy translations, AI-generated metadata, and an early version of an AI-powered engagement analytics platform by the end of Q3” .
“The in-person events business continues its strong recovery… we expect our Video Solutions team to secure around 300 events in 2023” .
“GLX… Bahamas is experiencing a steady upswing… plan to open GLX Hubs in Nigeria and South Africa this summer” .
Shareholder meeting context: “When we moved Vidable to GA, 100% of the initial 30 clients adopted Vidable… we’re now enabling non‑Mediasite customers via API… launched in Europe with GDPR-compliant product” .

Q&A Highlights

Vidable adoption and GTM: 100% conversion from initial trial clients; broadening via APIs for partners/integrators; GDPR-compliant EU solution live; plan for SDK longer-term .
GLX operating model: Emphasis on local hiring/partners to deliver in‑country hub support and student success; structure tailored by country .
UNESCO partnership: Global gateway to education ministries; enhances credibility and accelerates country access; Nigeria as first large-scale rollout case .

Estimates Context

Wall Street consensus for Q2 2023 revenue and EPS via S&P Global was unavailable for SOFO (no mapping returned by the estimates tool); as a result, we cannot provide vs-consensus comparisons for this quarter [GetEstimates error].
Given no published numeric guidance and unavailable consensus, we expect models to adjust for: sequential revenue re-acceleration, gross margin compression from transition costs, and stronger forward revenue conversion from higher Mediasite recurring billings .

Key Takeaways for Investors

Sequential inflection with Mediasite billings and renewals suggests improving revenue visibility into upcoming quarters; watch conversion of $3.5M deferred revenue slated for next quarter .
Margin headwinds are transitional (cloud migration, services mix); operating expense discipline quarter-over-quarter supports narrowing operating losses .
Vidable traction and Video Solutions channel leverage (CTI) are tangible growth vectors; execution on new features and 1‑hour event turnaround can catalyze enterprise uptake .
GLX offers asymmetric upside if Nigeria/South Africa hubs scale; near-term KPIs are hub openings, partnership depth, and early enrollment throughput .
Liquidity remains a watch item: cash balance declined; management is actively managing debt service (NBE deferral) while pursuing growth—monitor financing developments and Nasdaq compliance milestones .
Near-term trading setup: sequential growth and AI narrative are positives; lack of guidance and small-cap liquidity risks can amplify volatility around execution updates .

Sources: Q2 2023 press release and 8‑K exhibits ; Q2 2023 10‑Q ; Q1 2023 press release/10‑Q ; Q4 2022 press release/8‑K ; Nasdaq notices ; NBE amendment .

SONIC FOUNDRY INC (SOFO)·Q2 2023 Earnings Summary