Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Sonic Foundry (NASDAQ:SOFO)

Q4 2013 Earnings Call

November 21, 2013 4:30 pm ET

Executives

Tammy Jackson

Kenneth A. Minor - Chief Financial Officer, Chief Accounting Officer and Secretary

Gary R. Weis - Chief Executive Officer, Chief Technology Officer and Director

Analysts

Howard Halpern - Taglich Brothers, Inc., Research Division

Marco Rodriguez - Stonegate Securities Inc., Research Division

Mike Niehuser - Beacon Rock Research, LLC

Tammy Jackson

Good afternoon, and welcome to Sonic Foundry's 2013 Fiscal Year-End Earnings Presentation. I'm Tammy Jackson, and I will be moderating today's webcast. [Operator Instructions] We'll begin with the Safe Harbor statements and take Q&A after the prepared remarks.

In compliance with the SEC regulation regarding fair disclosure, we will be using SEC filings and public presentations like this one, as the principle means of informing the Street and investors of our current and past results, financial projections, or any material non-public information during those meetings.

Sonic Foundry's disclosure policy defines the period beginning on the 15th day of the third month of each fiscal quarter and ending on the day we publicly release the results of that quarter as a quiet period. During such quiet periods, we will not make any comments about their financial performance nor provide forward-looking guidance, except in press release form.

Finally, this conference will contain forward-looking statements about the products and services of Sonic Foundry within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements include statements about our products and services, our customer base, new partnerships, our future operating results and any statements we make about the company's future, including responses to your questions. These types of statements address matters that are subject to many risks and uncertainties. Actual results could differ materially from the forward-looking guidance we provide. Any forward-looking statements should be considered in context of the risk factors disclosed in our periodic Forms 10-Q, 10-K and other filings with the SEC. These filings can be accessed online at sec.gov and other websites, or can be obtained from the company’s Investor Relations department.

All of the information and disclosures we make today regarding our business, including any forward-looking guidance are as of the date given, and we assume no obligation to update or change this information regardless of subsequent events. An archive of this presentation will be available at sonicfoundry.com for 90 days.

And now, Ken Minor will begin today's presentation.

Kenneth A. Minor

Okay. Thank you, Tammy, and thanks for joining us, everyone. Good afternoon, everyone. I'll start our presentation as we normally do by going through a few of the quarterly financial highlights. Billings grew by 19% for the same -- over the same period for the prior year, that's from $6.1 million last year to $7.3 million this year.

Revenue grew 9% to $6.8 million over the same period last year compared to $6.2 million as primarily due to an increase in the number of recorders that were sold. Our product revenue increased 17% year-over-year to $3.7 million, that's up from $3.1 million. And our GAAP net loss of $666,000 compares to $103,000, Q4 2012. That's largely impacted by the deferred revenue impact and the growing demand for the Mediasite addition to our solution, which is My Mediasite. My Mediasite is sold as an annual license and therefore, it's recognizable as revenue over the course of the license rather than when it's sold.

The GAAP EPS of $0.17 loss compares to $0.03 in Q4 of last year. And we achieved non-GAAP income of $391,000 this year, which is $0.10 a share and that compares to $281,000 or $0.07 per share last year. And again, there were significant recurring billings, which included My Mediasite that were deferred and recorded in the balance sheet are the reason for the significant level of non-GAAP earnings for the quarter. And as I go through the year, you'll see it's an even more significant [indiscernible] for the year as well.

Gross margins were $4.9 million, that's a 72% rate of revenues for both periods, that's up from $4.5 million last year. The other revenue, which is the balance sheet component of the deferred, that I was mentioning a moment ago, is up to $7.1 million now, that compares to $5.6 million last year. And it's a 27% increase over the prior year. And the cash balance then for the ending quarter and ending year is at $3.5 million.

For the full year results, billings grew by 14% to $29.2 million over the prior year's 25.7%, which is a little over than the 13% guidance that we provided. The revenue grew by 6% to $27.8 million over the prior year's $26.1 million. And again, that reflects that growing component of billings that are spread over a longer period.

The product revenue growth of 9% was mainly due to an increase in units that were sold. The GAAP net loss of $792,000 compares to a net income in the prior year of $157,000. And on an EPS basis, that's a $0.10 loss compared to a $0.04 income last year.

I mentioned that the full year non-GAAP results were pretty significant. We've recorded non-GAAP income of $2.7 million for the full year in 2013, that's $0.68 per share. And that compares to $1.7 million or $0.43 per share last year, that's a 64% increase over the prior year. And again, that's the -- those deferred billings are the primary driver for that.

And for the full year basis, again, we have a 72% margin in both periods. This is actually slightly higher in 2013 than the 2012. In terms of dollars, that's $20.1 million now compared to $18.8 million.

For our billings for the quarter results, our product billings were up $617,000 for the quarter. It's a 20% increase over the prior Q4 of 2012, and more than half of that in the quarter is due to the increase in the annual software licenses, which is primarily My Mediasite.

Since the introduction of My Mediasite, which happened just on December 17, we've now recorded a total billings for My Mediasite of $700,000. And the service billings, likewise, were up pretty significantly over the prior year's Q4. Service billings were $545,000 increased from the prior year, which is an 18% increase.

And for the statement of operations, a little more detail. I'll skip some of the points that we've already gone over, but the product and other revenue, as I mentioned, is at $538,000, a 17% increase. Our average selling price was a decrease from $9,300 last year at $6,800. That's largely due to an increase again in the refresh, and we've seen that continuing to increase, which is really a reflection of the growing business and the fact that customers are continuing to stay in those units and want to upgrade those to the more current stock. It's also a reflection of a couple of larger deals that happened during the quarter that requires larger volume deals and should come with it, larger discounts. So that had a little bit of an impact on the ASP in Q4.

The number of recorders that were shipped increased from 323 last year to 414 this year. And to drill down the operating expenses, operating expenses in total increased 17%. Year-over-year, the total is $5.5 million that compares to $4.7 million last year. The selling and marketing increased $434,000, which is a 15% increase from the prior year. Net results partly from the higher salary, incentive comp, benefit costs due to slightly higher staff levels in Q4. It's also a result of increased travel and sponsorship of trade show attendance that were associated with the introduction of our products, as well as entry into new markets.

And the G&A increased by $243,000, that's a 36% increase. That's partially related to accounting benefits with increased headcount. But it's also -- there's a big chunk of that that's related to increased professional costs, which has largely been an increase in our legal efforts.

The product development increased $114,000 over the prior period's Q4, that's an 11% increase, and that's mainly due to the allocated increase of costs from G&A, which are driven by higher stock comp cost, as well as higher incentive depreciation loss as well.

In terms of our non-GAAP results. I had mentioned that the totals were -- the reconciliation, that gets you from the GAAP results, non-GAAP results from the press release, but the stock comp expense was pretty similar year-over-year, $160,000 versus $151,000 last year. The depreciation and amortization component likewise is pretty similar. We had $290,000 in depreciation and amortization at this period, and that compares to $246,000 last year. So the big difference in how we get to non-GAAP versus last year, like I said, is the way that billings has been recorded as revenue. So typically, we see that the billings number being pretty close to revenues. This year, billings exceeded revenues by $547,000, that's for the quarter. That compares to last year when it was the reverse. The revenue actually exceeded billings by $73,000. So there's a $600,000 difference in the way our billings are turning into revenues. Again, that's largely due to the recurring effect by Mediasite and other software products and service improvements [ph].

The noncash for taxes is the same in both periods at $60,000. So after you apply those adjustments, you get to the noncash -- non-GAAP net revenue, I mentioned, $390,000 compared to $281,000 last year.

For the full year, I'll go through the same details. The product revenues increased $1.1 million over the prior year, that's a 9% increase, and increased to $13.8 million now versus $12.7 million last year.

Units shipped again was the primary driver. Units shipped went from 1,280 units in 2012 to 1,458 this year, and that's largely due to some increases that we've seen at the refresh, as well as general increases in units sold. Operating expenses reflect an increase in total of 10% rather. It's an increased total to now the $20.7 million, that's versus $18.7 million last year.

Selling and marketing increased $1.2 million, which is a 10% increase, same drivers essentially, higher salary, incentive comp and benefit costs, as well as an increase in travel and trade show attendance costs. The G&A increased by $528,000 full year, a 19% increase. Again, largely due to professional fee increases and legal.

In terms of product development. The increase in total is $197,000, that's a 5% change for the full year. And a lot of that has to do with the allocation of the G&A cost. This was largely driven by stock compensation, some incentive costs, and some depreciation cost. The increased headcount would have resulted in an increase in wages year-over-year, but that was largely offset by the capitalization of software development costs in the second quarter of fiscal 2013.

So now I'll just run you through the details again of how you reconcile GAAP to non-GAAP. The noncash depreciation was $1.1 million this year, again, pretty similar to last year in total. The stock compensation was $645,000 this year. Billings, again, with a significant change over last year. Billings exceeded revenues by $1.5 million this year, which drove that significant increase in the deferred revenue account. It was the opposite last year. So revenues exceeded billings by $385,000 last year, so it's a $1.9 million swing in the way our billings turned to [indiscernible] for the full year.

And then again, our deferred income taxes were essentially the same year-over-year. So you make those applications of those adjustments and you end up with a $2.7 million number this year compared to $1.7 million last year.

And then finally, the balance sheet. In terms of the statements, that's the last statement I'll run through, our current assets increased from $11.9 million last year to $12.6 million this year. And that's largely due to an increase in receivables and that's partially offset by a decrease in cash. That's largely due to the increase in billings that we incurred in Q4 compared to the prior year. So obviously, when you have a lot of billings that happened during that period, that gets caught up in accounts receivable. And we, obviously, expect that to turn back in cash at very short term in Q1.

In terms of some of the other changes, we saw long-term assets, that will include the capitalized software development costs, I mentioned. Total is $458,000, that's net of the amortization we already recognized. And current long-term liabilities increased from $12.3 million last year to $13.6 million. Now that's almost entirely due to the increase on revenue.

The liabilities that are noncash now are the $7.1 million, I referred to a moment ago, deferred revenue, as well as the $2.2 million for deferred taxes. So now, we've got $9.3 million of liabilities that are noncash related to what we paid, and it represents 2/3 now of the total liabilities on the balance sheet. We do have notes that are payable yet to Silicon Valley Bank. There is a balance of $767,000, that's due now. We also have revolving line of credit about $3 million maximum. At the end of September, we had $2.2 million available under that. Again, we haven't drawn on that for quite some time. We definitely believe that our cash, our debt availability is adequate to accomplish our needs in the near future.

And one thing, I'll also mention during this balance sheet section. As most of you probably remember, in Q3, we announced that the Board of Directors had approved the stock buyback plan of $1 million and access $1 million. We, again, did not make any purchases of stock during the fourth quarter. Similarly, we didn't make any in the third quarter. It's more likely that when we do utilize this facility for any stock buybacks, then it will be for locked purchases as opposed to open-market purchases. I think, given the news that we announced today, in addition to our earnings, it's probably a little less likely that we'll see some of that.

So speaking of news we announced earlier, I haven't even addressed that yet. We did announce 2 pretty significant acquisitions for us. And Gary will certainly run through a lot more discussion about that when he gets up to his section. I want talk a little bit about the timing. In both transactions, we have term sheets that we've now negotiated. So they're both at the same point in terms of the legal position for both. We expect the timing to be a little bit different with respect to MediaMission than the Mediasite KK. MediaMission, we expect that we will close that transaction. We'll actually enter in the stock purchase agreement with that company within the next 30 days. I think that we'll close very soon after that, so I expect that we'll probably close that transaction either on or before December 31.

Mediasite KK will be -- there's a little more to that transaction because the SEC rules will require us to have an audit of those -- of their operations. So we do have the term sheet in place with them as well, similarly as MediaMission. I think, that we, again, will likely have a stock purchase agreement executed within the next 30 days, but it will likely take a little bit longer to close that transaction. We're certainly focused on closing as quickly as possible, but it certainly could take a little bit longer than the other transaction.

In terms of what the impact of those transactions are. We talked a little bit about this in the press release. I just want to lay out a simple chart that show the magnitude of those. So the first column shows the major financial metrics, billings, revenues, net results for Sonic Foundry. And I've got the next column Mediasite KK. And then MM is short for MediaMission. So obviously, the final column is the total. And I'll just run through quickly the assumptions are for that. In every case, in the case of Mediasite KK, as well as MediaMission, I subtracted the sales that we incurred to them. So these are the net increases in revenues for each of those is [ph] closed to our total revenues. The total revenues are greater.

In the case of Mediasite KK, I also adjusted the results for the current period, currency translation. The reason I did this is because you would normally reflect the average currency rates during the period I'm talking about. However, the currency changed pretty significantly. So as of the current exchange rates of roughly JPY 100 in the dollar, that would add about $6.5 million of revenues in billings to less than about $800,000 of net income.

Finally, with a lot of adjustments I'm talking about, we -- since we own 26% currently of Mediasite KK, we do recognize 26% of their income as equity income, a noncash equity income. I reduced that out of the -- show their net results from MSKK, that's a reduction for that amount. So the 0.8 would be the increase that we would have incurred from the acquisition of Mediasite KK. So it would have offset the loss that was cost by the deferral of the revenues from billings for us for 2013. Obviously, we expect a more positive results going forward.

The last thing I'll mention about currency is that going forward, we will certainly be presenting dollars once these transactions are closed. Their operations will be included in our operations based on the average currency rate in effect during the period. However, we do want to be able to have a valid yardstick that makes some sense. So we will also be baking some comparisons to the currency rate that was in effect at the beginning of the year. So you'll be able to see the impact in the results without the effect of currency translation adjustment.

So that's it for me. I will turn the presentation over to Gary at this point. I'll let him run through a few of the business trends.

Gary R. Weis

Thanks, Ken. Good afternoon, everyone. There's a lot of exciting news to cover today, obviously, with the acquisitions that we're talking about. But I want to go through the first part of the presentation with kind of the standard format we've been used to using to show you some of the key metrics of the business.

So first, in the fourth quarter of 2013, we started to see a few more larger deals come into mix. Now these are domestic U.S. deals. They are not the large Mid-East deals. But one of the things you could see over the past 3 quarters in the year, we tended to have the top 5 deals be relatively small as a percentage of total. This quarter, we started to see a couple of larger deals, which obviously, makes the billings growth easier to obtain.

Now Ken has already talked a lot about the non-GAAP and GAAP reporting. This chart shows -- this is the chart we usually use to show the seasonal variation in the business. And one of the things you'll note here is that something changed. And obviously, this first half of the year, we had a significantly greater non-GAAP income, whereas the revenues in billings behaved, as you would have kind of expected to with the same seasonal variations that you would see. That is caused almost entirely by the fact that at the beginning of the year, we've started to sell a significant product, My Mediasite, on an annual license basis. And what that means in simple terms is that we invoice the customer, we collect the money from the customer, but due to GAAP accounting rules, we have to apportion that billings over the entire year in terms of how we turn it into revenue. So you can see that in the total year, we had significant growth of non-GAAP income, and I'll show you that in a separate chart.

This chart now takes the previous chart, GAAP and non-GAAP income and boils it up for a full year comparison. And we're actually very pleased about the uptake of My Mediasite. Annual licenses are very good for Sonic Foundry. It gives us an opportunity to get the customer to make another renewal decision every year. And so it becomes a form of easily recognizable recurring revenue.

Frankly, when we did our plan for the first -- for 2013, we assumed a slower uptake rate. So we're very pleased about the acceptance by the customer of My Mediasite. This is not a one-only thing. We totally have other products in the plan that will also be annual licenses for both 2014 and 2015. So this is somewhat of a transition in how we recognize billings and revenue in the business. We are still going to aggressively be building and selling our recorder appliances, but in addition to those sales, we will also start to see an increasing number of annually licensed products.

In terms of new versus existing. You see in the fourth quarter -- for the first time, actually, you start to see a little bit less business from existing customers and more business from new customers compared to last quarter and even last quarter last year, fourth quarter last year and third quarter of this year. I think that's due in part because we are finding more new customer opportunities to take advantage of the entire product portfolio that we bought. Breakdown by sector. You can see the higher education, obviously, remains strong. Again, we expect that trend to continue. And from international versus domestic, again, kind of the same trend that you've been used to see.

Now for the rest of the presentation, I want to go through these 5 topics. And I kept acquisitions at the end. I'll talk more about what led us to do the acquisitions and then bundle that into also our guidance discussion for the full year for 2014.

Let's start by talking about the current Mediasite product experience. Our customers are giving us very strong feedback that the current production release of Mediasite, 6.1.11, is the best and most stable product release we have ever had in Sonic Foundry. Very low software defects. Customer adaptation in terms of migrating from previous 6.x releases is very strong. We fully anticipate that the customer adaptation or update on 6.1.11 will continue to move very rapidly. And the base has worked out very, very well for us. We're also seeing a growth in customer usage. And in the past, we have dealt with collecting customer usage in an anecdotal way by talking to our customers.

In 2014. We're going to begin to formalize that a bit more, and we're going to launch a customer survey in the second quarter of the fiscal year, first quarter of the calendar year, to basically allow us to get direct feedback from customers in terms of the rate at which they're generating content, the number of views that they have from their students or customers, and the time the customers or students spend viewing the material. We will share that with both the customers and investors on this call in the future.

Finally, we retooled the sales force in 2013. And we got more specific focus on different groupings of customers. So for example, we have a named account grouping that consists basically of large, significant higher education customers. We have a middle-market higher education grouping that deals with customers that are smaller, tend to have a smaller revenue component to Sonic Foundry, and have slightly different requirements.

And finally, we have an enterprise or corporate segment, which also has a slightly different set of product requirements. In the future, now that we specialize the sales force into those groups, we will also begin to specialize our development resource along the same lines, so that we no longer will monolithically release new versions of Mediasite. We will have feature groups that will be released on a schedule that fits what we're trying to accomplish in the marketing and sales to those customer groups.

We've talked a lot about adoption of My Mediasite. We've had a 479% increase in adoption since the first quarter. My Mediasite is a very flexible, easy-to-use tool that allows educators to create content in their own workspace, at their own desktop, at their own laptop before they go into the classroom. It's very much driven by the whole concept of the flipped classroom, where the educator will compose materials before they get to the classroom and expect the students to have mastered those materials before they get to the classroom. The classroom time now becomes much more of a development workshop for the students to demonstrate their skill, to solve problems, to interact and so forth. We believe that is very much complementary to room-based lecture capture.

And in fact, we've gotten strong feedback from many of our large customers who have deployed room-based lecture capture, that having My Mediasite available allows them to meet the total needs of their faculty. And so for those faculty members that have a lot of composed material, they can do that with My Mediasite. To those faculty who want to come to the classroom and teach in the traditional manner, they're also covered. So this has worked out very, very well for us from a strategy perspective to get our customers to value Mediasite more greatly and then to buy more product.

Events continues to be a very strong portion of our business. We have, in the last year or 2, began to focus more on the actual delivery of larger events. Dreamforce is a good example of that. This is our sixth year of recording Dreamforce, and we've in fact recorded huge number of sessions in 4 days in San Francisco. And basically, what we do is record the sessions, make them available in a 24-hour window to our customer's viewers.

Now I'm going to shift gears and talk a little bit about Mediasite 7. Mediasite 7 is a very important release for us because it really enhances how our customers can capture multiple concurrent video sessions. One of the key capabilities of Mediasite is to capture rich media. That's very different than YouTube. YouTube is a video channel and audio channel, 2 channels, basically. For Mediasite 7 MultiView, we can capture up to 4 concurrent live high-definition sources. A number of our advanced customers have told us that this is a strong requirement for the future classroom because it's a multi-media classroom, there's multiple things going on and different media formats in the classroom. And the instructor or faculty member doesn't want to have to fool around with switches and wires and so forth to switch recording of different media inputs. Our new recorder family and our new software, Mediasite 7, allows those 4 concurrent sessions to be captured and then edited or screened or managed on demand at a later time.

One of the things we've done as a result of that is we've provided for player customization because now, it's going to be an important aspect of the material, the composition of the material to decide which of these multiple video sessions gets the full focus of the viewer or the player at any one time. So those 2 things together will really allow our customers to build on rich media to help them do education through corporate presentations.

Where we are in the release of Mediasite 7? We began the beta process in late November. Because of the many different facets of Mediasite 7, we have decided to do about a 2 month to 2.5 month beta period, so that our customers can get familiarity with the product before they install into production, and give us feedback for what changes or what potential defects they run into in using the product. One of the things that we've done with Mediasite 7 is we've instituted an ability to, in a near real-time basis, capture the customer experience. So what that means is we can capture logs that are collected on the various Mediasite server and recorded products, get them into our technical support teams within an hour, about real time, certainly less than an hour of time after the event happens. So that gives us a great deal, more flexibility and capability in supporting the customer. Assuming that, that works out like we expect it to, we will probably retrofit that to Mediasite 6.1.11 as well. The general release, the production release of Mediasite 7 is scheduled now for January. We will, as we get closer to January, we'll publish an actual date. So that gives you some view of Mediasite 7. We're very excited about that. We made investments both at the software level and the recorder hardware level to totally facilitate this.

I'm now going to spend a little time talking about the video market to give you a little bit of a background why we think some of the acquisitions we did today are very important for us. Clearly to us, the change in education, the methodology of education, the method of education is a very significant driver for how content will be captured, displayed and used in both education and for that matter, to some degree, in the corporate experience. We sponsored some research conducted by the Center for Digital Education. We reviewed those results, we released those results Tuesday of this week, and we had more than 1,000 webinar participants who viewed that release. It deals -- the study deals with what's driving the flipped classroom in terms of using greater availability of technology and to support the model and positive results from initial trials that educators have had used [ph]. This methodology is here to stay. It's what drove us to My Mediasite. And by the way, My Mediasite will also be capable of supporting multiple video capture on the desktop, so the same degree of flexibility that you would get if you were recording in a classroom. And we really believe we need tool sets, and editors and so forth, going forward to support how educators want to teach.

It is a global market. You can read these 2 quotes for yourself from Wainhouse and from Gartner. The market is growing very rapidly. And we see the market beginning at very simple YouTube video and audio. A customer will want to mix that content with rich media and other contents. And so, our enterprise video server capability deals with all of the formats. We want to be the trusted, reliable partner that our customers can use to manage all of their video assets. And by manage, I mean capture, store, edit, secure, and playback to their viewers as -- in the most functional possible way. We also believe that metadata and that search capabilities are very important to the usage and viewing and navigation of video material. That's what led us to introduce voice search earlier this year. And we will continue to enhance ways that metadata can be added to video content, and really make the Mediasite server environment be the best asset a customer can have to manage their video content.

We really believe that the market pace is going to differ in the various geographies around the world. You can see from this map that Mediasite is in a lot of places, in 45 countries. We do that through our partner network. And obviously, in Japan and in Europe, we've seen the need to be more directly in contact with our customers. And that's one of the drivers that led us to decide to do the Mediasite KK and MediaMission acquisitions.

So let's talk about acquisitions. Why did we do this? First, we did it to participate in the growing market for video management worldwide. Clearly, in the U.S., we address it -- we have addressed it in the past directly with our own sales force and directly with our own supporter [indiscernible]. We've done it with our partner MSKK. We've done it with our partner MediaMission. But we felt that by more tightly integrating what those folks have been doing with what we, today, do gives us better advantage to get to the customer.

We also think that having an operational presence in Europe, given the growth in our Middle East business and given the growth in Europe in general, is an important aspect. Meaning, a customer care center that's local to the time zones of Europe, meaning the ability to do depot stocking and maintenance replacements of recorders in Europe to avoid shipping them directly to the United States. Same thing true in Japan. So the acquisitions will help us capitalize and leverage that. And finally, local market innovation is extremely critical. Both MediaMission and MSKK have done that. My background was in building the IBM global network. And I operated businesses in 22 countries around the world. One of the first things I learned and most important thing I learned is that you have to rely on very capable local management to figure out what to do for the local market and support the local customer. One of the countries that's most important we're in, is Japan. It's also true obviously in countries like Europe. I'm very pleased that our partners in Mediasite KK, led by Mark Hamison [ph], have agreed to this transaction. And similarly, Robert Jan and Tom van Buren of MediaMission are excellent, innovative team members now that will become part of Sonic Foundry and help us to innovate by using their expertise on the global basis.

Now I want to share with you some of the metrics around the transaction. And Ken took you through kind of a high level view of the pro forma consolidation. What I'm trying to do is put in perspective the financial relative value of the incremental revenue that we're going to obtain from these acquisitions.

This chart, basically, is a way to say so, what is Sonic Foundry, the U.S. Sonic Foundry, the existing Sonic Foundry business? What is our range of market capitalization to revenue ratio? And what this says basically what is a dollar-of-revenue worth from a market capitalization perspective? And all I did on the chart was take the 52-week low stock price to get to one value for market capitalization, the 52-week high to get to another value, divide those by our revenue for 2013 and you get a ratio of 0.81 or 1.64. Now I then averaged it for 2013. So if you look at the numbers at the lower right, $1.22 of market cap per revenue is kind of how we view the Sonic Foundry business as we used to know.

Now if you perform the same kind of metrics for the acquisitions. First, on the left-hand side, it's MSKK, what I'm going to call SOFO Sonic Foundry, value. The incremental revenue is $6.5 million. That's after we net out the product that we already -- that we had in the past -- in 2013 sold to MSKK.

The acquisition of the remaining portion of Mediasite KK that we don't already own is $5.9 million. So that comes out with an acquisition cost and [indiscernible] leverage ratio of about 0.90, clearly better than the $1.22 that we had from a Sonic Foundry perspective.

Now when you look at MSKK, you also are ought to look at the value of the total company. The reason that 0.90 is lower by as much as it is because we only had to buy approximately 73% of the company to recognize all of this incremental revenue.

On a total company basis, if you take the total outstanding market capitalization of the company at the stock price that we're acquiring the 73% at, we wind up with a ratio of 1.22, which happens to be right very close to the number that we were talking about before.

If you look at MediaMission. MediaMission is -- obviously has different numbers, same principle. It comes out to be $1.49, a little bit higher, but we also think that in the short term to be greater leverage and greater synergy value [indiscernible]. So in total, on a cost per individual incremental revenue -- total incremental revenue, it's about 0.98 compared to the 1.22 for Sonic Foundry.

This is just a screenshot of the Mediasite KK website. You notice it is in Japanese. That's the whole point. They are excellent at tailoring our products to the Japanese market. They do language translation. They do all of the other things that you would think you would have to do to be successful in Japan. And by the way, if you don't do this in Japan, you will not be successful. The management team there has done an excellent job of creating the market in Japan.

If you look at just a few of the customers that they have, it's a large number of customers. They are household names. They have an event services business just like we do, as well as a product sales business. They have been very successful in making large companies in Japan aware of the technological advantages of Mediasite.

They received an award from the Japan Ministry of Education that basically dealt with the recognition of some of the value that they had provided for the various institutions in Japan.

For MediaMission of Netherlands, they have been a partner of ours since 2004. They really helped a large customer, Delft University, to create a huge amount of Mediasite content. And Delft is also a member of the edX, the same partnership that was founded by MIT and Harvard. They are really good at building ancillary services around what we have at our core technology in Mediasite. We'll look to leverage their skills in doing that outside of Netherlands as well.

So let's talk a little bit about 2014 guidance. Ken mentioned before that we will report on our results going forward after these transactions close. We'll report according to the GAAP methodology by adjusting currency every quarter. However, we need to have a yardstick that allows us to compare to the guidance that we're giving today, which is, in essence, a constant currency guidance.

When you consolidate results in units other than dollars, that will fluctuate throughout the year. So on a pro forma basis, we will report our operational results in accordance with this guidance, which is meant to be in constant dollars.

In -- so we will say 13% growth in consolidated pro forma business adjusted for currency, and that's also -- you have to be careful if you get it to a dollar basis. You have to adjust for the fact that there's only a partial year effect of the acquisitions. So we -- if we're fortunate, everything come together and we close by January 1, then we will have 3 complete quarters of results that are folded into our 2014 fiscal year. That will result in a guidance of $39 million of billings. The -- that does not include the billings for the very large international transactions. And this year, we are giving a range of $300,000 to $2 million for 2014. And I might add that one of the things that we've done or in the process of doing is looking to establish an operational presence in UAE to make sure that we're close to that business. And so, that gives you some sense of the confidence that we have and how that business is going to grow during 2014.

From a bottom line perspective, for the first time, we're going to give guidance for the bottom line. There is a footnote in the sense that these transactions will cost execution dollars to implement unlike the distant past when you could amortize these over longer periods of time. We have to, according to GAAP rules, expense them as we incur them, basically, in the first quarter of fiscal 2014. We estimate that number to be around $450,000. And we also then, including that, anticipate that on a pre-tax basis earnings will be 4% to 5% consolidated revenues. That's inclusive of the acquisition and transaction costs. So we believe that in 2014 we will have firmly crossed the line in terms of GAAP profitability. I think when we talked at the last earnings call and I think the one before that, we had said that we would expect to have a result in 2015 that would exceed $50 million of revenue, and that would in fact -- I'm sorry, I'm getting a little ahead of myself. Thank you. $40 million in revenue and 15% pre-tax net. That estimate was not based on these transactions. So you could anticipate that in future periods we will adjust that. We think this gives us a definite upside above the $40 million, and we'll keep you updated on that as we get into [indiscernible] next quarter.

So that concludes our prepared remarks. I think we will -- we also have, today, analysts on the phone for live. And Ken, you will moderate the Internet questions. So I'll turn it over to you.

Kenneth A. Minor

I think, first of all, [indiscernible] we'll take calls from the analysts.

Question-and-Answer Session

Operator

[Operator Instructions] We'll start first with Howard Halpern.

Howard Halpern - Taglich Brothers, Inc., Research Division

My first question relates to the international transaction. Is that primarily going to be for the Mediasite 7.0 and not the subscription of My Mediasite?

Kenneth A. Minor

All right. Let me go ahead and translate it for him. I guess, Gary wasn't getting that in his ear. But it was for the international transactions. Howard is asking whether that is primarily related to Mediasite 7.0. Did I get that right, Howard?

Howard Halpern - Taglich Brothers, Inc., Research Division

Yes. So it's really a question of whether it's the appliance or the subscription model.

Gary R. Weis

Go on.

Kenneth A. Minor

Whether there's really a subscription amount?

Howard Halpern - Taglich Brothers, Inc., Research Division

Yes. I mean because the My Mediasite site has been picking up, but is the international more focused on the actual licensing of the technology?

Kenneth A. Minor

Yes. I think so, so far. I think that we certainly are seeing transactions internationally that are My Mediasite-related as well. So I think we'll certainly have a mix of My Mediasite that's being sold both domestically and internationally. I think, ultimately, I don't really see a big difference between the 2. So I think it will be pretty much spread between...

Gary R. Weis

And I would add, Howard, that the adoption of lecture composition on some -- on a tool like My Mediasite varies around the world. And I think the trend is strongest in the United States. But as Ken pointed out, we are also seeing it in other geographies, certainly in Europe. And so, again, I would emphasize that the My Mediasite investment was meant to complement our customers that want to do a combination of room-based lecture capture, which is a product acquisition of an appliance and a server license, and to those customers that want to use My Mediasite, which also requires a server license.

Howard Halpern - Taglich Brothers, Inc., Research Division

Okay. And sort of in the near term, the first quarter, since you're going to be releasing Mediasite 7.0, have you seen, I guess, new customers that will take a pause and wait until that is officially launched in January? So they might hold back a little bit on the older version for new customers?

Gary R. Weis

Not at all. We have seen the greatest feature difference between 7.0 and 6.1.11 is the dual or up to 4 video stream recording. That requires a customer who has planned in advance for that capability, and we've been in dialogue with 3 or 4 large customers that fit that category. So there aren't any feature differentiations in the base software that would cause a customer to want to hold off from buying 6.1.11 to wait for 7.0. The other thing is if you buy our product, in the first year you buy it, you also buy support and that support entitles you to upgrade to any release of Mediasite. So there's no reason to wait to buy 7.0 versus 6.1.

Howard Halpern - Taglich Brothers, Inc., Research Division

And you're not -- there's no hesitation by the higher education? There's no -- has the budget constraints -- or you still see them, or is the opportunity to differentiate with the flipped classroom driving sales in the U.S. and internationally?

Gary R. Weis

Well, I think it would be fair to say that we always see some level of budget concern, right? And one of the advantages with My Mediasite is the entry cost for My Mediasite is lower than it would be to necessarily fit up some fixed number of rooms. So that works in our advantage for a customer that wants to maybe start with a flipped classroom. I'm not suggesting that that's a majority of customers, but yes, that is one mode of buying that we're seeing.

Howard Halpern - Taglich Brothers, Inc., Research Division

Okay. And in the events business, how do you see that growing because it seems like it is becoming a growth vehicle?

Gary R. Weis

It is becoming, I'm sorry, what?

Howard Halpern - Taglich Brothers, Inc., Research Division

It's becoming -- it's growing, and it's becoming more popular to do the conferences with the video and the stored video and then the search itself. What is the opportunity even internationally now that you have some outlets there?

Gary R. Weis

So let me take it apart and try to do 2 pieces. The first is, yes, we do see the business growing. We have focused on growing it through partners for the smaller customers and through our own delivery mechanism for larger customers. And so, we have operated that business largely in the U.S. But we have gone offshore to Europe and other geographies, to capture for U.S.-based customers hosting events outside the United States. Now outside the United States, Mediasite KK in Japan offers that service today in Japan. So part of that incremental revenue that you see coming in now to us after this transaction is from events business actually being operated by MSKK in Japan. Similarly, in Europe, in the Netherlands, in particular, MediaMission has been doing the same kind of things. So, yes, we will see some incremental revenue for that consolidated revenue that will be ascribed to the events business, as we go forward.

Operator

And with that, we'll turn to our next analyst to Marco Rodriguez.

Marco Rodriguez - Stonegate Securities Inc., Research Division

I had a couple of real quick housekeeping items. I didn't know if I missed this on the call, but what were the refreshed units, units sold and the ASP units in Q4?

Kenneth A. Minor

The ASP for Q4 was 8,600. The refreshed, I guess, I don't have the number memorized. The total units was 411. The total refreshed units were up a little over last year. I'll gladly give you that number off-line. It's a little higher than last year.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Sure. Okay. And then, another quick housekeeping item here. On your presentation, when you discussed the pro forma numbers on a net basis, when you include the acquisitions, is that a GAAP net income?

Kenneth A. Minor

That is a GAAP net income, yes.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Got it. Okay. And then, I was wondering if you could talk maybe a little bit more about the acquisitions here. MediaMission, more of a distributor, reseller, were there other products that they were selling in addition to yours?

Gary R. Weis

No, they were captive to our core technology, Mediasite technology. But they build applications around our technology. So without our technology, they couldn't build those applications. So basically, it was captive to our technology. But they did have -- they do have additional services and products, software products customization, if you will, that is meant to complement the Mediasite solutions.

Kenneth A. Minor

That's right. Hosting, events, other services like that.

Gary R. Weis

And I think the -- what was it, podcast?

Kenneth A. Minor

Yes, podcasting is an application that they've developed, but we actually license from them.

Gary R. Weis

So they are innovators.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Got it. Got it. And so, in terms of the acquisition, are you thinking that -- because obviously, you guys have a sales unit. You have a sales team that does some international sales. I mean, you were pretty focused discussing all last year some potential business in the Middle East. So I'm just trying to better understand why acquiring these 2 companies rather than just turning your current sales force into those areas at a little bit more rapid pace?

Gary R. Weis

Well, the easiest one to answer is Japan. My experience is 100% for sure. I've never seen a U.S.-based sales force make any significant penetration selling anything in Japan. It's impossible to reach customers in Japan unless you do it in the local language and you sell in Japanese. So there is no way that we could have used our international sales force to accomplish that measure. Secondly, for Europe, yes, we do have a group of sales folks headquartered in London. This resource that we're acquiring with MediaMission is meant to supplement and grow on that. If you look at MediaMission, I think the total workforce is 7.

Kenneth A. Minor

Right.

Gary R. Weis

And of that, I think 2 would be validly considered sales resource. And they will closely interact and work with Ray Hassell, who's our VP of Sales out of London.

Kenneth A. Minor

Yes. MediaMission does a lot more than sales. They do product support in Europe and throughout the Netherlands. They have their own hosting business. They have some events business, and they developed some software. So there's a lot of additional synergies. We anticipate, based on their technical know-how, that they will be a huge resource for us in providing depot maintenance repair in Europe, providing more follow-the-sun and support for our customers. So there's a lot of additional synergies on top of [indiscernible]

Marco Rodriguez - Stonegate Securities Inc., Research Division

Got it. And then, in terms of acquiring these 2 companies, it sounds as if everything is going to be synergistic from a top line perspective more or so than kind of replacing back-office operations. Is that a fair characterization?

Gary R. Weis

Yes, absolutely. This is about revenue. It is not about achieving improved profitability because you figured out how to do away with operational staff or expenses underneath. It's just not that kind of situation. It's about leveraging and gaining synergies of the resources that are on the ground in those geographies.

Kenneth A. Minor

Yes, and these are pretty elite teams. So they don't have big back-offices to consider any sort of consolidation. And clearly, as Gary had mentioned, that kind of management doesn't work in most of these localities.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Got it. Okay. And a last quick question, can you give us a sense of what sort of historical revenue growth rates those 2 operations were doing?

Kenneth A. Minor

Yes. I mean, it's -- I think on average, they've been similar to us. But they've certainly had periods that were quite a bit better. So there have been years that have been significant jumps and then were followed by smaller jumps. But on the case of Mediasite KK, as an example, their fiscal '13 year was a pretty big jump from their fiscal '12 year. They had a couple of very significant transactions. They actually straddled a little bit in '12 and '13, but it had allowed them to grow pretty significantly. And likewise, MediaMission has been having some pretty good success as well. So I think, on the low end, they've been kind of in that 13% range. But they've had some years that have been quite [indiscernible].

Gary R. Weis

I think the same explanation that we give about our business being chunky, in the sense that every once in a while, you come across a larger customer. Same is true for that, right? And in the year that you hit a big customer, it's over 13%. In a year, that you have to retire that quota totally by smaller deals, it's a lot harder to work. But you'd still get it done.

Marco Rodriguez - Stonegate Securities Inc., Research Division

Okay. And I'm sorry last quick question. The Middle East opportunity that you were thinking about hitting in first half of '14, are those -- can you give us an update?

Gary R. Weis

Yes. So every deal that we've talked about in the past is still in play and progressing. We're in dialogues with not just the end customer, but also the contractors and dealers that will actually supply and integrate our equipment into the rooms in those campuses. Like I said, we have made the determination to relocate a technical resource into the area, into the UAE, so that, that resource will be positioned better to support those implementations. We won't be doing that if we didn't have every confidence that these deals were going to begin to percolate in 2014.

Kenneth A. Minor

That's right. And we had mentioned once in the past, I think, that 1 or 2 of these campuses will start classes on January 1. I think that if there are delays in construction, obviously, resulted delays in purchasing Mediasite from us but they have delayed in starting classes as well. So we want to make sure that people don't get the wrong impression that if it doesn't happen this quarter, it's not going to happen. That's not true. Those deals are strong and stronger [indiscernible].

Gary R. Weis

In the building -- just to put some color around it, in the building that was supposed to open in January, they had a rather serious construction fire. And so, our best guess is that they'll push everything back by 6 months. So Ken's point is right on that you shouldn't interpret these delays as the fact that they went somewhere else. That is not the case.

Operator

Now next to the next analyst, Andrew Birch [ph].

Unknown Analyst

I have a couple of questions. Number one, what are our cumulative losses that we've had over the last 10 years that we're carrying in the books? If we're going to make money going forward, we won't have any taxes. What is the cumulative losses? And what was it? We have about 4.1 million or 4.2 million shares outstanding after these acquisitions?

Kenneth A. Minor

You're right on with the shares outstanding. We're I think just under 4 million now. And the shares -- the acquisitions will be about 230,000. So it will be just right around 4.2 million. In terms of the NOLs, it's gigantic. However, we've got, I think, $88 million of NOLs. And so, we -- you're right on that, that will keep us from having to pay anything from these new profits to the government. And so, that will assist us in protecting those profits for quite a while, yes.

Unknown Analyst

We also got like, I don't know, $20 this year or something like that in losses that we're carrying on the books going forward, which is good if we start making money going forward. What's the most competitive threat you think we see to continued growth as far as our competitive environment?

Gary R. Weis

Let me take that one, Andy. I think that from the standpoint of how we have diversified our product to include desktop composition and to include 4 concurrent video streams from a rich media perspective, we don't see a whole lot of direct competition out in the marketplace. We see a lot of individual small companies that might have recorder hardware to actually physically record input from different devices. But Mediasite is literally the only product out there that isn't end-to-end solution. And we've learned, through a few years of experience, that's the customer we want to sell to. We want to sell to the customer that values the solution. We're not interested in selling to a customer who wants to assemble their own piece parts to do part of the job themselves. And that strategy has served us very well.

Unknown Analyst

So how big is the market you think for today for that market? Everybody is doing it on their own, but how big is the market?

Gary R. Weis

Boy, Andy, we've tried to size the market through a lot of different providers of information, whether it's Gartner or Forrester or whoever it is. And the reality of it is that what we sell to isn't well defined as an identified analyst-based market -- analyst-based market sizing. We've done it a different way. We've looked at the potential to rooms and so forth, and we had a number that's north of $600 million, $700 million.

Kenneth A. Minor

That's right. We have said that there's about 65,000 rooms that are immediately addressable for our technology. And so, even if you figured that with the recorder cost to us, as well as support, it's going to be -- as well as our EVP application, the average is going to be maybe just a little short of $15,000 per room. So we're talking about $900 million, $1 billion to address the entire market.

Gary R. Weis

And that's only a fraction because that doesn't take into account the My Mediasite equivalents that are out there. And so...

Unknown Analyst

For the business market, right?

Gary R. Weis

That's right.

Kenneth A. Minor

Or the international.

Gary R. Weis

That's right. That's right. So I think the problem is not the size of the market. I think we've got plenty of headroom to grow in the available market that's available to us. The challenge we'll always face is that we are very disciplined in how we reach those customers, and we're also very disciplined in meeting the commitments we have said to make money in the business. So we're trying to balance absolute growth with the ability to deliver on the 15% net income objective that we have for 2015.

Unknown Analyst

So this year will be a year that we hope to get close to $40 million in sales and be profitable. We won't have any debt on the books either at the end of next year, will we?

Kenneth A. Minor

There will be some. I mean, it will certainly have acquisition debt. The press release shows what the components of consideration are. And roughly, 1/3 of the transaction in each case is debt, some are financed debt. And then, we'll have some additional borrowings from our bank, as a result, but depending on the cash flow for the quarter. I mean, we've, at this point, got enough cash in the bank to handle the cash that's due for those transactions. And obviously, as I mentioned, we've got a pretty significant backstop for the revolver as well.

Unknown Analyst

But your balance sheet will be very strong, you're saying, a year from now?

Kenneth A. Minor

That's right. Absolutely.

Operator

To our next analyst, which will be Mike Niehuser.

Mike Niehuser - Beacon Rock Research, LLC

With these 2 acquisitions, are there -- is this something we're going to be seeing more of in the next couple of years with acquisitions of other companies that you work with internationally?

Gary R. Weis

Hey, Mike, let me take that one on. I'll never say never. So if there's the right target opportunity to do something, we'll, of course, consider it. And that's beyond just partners or resellers or whatever. But I will tell you that these 2 we picked were differentiated by the fact that they had content much more than just being a reseller or distributor. And so, I think there's a fairly low probability that you'll see this become a trend, right? We'll be opportunistic, but these were the 2 guys out there that were the best fit for what we wanted to achieve strategically.

Kenneth A. Minor

That's right.

Mike Niehuser - Beacon Rock Research, LLC

So does -- the one in the Netherlands, does that expand beyond the market in Netherlands to other countries in Europe?

Gary R. Weis

Slightly. But frankly, that's one of the synergies. The 2 principals of the company are both Netherlands citizens. They both speak the language. They both could leverage their sales ability in the country. But one of the advantages of pairing them up with Ray Hassell is to figure out how to take some of the innovation they've created and sell it into Germany, sell it into U.K., sell it into other countries in Europe. So we really see that as synergistic. We see our reach in terms of our sales force being able to help expand their capabilities out to other countries in Europe.

Mike Niehuser - Beacon Rock Research, LLC

Well, I guess, it's interesting you bring that up as one expansion potentially be geographically and the other would be another vertical of innovation. And I find it interesting that you've been working with them since 2004 and that they've had -- they've influenced Sonic Foundry with podcasting. And is there anything else you can elaborate on how they've influenced or how is the synergies you've seen and benefits to them beyond geography and market size?

Gary R. Weis

Well, let me ramble a little bit and see if I answer your question. You're right. We've had a very close working relationship with both Robert John [ph] and Tom [ph]. So we have -- when we needed to get the podcasting out quickly, frankly, the path of least resistance was to collaborate with them and have them develop it and then resell it. So that's been 1 good example of leveraging their innovation. Only in that case, we license it from them. Obviously, we no longer, after this transaction is closed, have to license it, right? They are us. The other examples are a little bit harder to talk about because they are -- I'll try to give you an example, right? But in the case of some of the events business, for example, there are things that we partner with people to do around the events business. So let's take something as simple as registration for an event. We have folks in the U.S. that we partner with to do that. We don't do that ourselves here in the U.S. I believe in the Netherlands they have seen opportunities like that, and they've done those things themselves in-house. So we understand that some more. But we may be able to leverage the capabilities they've created for Netherlands for the Netherlands market and figure out how to internationalize those and how to use those in other geographies. That's the only example I'm comfortable talking about at this point.

Mike Niehuser - Beacon Rock Research, LLC

Well, that's fair. And just one clarification on the last question that you answered, you mentioned a 15% net income goal for 2014. Did I get that right?

Gary R. Weis

No, no, no. That's our longer-term guidance for 2015.

Mike Niehuser - Beacon Rock Research, LLC

2015? Okay.

Gary R. Weis

That's something we said last year. So I mean, we said that a while ago, 3 quarters ago, I think.

Mike Niehuser - Beacon Rock Research, LLC

Right. Well, it sounded familiar, and I just wasn't listening. I apologize for that. And in the press release itself, it mentioned the quote that they have there, that you're more excited about the position of the company now than at anytime, I think, in the history of the company. What is it exactly that gives you that level of excitement? Is it the potential for growth, or is it product development, geography, partners? What is it that if you could say there's one thing or a couple of things, what gives you the most confidence of the growth potential or the upside of the company for next year or the years ahead? And that's my last question.

Gary R. Weis

Well, probably, if you put a gun to my head and forced me to pick one, I would say that 3 years ago, Sonic Foundry was seen, whether it's fair or unfair, as a room-based lecture capture solution. That's what people thought of us, I think, in general. Today, we are far, far, far more than that. We are a desktop composition, we're a video asset management, we're still continuing to have a strong practice in lecture capture in-room and out-of-room. And so, I think the work that's been done by the team, both the sales team and the engineering team, to diversify our product set and diversify the way in which we bring that value to the customer is the thing that makes me most excited about the changes we make.

Kenneth A. Minor

Since Mike said that was his last question, I should ask whether there are any questions from any new analysts that are on the call? I think there's a potentially 1 more analyst that was going to join. If not, then we should probably jump to the Internet and make sure we provide opportunity to ask those questions as well.

Operator

[Operator Instructions] I'm not seeing any. So I think turning onto the next question would be appropriate.

Kenneth A. Minor

All right. Thank you. Go ahead, Tammy.

Gary R. Weis

Now it's Tammy's time.

Tammy Jackson

Okay. What percentage of existing customers in higher education market are in the process of or are going through the process of conducting RFPs for campus-wide rollout of single provider lecture capture? And do you see the providers of this technology shrinking as this occurs?

Gary R. Weis

Well, I'll start, I guess, by saying that from a -- the way the question was phrased about RFPs. We continue to be most successful at selling directly to individual schools on a campus because the decision-makers are close to the application and they're close to the benefit associated with the application. We do see campus-wide standardization. We do see central service units asking those kinds of questions. But frankly, those are very much longer selling cycles. We are engaged in those. We have probably 5, but I can't name the individual names. We probably have 5 opportunities that we're tracking that would turn into the next 100-plus room campus-wide deal. But it is absolutely fraught with risk to try to predict the timing of those deals because they really are dependent on funding. They're dependent upon, I hate to say it, but politics to some degree in the campus. And so, while we work on those through our named account sales division, we don't see that as the single or most productive source of gaining additional billing from customer. I think the other part of the question, Tammy, was industry consolidation, the way I would -- I guess I would phrase it?

Tammy Jackson

Right.

Gary R. Weis

Okay. That's an excellent question. I would say that we certainly have and have seen any direct evidence of any impending consolidation. We know what our world looks like. And we know that we're quite pleased with our customer management, customer acquisition programs. We certainly want to grow our pipeline, but we don't see any evidence of any near-term consolidation.

Tammy Jackson

The Mediasite cloud was mentioned in a recent press release. What sort of growth are you seeing in the cloud business?

Gary R. Weis

I guess I would start by saying that, to us, the cloud business is any customer that simply wants to buy a service and doesn't want to get involved in installing hardware and software to implement that service himself or herself. So that's what I'll take as the definition of the cloud business. We see growth in that business, but I will tell you that we don't see a disproportionate amount of growth. And we obviously want to pursue that business whenever our customer wants to buy in that manner. But frankly, we're agnostic in terms of how the customer wants to buy the service. If the customer wants to operate it themselves, we're happy to help them implement it, sell it to them in that manner. If the customer wants to avoid the complexity of doing that and buy our service, we're also happy and capable of delivering that. But we don't have a bias to say one's a lot better than the other.

Tammy Jackson

Can you provide any indication of the types of other new products Sonic Foundry is working on, which would be sold on an annual license basis? And can these products accelerate overall revenue growth?

Gary R. Weis

I think probably, the -- I'll comment about 2 different areas. One is directly an answer to the question and the other is a little bit ancillary. From the standpoint of annual licensed products, we see growing demand in the corporate space for a video management system. It assumes that its inputs are ingested content as opposed to content reported [indiscernible] and I would anticipate that if we're going to package and sell our video management software into that environment that it will be sold on an annual licensed basis. So that's as far as I can go on talking about that one. Another area of different product focus in terms of the segment is that we've obviously been developing the MultiView technology as part of release 7. We found interestingly enough that there's a lot of interest around very high definition, super high def H.265 as opposed to H.264, the 4k capture capability. And we're going to continue to pursue that technology as part of Mediasite 7 and as part of our recorder family. That's particularly interesting to customers in the medical world. Customers that want to capture medical procedures, customers that want to capture very high-definition and high-resolution input. We think that with the advent of Media 7 and some of the enhancements we're looking to make in the coming year, that, that would be a fruitful market for us to pursue maybe starting with teaching hospitals [indiscernible].

Tammy Jackson

Are more U.S. universities now open to lecture capture adoption in the United States?

Gary R. Weis

Absolutely. I mean, I'll elaborate, it's the one-word answer. What we see in the United States, 10 years ago, we were fighting that battle. Educators were sitting on the fence or just outright didn't want to do that. Today, that's not the question. That's not even an issue. The issue becomes one of how deep does a university want to go in terms of room-based lecture capture and how deep do they want to go in terms of having their faculty do desktop conversation. And I'll tell you one of the differentiators happens to be the skill level of the faculty. If you've got a faculty that isn't technology-savvy, they're not going to want to, frankly, use My Mediasite. They're going to want to just stand up in a classroom, give a lecture the way they've been doing it in the past. So we're very comfortable with that mix. And we think the climate is right to grow that composite business.

Tammy Jackson

What does capital expenditure spending look like for 2014?

Kenneth A. Minor

It's pretty modest. I mean, we're expecting that CapEx will be less than depreciation, so right around the $1 million mark. But no significant capital [indiscernible].

Tammy Jackson

One final question. What will the common shares outstanding increase do with the acquisition? .

Gary R. Weis

Yes. The Mediasite KK acquisition is about 200,000 shares and the MediaMission one is 30-some thousand shares. So it's -- around numbers, it's 230,000, 240,000 something.

Gary R. Weis

Okay. Well, thanks very much for joining us today. This -- we're -- I hope you can see that we're both very excited about the implications of the acquisition. We have a lot of hard work to do going forward to make sure all of that goes smoothly, but we're very confident in not just the Sonic Foundry team but also the team from MediaMission and MSKK, that will all come together if that happens. So we look forward to a very successful 2014. Thanks for joining us. We look forward to the next one.

Kenneth A. Minor

Yes. Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Sonic Foundry Management Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts