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Sonic Foundry Reports Year-End Results for Fiscal 2005

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rwwine   Thursday, 12/01/05 07:27:08 AM
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Sonic Foundry Reports Year-End Results for Fiscal 2005
Thursday December 1, 6:57 am ET

Mediasite Sales Continue Climbing as Company's End-To-End Solutions Attract Enterprise Customers, Multi-Unit Purchases and Repeat Sales


MADISON, Wis., Dec. 1 /PRNewswire-FirstCall/ -- Sonic Foundry® Inc. (Nasdaq: SOFO - News), a leader in automated rich media communications technology, today announced results for its 2005 fiscal year. Highlights for fiscal 2005 include:

* Revenues increase substantially from a year ago. Annual revenues for
2005 totaled $8.3 million, up 89 percent from $4.4 million reported the
year earlier. Multiple unit sales, repeat purchases from existing
customers, increased sales and marketing efforts, new software offerings
and product enhancements contributed to the significant increase. Units
sold increased 74 percent from 269 in 2004 to 467 in 2005. The company
continues to see marked growth in billings related to customer support,
product services and recently launched hosting services. These items
are initially recorded as unearned revenue and then recognized over
future periods. For fiscal 2005, customer support fees more than
doubled to $975,000 from $425,000 reported for 2004.
Total billings for
fiscal 2005 were $8.8 million.

* Annual gross margins increase significantly. Gross margins for fiscal
2005 rose to 67 percent compared to 60 percent for fiscal 2004.
expected, high margin customer support revenue and licensing of server
software applications accounted for the majority of the increase in
gross margin percentage over 2004 levels. The company anticipates
continued margin increases in the near term attributed to a higher mix
of support, server software, consulting and hosting revenues.

* Operating expenses increase with growth in revenues, marketing and sales
staff. Operating expenses increased to $9.9 million, representing a
20 percent increase compared to the 89 percent top line growth. For
fiscal 2005, the company increased its selling, marketing and customer
support staff by 55 percent. Continued expansion in personnel is
anticipated in fiscal 2006 to maintain current momentum, but is expected
to grow well below projected top line growth. Advertising and tradeshow
expenses increased incrementally as a result of increased tradeshow
attendance and print placements. The company believes these investments
are important in defending its market leadership position and critical
to sustaining the success of new product and service launches announced
in fiscal 2005 and new product offerings planned for fiscal 2006.

* Cash used for operations decreased by almost half. Sonic Foundry
continued to progressively improve its operating cash flow by reducing
cash used for operations from $6.2 million in fiscal 2004 to
$3.3 million in fiscal 2005. Year-to-date, cash used in operating
activities decreased 47 percent due to improved operating results and
reduced working capital needs. For the fourth fiscal quarter of 2005,
total cash burn was reduced to $243 thousand. The company remains
focused on maintaining revenue growth and managing expenses to reach
break-even operating results in the 2006 fiscal year.

* Year-to-year net loss and EPS again improve. Sonic Foundry reported an
improved net loss of $4.2 million for the fiscal year, or 14 cents per
share, versus a loss of $5.4 million, or 18 cents per share, for fiscal

* Solid customer growth with emphasis on the enterprise. During fiscal
2005, Sonic Foundry expanded its customer base to 433, up 90 percent
from 228 in 2004. The company made significant in-roads in the
corporate, education, healthcare and government sectors, including
defense and aerospace, pharmaceutical, financial services and
universities. Existing customers are experiencing strong internal
demand for rich media content and are making additional purchases, an
indication of the growing market acceptance and demand for Mediasite and
rich media communications in general. Fiscal 2005's growing focus on
the enterprise was marked by new technology developments, expanded
service offerings and Microsoft certification (see below). Recent
customer additions include Sandia National Laboratories, University of
Texas-Austin, MetLife, Ross University, Merck, the Maryland House of
Delegates and the State of Wisconsin Senate.

* Developments in server technology. Sonic Foundry's recent technology
development efforts are in response to the broadening use of rich media
communications within the enterprise. The company is currently
introducing the EX Server to meet the need for a powerful, rich media
communications platform that reduces the time and resource costs
associated with managing, distributing and securing content across the
enterprise. The EX Server software offers a full suite of centralized
management tools allowing business, government and higher education
organizations to secure content access, monitor and report on system
usage and customize presenter and viewer experiences. The robust,
database-driven architecture of the EX Server software positions Sonic
Foundry's enterprise solution uniquely in the market by providing solid
integration and performance that is trusted by IT professionals and
system administrators.

* Recorder technology. Sonic Foundry introduced the Mediasite 440 Series,
an entirely new line of rich media recording devices designed to appeal
to various customers with both mobile and rack-mounted configurations.
The company's engineering effort continues to focus on designing
powerful recorder technology built to meet the rigorous demands for
state-of-the-art performance.

* Expanded service capabilities. In fiscal 2005, the company launched a
new managed services offering to help customers expedite rich media
deployment. The new offering enables organizations to jump start their
rich media communications efforts without having to wade through the
complexities associated with their IT or network infrastructure issues.
The company sees early traction with health and telemedicine Mediasite
customers, including Johns Hopkins Center for Clinical and Global Health
Education, Virtual OR and University of Wisconsin Department of
Medicine, who chose Sonic Foundry's hosting services as a hassle-free
solution to deploying rich media communications.

* Microsoft certification. Demonstrating enterprise compatibility, Sonic
Foundry earned certified status in Microsoft's Partner Program and a
Microsoft Competency in the area of ISV/Software Solutions. The Partner
Program recognizes the company's expertise, impact in the technology
marketplace and proven ability to meet customer needs, while the
ISV/Software Solutions Competency assures Sonic Foundry customers of
high quality and interoperability between the Mediasite solution and
Microsoft technologies.

* Mediasite.com search portal. To aggregate the thousands of
presentations created by Mediasite customers every day around the world,
the company today launched a new search portal, Mediasite.com, to link
information seekers with the experts providing knowledge. The Website
is one of the first to provide a true rich media information exchange.
Access to rich media content is one click away, providing a brand new
seamless viewing experience. A diversity of presentations and lectures
is available on a wide range of topics such as cancer treatment,
robotics, business startups, sociology, ethics and personal improvement.
Mediasite.com will help close the loop on the full content capture,
management, delivery and access process users seek for this new emerging
form of communications.

* Greater penetration in higher education. Sonic Foundry continued to
expand throughout the higher education market segment with
154 university and college customers worldwide, representing
approximately 36 percent of the company's customer base. Distance
learning, continuing education and professional development deployments
rapidly expanded through multi-unit sales and hosting services.
Mediasite is becoming the de facto standard for higher education
institutions, which choose Sonic Foundry's solution for the simplicity,
cost-effectiveness, Web communications capability and strong content
management tools. To further distribution in this market, Sonic Foundry
recently became a supplier to the Dell education channel with new
marketing and sales initiatives scheduled throughout 2006. In addition,
the company announced forthcoming integration with Blackboard, the
leading learning management system for educational institutions. These
and future advances illustrate Sonic Foundry's continued market
penetration and focus on enhancing the process of education through the
assistance of technology.

* Expansion into new global markets. Awareness of Mediasite continued to
grow globally through Sonic Foundry's international sales force and
increasing content generated by customers around the world. In fiscal
2005, Sonic Foundry fueled that awareness with market development
efforts in Europe and Pac-Asia. During the year, the company announced
the first internationalized version of its Mediasite line of rich media
systems. The company is using the same market development approach
which achieved early success in North America to gain a strong presence
in other worldwide markets. Build-out of the global sales force
continued with current field staff in New Zealand, Europe and Canada.

* High-profile and novel Mediasite applications on the rise. Fiscal 2005
was punctuated with multiple global, national and nontraditional
Mediasite Webcasts, such as Mediasite capturing images from NASA's Deep
Impact space probe collision with comet Tempel 1. National
personalities and leaders captured by Mediasite include the former and
current Chairmen and CEOs of General Electric Jack Welch and Jeffrey
Immelt, Michael Dell, Tom Ridge, Tommy Thompson, Ruth Bader Ginsburg,
John Kerry and Scott McNealy, CEO of Sun Microsystems.

"As an early stage, high growth company, we've succeeded in establishing our vision for a new market and one which we feel will be highly lucrative for years to come," said Rimas Buinevicius, chairman and CEO of Sonic Foundry. "The evangelism and enthusiasm of past years is now paying off and is starting to show the results we've predicted. Our greatest accomplishment is seen through the Mediasite customers who are changing the face of education, business, government and health through the use of rich media. They are improving technical communication processes, public service information, business planning and health care. Moving forward, we'll continue to respond to market demand for new product enhancements and service offerings with cutting edge technology that empowers people to communicate in a new, powerful way."

Sonic Foundry will host a Webcast today to discuss its 2005 fiscal year results at 10:00 a.m. CT/11:00 a.m. ET. It will Mediasite the presentation for both live and on-demand viewing. To access the presentation, go to www.sonicfoundry.com. An archive of the Webcast will be available for 30 days.

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