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20-20 Technologies reports second quarter results

^{Published on 2009-06-11 06:26:47, Last Modified on 2009-06-11 06:31:55 - Market Wire}
 

 LAVAL, QC, June 11 /CNW Telbec/ - 20-20 Technologies Inc. (TSX: TWT), the world leader in 3D interior design and furniture manufacturing software, today announced its results for the second quarter and six months ended April 30, 2009. All amounts are in US dollars unless otherwise indicated. Second Quarter Highlights - Revenues of $15.2 million compared to $21.9 million for the same period in 2008, and to $15.6 million in Q1 2009 - EBITDA increased to $2.6 million or 17.1% from $1.1 million or 5.2% in 2008 - Operating income of $1.7 million compared to a loss of $0.2 million a year ago - Restructuring and cost reductions result in savings on expenses of $2.9 million - Net earnings of $621,000 compared to $37,000 in 2008 "Restructuring and cost reduction plans implemented in 2008 and early in 2009 continued to generate positive effects on our bottom line as we exceeded our $2 million EBITDA goal for a third consecutive quarter and achieved higher profitability despite a 30% decrease in revenues. In this difficult economic context, we were successful in achieving the critical task of realigning our costs with our revenues. We were also able to strengthen our balance sheet in the second quarter," said Jean Mignault, Co-Chairman of the Board and CEO. Jean-Francois Grou, President and COO added "I am pleased to report these results, despite the impact on revenues due to challenging circumstances that 20-20 faced in what is usually one of our strongest quarters of the year, where clients suspended and deferred projects, re-evaluated their investments and operating budgets and reduced the number of active licenses renewed under support and maintenance" Revenues Second quarter revenues decreased by 30.7% to $15.2 million, compared with $21.9 million a year ago. The decrease is due to prevailing difficult economic conditions ($5.1 million) and weakness of the European currencies versus the US dollar ($1.6 million). Revenues for the six-month period declined by 20.3% to $30.8 million, from $38.6 million last year, as acquisitions made in the first quarter of 2008 contributed an additional $2.5 million in 2009, offsetting in part the fall in organic revenues. Europe accounted for 40.8% of revenues or $6.2 million for the second quarter, a decrease of 38.1% over last year, essentially due to weaker currencies against the U.S. Dollar. North American revenues were down 24.7% to $8.7 million. Although there was a slight variation in the geographic distribution of revenues, this is not indicative of any trend as all markets were affected by the economic downturn. Revenues from license sales declined by 48.2%, or $3.7 million, to $4.0 million for the second quarter. The decline in revenues was felt in all geographic and market sectors. For the first six months of the year, license sales decreased by 39.0%, or $5.2 million, over last year. Maintenance and other recurring revenues decreased by 16.5%, or $1.6 million, to $7.9 million, and by 8.1% or $1.4 million for the six months. Revenues from professional services decreased by 30.8%, or $1.4 million, to $3.2 million. For the first six months of the year, revenues from professional services decreased by 15.7%, or $1.3 million, over last year. Operating Income Operating income for the second quarter was $1.7 million, compared with a loss of $231,000 last year. For the six-month period, operating income stood at $3.3 million, compared to a loss of $831,000. Adjusted operating income increased to $2.4 million in the second quarter, versus $664,000 last year. For the six-month period, adjusted operating income increased from $542,000 in 2008 to $4.6 million in 2009. EBITDA increased to $2.6 million (17.1% of revenues) for the second quarter from $1.1 million (5.2% of revenues) a year ago, and increased to $5.2 million (16.8% of revenues) from $1.4 million (3.6% of revenues) for the six-month period. This improvement reflects the restructuring and cost reduction plans implemented in 2008 and early in 2009. Those plans generated cost reductions for the second quarter of approximately $2.9 million, while exchange rate variations lowered expenses by approximately $2.8 million compared with last year. For the six-month period, savings amounted to $5.2 million and exchange rate variations reduced expenses by $5.4 million from a year ago. Net Earnings The Company generated net earnings of $621,000 for the second quarter, or $0.03 per share, compared with net earnings of $37,000, or $0.00 per share, a year ago. For the six-month period, net earnings stood at $801,000, or $0.04 per share, compared to $561,000, or $0.03 per share for the same period in 2008. During the second quarter, the Company strengthened its balance sheet by increasing cash and cash equivalents to $12.6 million and reducing long-term debt, including installments due within one year to $10.9 million. Key Events of Q2 - 20-20 Technologies will implement its Enterprise inSight manufacturing solution at Mobelwerk Svoboda, a leading Austrian office furniture manufacturer. Svoboda is well-known for its innovative, premium office furniture products, and in particular, its custom-tailored workplace solutions. Subsequent to Q2 - 20-20 Technologies and Elica jointly unveiled the hoods manufacturer's new catalog now available on 20-20 Design, the industry-leading kitchen and bath design software. The electronic catalog contains 3D shapes of Elica's sleek, modern hoods, where 20-20 Design users can create custom projects for a realistic representation of kitchen designs. - S.P. Richards, a leading wholesale distributor of business and office supplies, launched a new and improved version of its Design Made Easy(TM) furniture space-planning and sales visualization tool built upon 20-20 Technologies cutting-edge 3D web application, 20-20 Virtual Planner. - 20-20 Technologies has redesigned its business portal - [ www.2020.net ] - that centralizes data interchange between manufacturers and their dealers. The enhanced functionality includes catalog downloads and software updates, easier access to technical support, a sales lead generation tool and a project financing service. Outlook "20-20's objective is to continue achieving a minimum EBITDA of $2 million in the coming quarters," said Jean Mignault. "The Company has reached this goal for the past three consecutive quarters and expects to continue to attain it." In the all-important U.S. market, pending home sales rose 6.7 percent in April 2009. This represented the biggest monthly jump in more than seven years. It is a sign that the residential real estate market is reviving, and that the slide in home values could soon be reversed. "It is 20-20's expectation that once home values begin to rise, so too will the confidence of consumers to invest in their homes," said Jean-Francois Grou. "The rise in values will also eventually unleash pent-up renovation demand both on foreclosed homes - many of which will be renovated once bought - and other home purchases. "Market conditions in North America appear to have stabilized during our second quarter. However, retailers and manufacturers who continue to look for solutions are still not committing to large projects. In both the residential and commercial sectors, selected new dealers are acquiring our design solutions while the majority is still not investing in technology. In general, our business in the commercial sector slightly deteriorated in the quarter for licenses and services while recurring revenues are holding. We expect that these conditions will remain similar in the coming months. In our European markets, conditions remained the same as in our previous quarter. In general, our business has not been impacted by the recession at the same level as our business in North America, while as reported before, the lower Pound Sterling and Euro year over year have both negatively impacted our overall revenue. Still a fairly small portion of our operations, our International business has slightly recovered in China while our business in Brazil and with our distributors is still severely impacted by the global downturn. As in North America, we expect little change in this situation for the coming months," concluded Mr. Grou. Conference Call Information 20-20 will host a conference call to discuss the second quarter results June 11, 2009 at 2 p.m. (EDT). The call will be accessible by telephone at 514-807-8791 and 1-800-732-9307. An audio replay of the conference call will be available until midnight, June 18, 2009. To access it, dial 1-877-289-8525 and enter the pass code: 21307800#. Please note that 20-20 Technologies' full financials and MD&A are available on SEDAR as well as on the Company's web site,[ www.2020technologies.com ]. About 20-20 Technologies Inc. 20-20 Technologies is the world's leading provider of computer-aided design, business and software solutions tailored for the interior design and furniture industries. Dealers and retailers use its desktop and Web-based products and solutions for the residential and commercial markets. 20-20 offers a unique proprietary end-to-end solution, integrating the entire breadth of functions in interior design. It provides a bridge for data communication from the point-of-sale to manufacturing and world-leading enterprise resource planning (ERP) systems, including computer-aided engineering and plant floor automation software. Operating in twelve countries with more than 500 employees, 20-20 is a publicly traded company (TWT) on the Toronto Stock Exchange (TSX). For more information, visit [ www.2020technologies.com ]. Non-GAAP Measures References in this press release to the term "EBITDA" are related to cash earnings. EBITDA is defined for these purposes as Operating Income before restructuring charges plus amortization and depreciation expenses. EBITDA is not a recognized measure under GAAP in Canada and may not be comparable to similar measures used by other companies. Reference in this press release to the term "Adjusted operating income" is defined for these purposes as operating income excluding stock-based compensation, amortization of business acquisition-related intangibles and non-recurring items. Adjusted operating income is a supplemental measure and should not be construed as an alternative to operating income as defined under Canadian GAAP as a measure of profitability. Our method of measuring adjusted operating income is unlikely to be comparable to similar measures provided by other companies. Forward-Looking Statements Certain statements contained in this news release constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of future operating results and economic performance of the Company are assumptions regarding projected revenue and expenses. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company are subject to a number of risks and uncertainties, including general economic, market and business conditions and could differ materially from what is currently expected. For more exhaustive information on these risks and uncertainties, please refer to our most recently filed annual information form, available at [ www.sedar.com ]. Forward-looking information contained in this report is based on management's current estimates, expectations and projections, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to do so, we are under no obligation and do not undertake to update this information at any particular time unless required by applicable securities law. ((*)) Planit is a trademark of Planit Holdings Limited (used with permission). 20-20 Technologies Inc. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of U.S. dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- April October 30, 31, ------------------------------------------------------------------------- 2009 2008 Restated ------------------------------------------------------------------------- ------------------------------------------------------------------------- (Unaudited) (Audited) $ $ ASSETS Current assets Cash and cash equivalents 12,555 13,487 Short-term investments - 1,644 Accounts receivable 19,848 17,538 Income taxes receivable 184 585 Contracts in progress 282 267 Prepaid expenses 1,306 1,244 Future income taxes 532 598 ------------------------------------------------------------------------- 34,707 35,363 Property and equipment 2,437 2,894 Intangibles 9,368 10,417 Goodwill 52,689 52,367 Future income taxes 1,734 1,500 Other assets 529 519 ------------------------------------------------------------------------- 101,464 103,060 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable 9,401 12,665 Income taxes payable 2,128 1,465 Deferred revenue 16,325 12,481 Long-term debt 37 3,805 Future income taxes 157 - ------------------------------------------------------------------------- 28,048 30,416 Long-term debt 10,819 11,824 Leasehold inducements 394 364 Non-controlling interest 1 33 Future income taxes 3,656 3,756 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 42,918 46,393 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Capital stock 58,582 58,647 Common stock options 1,091 1,145 Contributed surplus 1,015 961 Deficit (6,048) (6,883) Accumulated other comprehensive income 3,906 2,797 ------------------------------------------------------------------------- (2,142) (4,086) ------------------------------------------------------------------------- 58,546 56,667 ------------------------------------------------------------------------- 101,464 103,060 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 20-20 Technologies Inc. CONSOLIDATED EARNINGS (Amounts in thousands of U.S. dollars, except earnings per share, unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended Six months ended April 30 April 30 ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ Revenues License sales 3,991 7,699 8,135 13,342 Maintenance and other recurring revenues 7,934 9,498 15,880 17,272 Professional services 3,233 4,673 6,763 8,025 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 15,158 21,870 30,778 38,639 ------------------------------------------------------------------------- Cost of revenues License sales 488 815 936 1,496 Maintenance and services 3,327 5,314 6,956 9,653 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3,815 6,129 7,892 11,149 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gross margin 11,343 15,741 22,886 27,490 ------------------------------------------------------------------------- Operating expenses Sales and marketing 4,213 7,611 8,234 13,062 Research and development 2,703 4,285 5,881 7,871 General and administrative 2,623 4,014 5,434 7,275 Stock-based compensation 113 62 10 113 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 9,652 15,972 19,559 28,321 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating income (loss) 1,691 (231) 3,327 (831) Financial expenses (income) 550 (178) 1,696 (1,032) Non-controlling interest (11) 25 (31) 25 ------------------------------------------------------------------------- Earnings before income taxes 1,152 (78) 1,662 176 ------------------------------------------------------------------------- Income taxes Current 675 (217) 999 (395) Future (144) 102 (138) 10 ------------------------------------------------------------------------- 531 (115) 861 (385) ------------------------------------------------------------------------- Net earnings 621 37 801 561 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share Basic 0.03 0.00 0.04 0.03 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted 0.03 0.00 0.04 0.03 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 20-20 Technologies Inc. CONSOLIDATED CASH FLOWS (Amounts in thousands of U.S. dollars, unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended Six months ended April 30 April 30 ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings 621 37 801 561 Non-cash items Amortization 909 1,364 1,838 2,230 Leasehold inducements 11 13 22 27 Stock-based compensation 107 12 (6) 31 Capitalized interest on long term debt 7 13 14 13 Non-controlling interest (11) 25 (31) 25 Future income taxes (144) 102 (138) 10 Unrealized loss (gain) on long term debt exchange 7 - 232 - Unrealized loss (gain) on forward exchange contracts 6 72 69 - Changes in working capital items 879 (42,004) (757) (2,182) ------------------------------------------------------------------------- Cash flows from (used in) operating activities 2,392 (40,366) 2,044 715 ------------------------------------------------------------------------- INVESTING ACTIVITIES Business acquisitions - (107) - (40,830) Short-term investments 6 - (1,625) - Short-term investments dispositions 1,619 6,694 3,235 17,597 Property and equipment (67) (448) (146) (687) Other assets 14 (27) - 655 ------------------------------------------------------------------------- Cash flows from (used in) investing activities 1,572 6,112 1,464 (23,265) ------------------------------------------------------------------------- FINANCING ACTIVITIES Increased in long-term debt - 15,000 - 15,000 Repayment of long-term debt (1,037) (52) (4,789) (55) Options exercised - 53 - 53 Common shares repurchased - (126) (31) (203) ------------------------------------------------------------------------- Cash flows from (used in) financing activities (1,037) 14,875 (4,820) 14,795 ------------------------------------------------------------------------- Effect of changes in exchange rate on cash held in foreign currencies 704 393 380 (1,269) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 3,631 (18,986) (932) (9,024) Cash and cash equivalents, Beginning of period 8,924 35,242 13,487 25,280 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 12,555 16,256 12,555 16,256 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

For further information: Rick Leckner, MaisonBrison, (514) 731-0000