Company Maintains Strong Balance Sheet; Reports $445,000 Adjusted EBITDA
BALTIMORE — (BUSINESS WIRE) — November 16, 2009 — Avatech Solutions, Inc. (OTCBB: AVSO), the nationwide technology experts for design, engineering, and facilities management, announced financial results for its first fiscal quarter ended September 30, 2009.
The Company reported total revenues of $7.8 million for its fiscal 2010 first quarter, compared to $10.8 million in the prior-year quarter. Because of the expense reduction strategies undertaken in the prior quarters, Avatech reported an increase in its overall gross margin percentage and significantly lowered operating expenses when compared with those reported in the prior year. The Company’s overall gross margin percentage was 46.3% for the quarter ended September 30, 2009, an increase from the 44.3% reported in the prior year. Operating expenses decreased to $3.4 million for the current quarter, compared to $4.6 million for the quarter ended September 30, 2008. Avatech returned to profitability for the quarter reporting net income of $127,000, or $0.00 per fully diluted share, as compared with a net loss of $99,000, reported for the quarter ended June 30, 2009. For last year’s quarter ended September 30, 2008, the Company earned net income of $154,000, or $0.01 per fully diluted share. Adjusted EBITDA (as defined) was $445,000, compared to adjusted EBITDA of $448,000 in the prior year period.
Avatech’s balance sheet continues to be strong as evidenced by cash of $2.8 million, working capital in excess of $1.7 million and only $129,000 of long-term liabilities. The Company’s liquidity is further strengthened by its $5 million line of credit, although it has not needed to borrow on that line since January 2008.
“Overall, our results for the quarter exceeded our expectations as software sales and services revenues increased by 16.4% from the quarter ended June 30, 2009. In addition, in this quarter’s results we see the full impact of our cost reduction efforts with both cost of service revenue and operating expenses significantly lower than the levels experienced in the prior quarter,” commented President and Chief Financial Officer Lawrence Rychlak. “Taking the painful steps that we made last fiscal year has positioned us well to remain consistently profitable in spite of the lingering effects of the national recession.”
“We are beginning to see some improved market conditions as customers’ budgetary constraints loosen and they express greater interest in our software and services. The key points of our strategy throughout this economic recovery will be to continue to grow our revenues and monitor our costs in order to increase our market share and grow our bottom line. We remain cautiously optimistic about the future and know that we are well positioned from an organizational standpoint to execute our strategy and provide outstanding value to our customers,” concluded Mr. Rychlak.
George Davis, Chief Executive Officer, added, “This return to profitability combined with a slightly improved economic outlook in the United States, has provided stability to Avatech’s core business. I am excited to lead the next steps in our strategic process of diversifying the Company’s base of revenues. We are now well positioned to move forward on strategic development activities including M&A opportunities that, coupled with organic growth initiatives, will build a more solid business platform.”
Conference Call Information
Avatech Solutions will hold a conference call to discuss its fiscal 2010 first quarter results at 11 a.m. ET on November 16, 2009. The dial-in numbers for the conference call are (888) 680-0865 (domestic) or (617) 213-4853 (international), and enter the passcode (25615735). A replay of the call will also be available through November 23, 2009, and can be accessed by dialing (888) 286-8010 (domestic) or (617) 801-6888, and dialing the passcode (62413298).
A live webcast of the conference call will be available to all investors in the Investor Relations section of the Company's website, www.avatech.com. For those who cannot listen to the live broadcast, an audio replay of the call will also be available on the Company’s site for a limited time.
Note Regarding Use of Non-GAAP Financial Measure
This news release contains the non-GAAP measure Adjusted EBITDA. Adjusted EBITDA represents earnings (or losses) before interest, income taxes, depreciation and amortization, and stock-based compensation expense.
Adjusted EBITDA is used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA as adjusted eliminates the effect of financing, income taxes, stock-based compensation costs, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.
Avatech believes this non-GAAP measure provides useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measure included in this press release has been reconciled to the GAAP results in the accompanying table.
About Avatech Solutions
Avatech Solutions, Inc. (OTCBB: AVSO) is America’s leading professional services company for design and engineering technologies. Avatech advances the way organizations design, develop, and manage building, infrastructure, and manufacturing projects. Fortune 500 and Engineering News Record's Top 100 companies work with Avatech to gain a competitive advantage through technology consulting, implementation, training, and support services. One of the world’s largest integrators of Autodesk software, Avatech designs systems that accelerate innovation while improving quality and profitability. For more information please visit www.avatech.com.
This press release contains forward-looking statements about the expectations, beliefs, plans, intentions, and strategies of Avatech Solutions, Inc. There are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Statements that are not historical in nature, including those that include the words “goal,” “expect,” “anticipate,” “estimate,” “should,” “believe,” “intend,” and similar expressions, are based on current expectations, estimates and projections about, among other things, the industry and the markets in which Avatech operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; changes in interest rates, and demand for our products and services; changes in our competitive position or competitive actions by other companies; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or, if substantially realized, will have the expected consequences on our business or operations.
|Avatech Solutions, Inc.|
|Summary Consolidated Financial Data|
|Three Months Ended September 30,|
|Cost of revenues-|
|Cost of product sales||2,982,000||4,069,000|
|Cost of service revenue||1,196,000||1,954,000|
|Total cost of revenues||4,178,000||6,023,000|
|Earnings per share:|
|Weighted average common shares outstanding:|
|September 30,||June 30,|
|Series F convertible preferred stock||907,000||1,864,000|
|Total stockholders' equity||8,969,000||8,897,000|
|Total liabilities and stockholders' equity||$||16,630,000||$||17,259,000|
|Avatech Solutions, Inc.|
|Reconciliation of non-GAAP financial measure|
|Three Months Ended|
|GAAP net income||$||127,000||$||154,000|
|Provision for income taxes||104,000||96,000|
|Income before income taxes||231,000||250,000|
|Net interest (income) expense||9,000||(23,000||)|
|Depreciation and amortization||156,000||168,000|
|Note 1 - Management uses adjusted EBITDA, a non-GAAP measure, to evaluate the Company's operating performance and compare the Company's current results with those for prior periods, but cautions that they should not be considered as a substitute for disc|
Avatech Solutions, Inc.
Jean Schaeffer, +1-410-581-8080
KCSA Strategic Communications
Todd Fromer / Garth Russell
+1-212-896-1215 / 1250
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