20-20 Technologies Reports Second Quarter Results for Fiscal 2012

LAVAL, QC, June 13, 2012 /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 ended April 30, 2012. All amounts are in US dollars, unless otherwise indicated.

SECOND QUARTER 2012 RESULTS

Highlights

  • Revenues of $17.9 million, up 5.2% compared to last year, with license revenues increasing by 19.9%
  • Revenues in Europe, Middle East and Africa (EMEA) region up 15.5%
  • Adjusted EBITDA remained stable at $1.7 million compared to 2011
  • Net earnings stood at $0.2 million or $0.01 per share compared to $1.0 million or $0.05 per share last year

"One of the important engines of growth for the quarter was the Home sector in the EMEA region fuelled by a large contract with an existing customer further expanding the use of our solutions to all its entities and also to its resellers. Our capacity to address the needs and complexity of large customer requirements remains a key competitive factor and a compelling indicator of our industry leadership," said Jean-François Grou, Chief Executive Officer.

"The manufacturing sector continued to perform well in the EMEA and APAC regions but was partially offset by the decline in the Americas. Overall, the sales pipeline of the manufacturing sector remains solid. The Office sector continues to benefit from the introduction of Visual Impression last year with revenues reaching a stable base at current levels.

Our operating expenses have remained under tight control for the past few quarters.  Our gross margin benefited from higher license sales; however it was temporarily impacted by the reorganization of our professional services organization and lower utilization rates, mainly in North America. We will adapt our cost structure in the short term to restore a minimum level of profitability in our services activities," said Mr. Grou.

Revenues for the quarter increased 5.2% to $17.9 million, compared with $17.0 million a year ago. Without the negative impact of exchange rates revenues would have increased by 7.3%.

Based on the reorganization during 2011 of the Company's operations in three geographic areas, since the beginning of fiscal year 2012 revenues are reported in three segments: the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific (APAC). The regions represented 50.2%, 45.7% and 4.1% of total revenues, respectively.

Revenues in the Americas declined by 3.4% over the previous year due to continued soft market conditions in the U.S. affecting professional services and the manufacturing sector, however they were up 11.8% compared to the previous quarter. For the same period, EMEA revenues increased by 15.5% fuelled by a large contract in the U.K. with an existing customer, one of the largest vertically integrated manufacturers of kitchens in Europe, and new projects in France. APAC revenues increased by 3.6% over 2011 and by 24.9% sequentially over the first quarter of 2012. As already mentioned, in the APAC region, the Company is transitioning from selling third party solutions through distributors to direct selling of proprietary solutions, with the specific goal of improving our margins over time. As the transition proceeds, the growth rate in the region will continue to be temporarily impacted.

Home sector revenues, accounting for 56.8% of total revenues, reached $10.2 million, up 9.1% over the previous year. For the same period, overall license revenues increased by 34.3% and were partially offset by declines from maintenance and other recurring revenues of 3.6% due to unfavorable exchange rates, and professional services of 15.0%. Overall license revenues largely benefitted from the large contract in the U.K. referred to above.

Manufacturing sector revenues, which accounted for 27.0% of total revenues, increased by 1.2% to $4.8 million or 5.5% in constant dollars. For the EMEA and APAC regions, revenues in constant dollars increased by 10.7% and 65.3%, respectively, while the Americas recorded a decline of 22.9% as we see fairly low levels of activity currently in this region.

Overall manufacturing sector license revenues were up 8.8% while professional service revenues declined 3.2% reflecting lower revenues in the Americas. Maintenance and other recurring services remained relatively stable for the quarter. As mentioned, the sales pipeline for manufacturing solutions in the EMEA and APAC regions remains healthy.

Office sector revenues of $2.9 million remained essentially flat over the previous year. The year-over-year comparison is impacted by the pent-up demand experienced in the second quarter of 2011, when Visual Impression was released.

Operating expenses for the second quarter have remained relatively stable when compared with 2011 despite the increase in the headcount. As indicated before, in recent quarters, some research and development personnel were redirected to professional services for integration to address higher demand.

Adjusted EBITDA
Adjusted EBITDA reached $1.7 million or 9.4% of revenues, compared to $1.7 million or 10.0% of revenues a year ago. The margin decrease is due largely to a lower gross margin reflecting higher labor expenses when compared to 2011, combined with lower professional services revenues partially offset by the higher margin on overall licenses revenues. When compared to last year, provisions for bad debts increased by $0.4 million.

Net Earnings
The Company generated net earnings of $0.2 million or $0.01 per share, compared with net earnings of $1.0 million or $0.05 per share, a year ago.

Outlook
Considering a volatile market environment, we have maintained a balance between tight expense control and our ability to take advantage of market opportunities. As indicated with the release of our first quarter results, the professional service segment was under performing and we remained focused on increasing the margin; we also remained vigilant in terms of allocating resources to the best revenue opportunities.

"20-20 remains the clear industry leader, our global market position is unmatched, and we are confident of strong growth opportunities," concluded Mr. Grou.

Conference Call Information
20-20 will host a conference call to discuss first quarter results on June 13, 2012 at 2:00 p.m. (EST). The call will be accessible by telephone at 1-888-231-8191, or 514-807-9895. An audio replay of the conference call will be available until midnight on Wednesday, June 20, 2012. To access it, dial 1-855-859-2056 and enter the pass code: 90290080.

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.

REVIEW OF STRATEGIC AND FINANCIAL ALTERNATIVES

The Company's Board of Directors has initiated a review of strategic and financial alternatives with the objective of enhancing shareholder value and has appointed a Special Committee to review and consider such alternatives.

Please note that the Company's Board of Directors has not set any deadline for completing the review of such strategic alternatives, and may ultimately determine that its current business plan is the best means to enhance shareholder value.  Accordingly, there can be no assurance that the strategic review will result in the consummation of any agreement or transaction. The Company does not intend to make further announcements regarding the strategic review process unless it concludes they are warranted by the circumstances or are expressly required by law.

ABOUT 20-20 TECHNOLOGIES INC.
20-20 Technologies is the world's leading provider of computer-aided design, business and manufacturing software tailored for the interior design and furniture industries. Dealers and retailers use our desktop and Web-based products for the home and office markets. 20-20 offers a unique 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, including computer-aided engineering and plant floor automation software. Operating in eleven countries with more than 500 employees and an extensive network of partners worldwide, 20-20 is a publicly traded company (TWT) on the Toronto Stock Exchange (TSX). For more information, visit www.2020technologies.com.

NON-IFRS MEASURE

Adjusted EBITDA is a non-IFRS measure related to cash earnings and is defined for these purposes as operating income plus amortization, adjusted for non-recurring items and other items such as restructuring costs. Adjusted EBITDA is reported for information purposes only and is a financial performance measure mainly used in the financial industry. This measure does not have a standardized meaning as prescribed by IFRS and therefore may not be comparable to similar measures reported by other public companies. The reader must know that Adjusted EBITDA is not a substitute to net earnings as an indicator of our operating results neither under IFRS nor to cash flows from operating and financing activities as a measure of liquidity and cash flows.

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 comprehensive 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.

20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of U.S. dollars)  (unaudited)

     
     
  April 30, October 31,
  2012 2011
  $ $
ASSETS    
Current assets    
  Cash 9,803 11,362
  Trade and other receivables 20,631 15,461
  Income taxes receivable 133 115
  Contracts in progress 99 684
  Prepaid expenses 1,143 1,429
  Income tax credits recoverable 560 631
  32,369 29,682
Property and equipment 2,409 2,241
Intangibles 4,602 5,186
Goodwill 50,880 51,286
Income tax credits recoverable 3,533 3,551
Deferred tax assets 2,456 2,145
Other assets 1,179 1,215
  97,428 95,306
LIABILITIES    
Current liabilities    
  Trade and other payables 11,180 10,445
  Income taxes payable - 186
  Deferred revenue 17,068 14,134
  Current portion of long-term debt 2,183 2,099
  Provisions 1,151 1,900
  31,582 28,764
Long-term debt 1,822 2,610
Leasehold inducements 289 350
Deferred tax liabilities 1,962 2,127
  35,655 33,851
EQUITY    
Capital stock 58,466 58,154
Common stock options and warrants 1,477 1,622
Contributed surplus 1,096 1,058
Retained earnings (deficit) 551 228
Accumulated other comprehensive income 183 393
Equity attributable to owners of the Company 61,773 61,455
  97,428 95,306


20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of U.S. dollars, except per share data) (unaudited)

 
             
    Three months ended Six months ended
    April 30 April 30
    2012 2011 2012 2011
           
    $ $ $ $
           
Revenues   17,873 16,988 34,512 33,323
           
Cost of revenues   5,401 4,538 10,601 9,237
           
Gross profit   12,472 12,450 23,911 24,086
           
Operating expenses          
  Sales and marketing   5,480 5,135 9,873 9,767
  Research and development expenses   2,821 2,712 5,724 5,589
  General and administrative   3,387 3,443 7,035 6,880
    11,688 11,290 22,632 22,236
Operating income   784 1,160 1,279 1,850
           
Finance costs   359 220 669 524
Finance income   (22) (272) (44) (248)
    337 (52) 625 276
           
Profit before income taxes   447 1,212 654 1,574
           
Income taxes   268 222 331 211
             
Net earnings   179 990 323 1,363
           
Other comprehensive income          
  Foreign currency translation differences   1,106 1,697 (210) 1,623
Total comprehensive income for the period   1,285 2,687 113 2,986
           
Earnings per share          
  Basic and Diluted   0.01 0.05 0.02 0.07


20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of U.S. dollars)  (unaudited)

         
         
  Three months ended Six months ended
  April 30 April 30
  2012 2011 2012 2011
         
  $ $ $ $
OPERATING ACTIVITIES        
Net earnings 179 990 323 1,363
Non-cash items        
  Depreciation and amortization 746 735 1,527 1,549
  Leasehold inducements (24) (22) (62) (43)
  Stock-based compensation 240 38 344 57
  Accreted interest on long term debt 9 12 18 24
  Deferred taxes (313) (262) (605) (800)
  Interest expense, net 94 144 188 289
  Income taxes 581 484 936 1,011
  Unrealized forward exchange loss (gain) 80 (1) 474 42
  Changes in non-cash working capital items (227) (1,447) (2,858) (2,804)
  Cash from operating activities 1,365 671 285 688
  Interest paid (94) (141) (218) (377)
  Interest received 22 20 44 49
  Income taxes paid (190) (390) (407) (548)
Cash (used in) from operating activities 1,103 160 (296) (188)
         
INVESTING ACTIVITIES        
Business acquisition - (137) - (137)
Property and equipment - acquired (330) (382) (543) (596)
Intangibles - acquired (41) (527) (136) (555)
Proceeds from disposition of property and equipment - 17 - 22
Other assets (6) (4) (25) (5)
Cash used in investing activities (377) (1,033) (704) (1,271)
         
FINANCING ACTIVITIES        
Repayment of bank loan - (148) - (148)
Proceeds from issuance of long-term debt - 105 - 105
Repayment of long-term debt (554) (2,770) (747) (4,078)
Warrants exercised 251 - 251 -
Common shares buyback (24) (28) (92) (28)
Cash  used in financing activities (327) (2,841) (588) (4,149)
         
         
Effect of changes in exchange rate oncash held in foreign currencies 187 835 29 1,064
         
Net increase (decrease) in cash and  cash equivalents 586 (2,879) (1,559) (4,544)
Cash and cash equivalents, beginning of period 9,217 13,016 11,362 14,681
Cash, end of period 9,803 10,137 9,803 10,137

 

 

SOURCE 20-20 TECHNOLOGIES INC.

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