20-20 Technologies Reports Third Quarter Results

LAVAL, QC, Sept. 14 /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 third quarter and nine months ended July 31, 2009. All amounts are in US dollars unless otherwise indicated.

    
    Highlights

    - Third quarter revenues of $16.1 million compared to $20.4 million for
      the same period in 2008, and $15.2 million in Q2 2009
    - EBITDA increased to $2.2 million or 13.5% for the quarter from
      $0.9 million or 4.4% in 2008. The fourth consecutive quarter with
      EBITDA exceeding $2 million
    - Net earnings of $1.0 million, or $0.06 per share, compared to a loss of
      $1.6 million, or 0.08 per share, for the third quarter of last year
    

"The significant year-over-year improvement is a reflection of our continuing cost reduction initiatives. During the third quarter, we again successfully protected our EBITDA, cash position as well as our recurring revenues and market share in all of our key markets. Although above our set target of $2 million per quarter, EBITDA would have been even higher had it not been for the impact of the higher Canadian dollar. We continue to deliver on the strategic investment initiatives we identified in previous quarters at the pace we can afford and are improving our execution capabilities in preparation for the recovery that is expected in 2010," stated Mr. Jean Mignault, Chief Executive Officer.

Jean-François Grou, Chief Operating Officer stated that market conditions in North America were similar to those experienced during the previous quarter, no improvement nor deterioration. "The mood in the industry is better, people are more positive, but this has not yet translated into significant new orders as most are remaining prudent in their investment decisions. In the residential sector, dealers continue to acquire our design solutions as well as complementary solutions responding to our adapted sales programs. In general, our business in the commercial sector also stabilized in the quarter with recurring revenues holding the same as in the residential sector.

"In European markets, conditions are very similar to those in North America. Although our business there has not been impacted by the recession at the same level as it has been in North America, foreign exchange variations continue to create some fluctuations in our revenue," said Mr. Grou.

Revenues

Third quarter revenues decreased by 20.9% to $16.1 million, compared with $20.4 million in the previous year. The decline is due to persisting difficult economic conditions ($3.1 million) and weak European currencies versus the US dollar ($1.1 million). Revenues for the nine-month period declined by 20.5% to $46.9 million, from $59.0 million last year, as revenues from acquisitions made at the end of the first quarter of 2008 were offset by the 24.8% decline in organic revenues. Many clients have maintained a cautious approach towards spending; consequently projects are cancelled, delayed and/or re-evaluated from a budgetary perspective. North America accounted for 54.3% of revenues or $8.8 million for the third quarter of 2009, representing a decline of 16.8% on a year-over-year basis, largely attributable to sluggish market conditions. Europe accounted for 42.3% of revenues or $6.8 million for the third quarter, a decrease of 26.0% over last year, primarily due to weaker European currencies against the U.S. dollar.

Revenues from license sales declined by 25.7%, or $1.7 million, to $4.8 million for the third quarter. On a sequential basis, license sales increased by $0.8 million or 20.7% over the second quarter due to increased volumes for small manufacturers in Europe and the residential sector in both North America and Europe. For the first nine months of the year, license sales decreased by 34.7%, or $6.9 million, compared to last year. Maintenance and other recurring revenues continued to perform relatively well when compared to other business segments with revenues down 9.2% to $8.5 million for the quarter and by 8.4% to $24.3 million for the nine months. Revenues from professional services decreased by 37.8%, or $1.7 million, to $2.9 million. For the nine months, revenues from professional services decreased by 23.8%, or $3.0 million, from last year.

Operating Income

Operating income for the third quarter was $1.2 million, compared with a loss of $1.4 million last year. For the nine-month period, operating income was $4.5 million, compared to a loss of $2.2 million. Adjusted operating income increased to $1.9 million in the third quarter, versus $0.4 million last year. For the nine-month period, adjusted operating income increased from $0.9 million in 2008 to $6.5 million in 2009.

EBITDA increased to $2.2 million (13.5% of revenues) for the third quarter from $0.9 million (4.4% of revenues) a year ago, and increased to $7.4 million (15.7% of revenues) from $2.3 million (3.9% of revenues) for the nine-month period.

This improvement reflects the restructuring and cost reduction plans implemented in 2008 and early in 2009 which reduced staff by approximately 135 positions and annual operating expenses by $9.5 million. On a year-over-year basis, those plans generated cost reductions for the third quarter and nine-month periods of approximately $2.4 million and $8.4 million, respectively. For the same periods, favorable exchange rates reduced expenses by $1.8 million and $7.1 million.

Net Earnings

The Company generated net earnings of $1.0 million for the third quarter, or $0.06 per share, compared with net loss of $1.6 million, or $0.08 per share, a year ago. For the nine-month period, net earnings stood at $1.9 million, or $0.10 per share, compared to a net loss of $1.0 million, or $0.05 per share in 2008. During the third quarter, the Company strengthened its balance sheet by increasing cash and cash equivalents to $15.5 million. At the end of the quarter, long-term debt stood at $10.9 million.

    
    Key Events of Q3

    - 20-20 Technologies and Elica jointly unveiled the hoods manufacturer's
      new catalog on 20-20 Design, the industry-leading kitchen and bath
      design software.

    - 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 3D web application, 20-20 Virtual Planner.

    - Hickory Business Furniture (HBF), with the help of 20-20 Technologies'
      professional services team, implemented 20-20's Enterprise inSight.

    - 20-20 Technologies redesigned its business portal: www.2020.net. The
      portal centralizes data interchange between manufacturers and their
      dealers.

    - Indiana Furniture, a U.S. independent mid-market case goods
      manufacturer, deepened its longstanding relationship with 20-20 by
      selecting 20-20's Enterprise inSight solution as its new Enterprise
      Resource Planning solution for its five plants in Jasper, Indiana.

    - 20-20 launched ShopWare Solutions, a line of manufacturing solutions
      dedicated to improving the business processes of small and medium-sized
      cabinet makers.

    - Thermwood, a manufacturer of CNC router systems and a technology leader
      in nested based applications, joined with 20-20 to offer an integrated,
      highly productive manufacturing system for cabinet manufacturers.

    - Optima, China's largest Kitchen and Closet manufacturer has signed a
      deal for 20-20's Closet Design solution

    Subsequent to Q3

    - 20-20 announced that it has entered into a seven (7) year term loan
      agreement with Investissement Québec of C$5 million. The funds will be
      used for general working capital purposes. 20-20 has amended the
      Canadian banking arrangements with its principal lenders to take this
      loan into account and address all outstanding covenant issues.

    - 20-20 launched its 2010 versions of 20-20 CAP Studio, 20-20 Worksheet,
      20-20 Giza Studio, and 20-20 Office Sales, all of which offer new
      features developed to simplify our customers' daily business routine.
    

Outlook

"It is still too early to report any material signs of recovery in the majority of our markets, but improvement is expected through 2010 supported by many leading indicators to our business bottoming out or turning positive in recent months. In the United States, pending home sales reached a 2-year high in the month of July and consumer confidence in September was also stronger than expected. In North America, most of 20-20's existing and potential customers are seeking new market segments as well as a diversification of their offering in anticipation that the demand will be for smaller interior design projects requiring a lower level of investment with little or no financing," commented Mr. Grou.

"Our International business continues to show signs of improvement, mostly in Brazil and China as their respective economies do not appear to have been hit as hard as those in North America or Europe. Our distributors' business in other smaller markets worldwide remains severely impacted by the global downturn. All of the cost reduction initiatives undertaken to date Company-wide remain in force, in line with global economic conditions. These have been key factors in protecting reasonable profitability on lower overall revenue and were instrumental in facilitating negotiations with our Canadian lenders to amend our banking facilities, as reported last month. The new C$5 million loan from Investissement Québec will further solidly our financial position to better cope with the challenging environment and will improve our ability to capitalize on selective opportunities as customer demand recovers," concluded Mr. Grou.

Conference Call Information

20-20 will host a conference call to discuss the third quarter results September 14, 2009 at 2 p.m. (EDT). The call will be accessible by telephone at 1-888-231-8191 (North America) and 647-427-7450 (Toronto and international). An audio replay of the conference call will be available until midnight, September 21, 2009. To access it, dial 402-220-7732 or 1-800-766-2843 and enter the pass code: 28761773#.

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.

    
    20-20 Technologies Inc.
    CONSOLIDATED BALANCE SHEETS
    (Amounts in thousands of U.S. dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                        July 31,  October 31,
    -------------------------------------------------------------------------
                                                           2009         2008
                                                                    Restated
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     (Unaudited)    (Audited)
                                                              $            $
    ASSETS
    Current assets
      Cash and cash equivalents                          15,534       13,487
      Short-term investments                                  -        1,644
      Accounts receivable                                18,327       17,538
      Income taxes receivable                               279          585
      Contracts in progress                                 296          267
      Prepaid expenses                                    1,306        1,244
      Future income taxes                                   484          598
    -------------------------------------------------------------------------
                                                         36,226       35,363
    Property and equipment                                2,567        2,894
    Intangibles                                           9,697       10,417
    Goodwill                                             58,378       52,367
    Future income taxes                                   1,940        1,500
    Other assets                                            587          519
    -------------------------------------------------------------------------
                                                        109,395      103,060
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities
      Accounts payable                                    9,828       12,665
      Income taxes payable                                2,079        1,465
      Deferred revenue                                   16,251       12,481
      Long-term debt                                         37        3,805
      Future income taxes                                   261            -
    -------------------------------------------------------------------------
                                                         28,456       30,416
    Long-term debt                                       10,817       11,824
    Leasehold inducements                                   448          364
    Non-controlling interest                                 10           33
    Future income taxes                                   3,771        3,756
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         43,502       46,393
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Capital stock                                        58,582       58,647
    Common stock options                                  1,091        1,145
    Contributed surplus                                   1,015          961

    Deficit                                              (5,003)      (6,883)
    Accumulated other comprehensive income               10,208        2,797
    -------------------------------------------------------------------------
                                                          5,205       (4,086)
    -------------------------------------------------------------------------
                                                         65,893       56,667
    -------------------------------------------------------------------------
                                                        109,395      103,060
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    20-20 Technologies Inc.
    CONSOLIDATED EARNINGS
    (Amounts in thousands of U.S. dollars, except earnings per share,
    unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                             July 31                 July 31
    -------------------------------------------------------------------------
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Revenues
      License sales                4,816       6,479      12,951      19,821
      Maintenance and other
       recurring revenues          8,460       9,314      24,340      26,586
      Professional services        2,872       4,614       9,635      12,639
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  16,148      20,407      46,926      59,046
    -------------------------------------------------------------------------
    Cost of revenues
      License sales                  605         709       1,541       2,205
      Maintenance and services     3,574       4,631      10,530      14,284
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   4,179       5,340      12,071      16,489
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gross margin                  11,969      15,067      34,855      42,557
    -------------------------------------------------------------------------
    Operating expenses
      Sales and marketing          4,281       7,026      12,515      20,088
      Research and development     3,193       4,985       9,074      12,856
      General and administrative   3,192       3,486       8,627      10,761
      Restructuring costs              -         968           -         968
      Stock-based compensation        89         (46)         99          67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  10,755      16,419      30,315      44,740
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating income (loss)        1,214      (1,352)      4,540      (2,183)

    Financial expenses (income)        7         537       1,703        (495)
    Non-controlling interest           8          (9)        (24)         17
    -------------------------------------------------------------------------

    Earnings before income taxes   1,199      (1,880)      2,861      (1,705)
    -------------------------------------------------------------------------
    Income taxes
      Current                        256        (288)      1,255        (683)
      Future                        (102)         (6)       (240)          4
    -------------------------------------------------------------------------
                                     154        (294)      1,015        (679)
    -------------------------------------------------------------------------

    Net earnings                   1,045      (1,586)      1,846      (1,026)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
      Basic                         0.06       (0.08)       0.10       (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted                       0.06                    0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    20-20 Technologies Inc.
    CONSOLIDATED CASH FLOWS
    (Amounts in thousands of U.S. dollars, unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
    -------------------------------------------------------------------------
                                             July 31                 July 31
    -------------------------------------------------------------------------
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    OPERATING ACTIVITIES
    Net earnings                   1,045      (1,586)      1,846      (1,026)
    Non-cash items
      Amortization                   972       1,290       2,810       3,520
      Leasehold inducements           12         (27)         33           -
      Stock-based compensation        89         (37)         83          (6)
      Capitalized interest on
       long term debt                  7           6          21          19
      Non-controlling interest         8           -         (24)          -
      Future income taxes           (102)         (6)       (240)          4
      Unrealized loss (gain) on
       long term debt exchange    (1,182)        243      (1,416)        353
      Unrealized loss (gain) on
       forward exchange contracts   (186)          -        (117)          -
      Changes in working capital
       items                       1,000         128         242      (2,054)
    -------------------------------------------------------------------------
    Cash flows from (used in)
     operating activities          1,663          11       3,238         810
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Business acquisitions            664        (757)        664     (41,587)
    Short-term investments             -           -      (1,625)          -
    Short-term investments
     dispositions                      -           -       3,235      17,597
    Property and equipment          (156)       (125)       (301)       (812)
    Other assets                      (2)         (1)         (2)        654
    -------------------------------------------------------------------------
    Cash flows from (used in)
     investing activities            506        (883)      1,971     (24,148)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increased in long-term debt        -           -           -      15,000
    Repayment of long-term debt       (9)        (32)     (4,798)        (87)
    Options exercised                  -          11           -          63
    Common shares repurchased          -         (40)        (31)       (243)
    -------------------------------------------------------------------------
    Cash flows from (used in)
     financing activities             (9)        (61)     (4,829)     14,733
    -------------------------------------------------------------------------

    Effect of changes in exchange
     rate on cash held in foreign
     currencies                      819         (43)      1,667      (1,395)
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash and cash equivalents     2,979        (976)      2,047     (10,000)
    Cash and cash equivalents,
     Beginning of period          12,555      16,256      13,487      25,280
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                12,534      15,280      15,534      15,280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE 20-20 Technologies Inc.

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

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