20-20 Technologies Reports Third Quarter Results for Fiscal 2011

LAVAL, QC, Sept. 12, 2011 /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 ended July 31, 2011.  All amounts are in US dollars unless otherwise indicated.

Third Quarter Highlights

  • Revenues of $17.4 million, up 17.6% compared to last year
  • Net earnings stood at $0.4 million or $0.02 per share compared to $0.8 million or $0.04 per share last year
  • Office sector revenues increased by 27.4%, fuelled by Visual Impression launched earlier this year
  • Revenues from International markets increased 47.6% over 2010
  • EBITDA at $1.6 million ($1.9 million in constant dollars) compared to $1.4 million in 2010

"In the context of continuing difficult overall market conditions, we are pleased by third quarter revenue growth and by the performance of all three of the Company's sectors," said Chief Executive Officer Jean-François Grou. "During the quarter, we observed no improvement or deterioration in the U.S., our largest market. In Europe, our closet and bathroom solutions registered solid year-over-year growth, while inSight maintained its momentum of the past few quarters.  International markets represent an increasing percentage of revenues and show no signs of slowing.

"Maintenance revenues, representing over 40% of total revenues, hit bottom in the fourth quarter of 2010 and, as expected, have steadily increased together with the contribution of overall license growth registered in the past few quarters," Mr. Grou added.

"While our EBITDA in constant dollars has remained relatively stable in the past few quarters, we remain committed to improving profitability while directing sufficient resources to our sales and marketing efforts in high-growth areas."

THIRD QUARTER RESULTS

Revenues increased 17.6% to $17.4 million, compared with $14.8 million a year ago. The positive impact of exchange rates was $0.9 million; without this impact, revenues would have increased by 11.7%. All three sectors registered positive growth during the quarter.

Revenues from all geographic regions increased, with continued strong contribution from International markets and stable but soft market conditions in the U.S. As percentages of total revenues, North America, Europe and International markets represented 48.2%, 45.4% and 6.4% respectively.

Home sector revenues, accounting for 52.4% of total revenues, reached $9.1 million, up 13.9% over the previous year. License revenues increased by 16.1% over 2010.

Europe and International markets were the main contributors to revenue growth in this sector, fuelled to a large extent by closet solutions.

Manufacturing sector revenues, which accounted for 30.3% of total revenues, increased by 19.1% to $5.3 million. License revenues increased by 18.3% or $0.3 million, while maintenance and other recurring revenues were up by 9.6% and professional services were up by 35.4%. The momentum of manufacturing solutions in Europe and International markets remains very strong, supported by a solid pipeline following the European launch of inSight in 2010.

Office sector revenues reached $3.0 million, up 27.4% over the previous year, and remained relatively flat sequentially. The office sector is benefiting from stabilizing market conditions in the North American office industry and the introduction of Visual Impression, launched early in 2011. This contributed to License revenue growth of 54.4% for the third quarter over last year. Revenues from professional services continued to benefit from license revenue growth and increased by 33.5%.

Maintenance and other recurring services revenues increased by 7.9% to $7.6 million, largely reflecting increased revenues in North America with contract renewals and some price increases. Revenues from International markets increased by 30.6% over a small revenue base, while revenues from Europe remained stable. As indicated in prior quarters, with retention rates relatively stable and license growth registered in the past few quarters, maintenance revenues should continue to trend up gradually on a sequential basis in the coming quarters.

In the third quarter of 2011, operating expenses in total increased by $1.4 million over the same period last year, essentially in Sales & Marketing, largely due to exchange rate variations of $0.8 million, particularly in European currencies, effectively offsetting the corresponding benefit in our revenue growth due to currency fluctuations.

EBITDA
EBITDA reached $1.6 million or 9.4% of revenues from $1.4 million or 9.5% of revenues a year ago. The increase in EBITDA is due largely to higher revenues. In constant dollars, EBITDA would have been $1.9 million or 10.8% of revenues.

Net Earnings
The Company generated net earnings of $0.4 million or $0.02 per share, compared with net earnings of $0.8 million or $0.04 per share, a year ago. The negative impact of exchanges rates on earnings was $0.2 million.

Balance Sheet
The Company maintained a solid balance sheet with cash and cash equivalents of $11.6 million compared with $19.8 million for the previous year. Long-term debt was reduced by $8.9 million when compared with last year and stood at $5.0 million, including the current portion, as of July 31, 2011.

Outlook
"Despite recent events in the U.S. and some signs of deteriorating economic conditions, we have not perceived any negative impact on our customer base or sales pipeline at this stage," Mr. Grou stated. "In Europe, market conditions are gradually improving, and demand from emerging markets remains strong. The outlook for International markets, China in particular, appears very bullish, and we remain in a phase of building momentum.

"As indicated in the past few quarters, we remain focused on maintaining equilibrium between short-term profitability and investing for the next phase of growth. We continue to face strong headwinds from uncertain and volatile economic conditions in many of our markets. However, unless market conditions change significantly, we do not intend to change our strategy as we are convinced that this is the best avenue for creating value for shareholders," Mr. Grou concluded.

Conference Call Information
20-20 will host a conference call to discuss the third quarter results September 12, 2011 at 2:00 p.m. (EDT). The call will be accessible by telephone at 1-800-731-5319, or 514-807-8791. An audio replay of the conference call will be available until midnight, September 19, 2011. To access it, dial 1-877-289-8525 and enter the pass code: 4470350#.

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 manufacturing software tailored for the interior design and furniture industries. Dealers and retailers use our desktop and Web-based products and solutions 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-GAAP MEASURE
References in this press release to the term "EBITDA" are related to cash earnings. EBITDA is defined for these purposes as Operating Income before non recurring 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.

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.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. dollars) 

 
  July 31,   October 31,
  2011   2010
  (Unaudited)   (Audited)
  $   $
ASSETS      
Current assets      
  Cash and cash equivalents 11,610   14,681
  Accounts receivable 20,127   16,685
  Income taxes receivable 204   102
  Contracts in progress 174   178
  Prepaid expenses 1,316   1,019
  Income tax credits recoverable 590   984
  Future income taxes 250   263
  34,271   33,912
Property and equipment 2,380   2,345
Intangibles 6,596   6,968
Goodwill 65,661   61,472
Income tax credits recoverable 3,640   2,304
Future income taxes 1,686   2,745
Other assets 1,235   1,160
  115,469   110,906
LIABILITIES      
Current liabilities      
  Bank loan -   148
  Accounts payable 12,050   11,907
  Income taxes payable 725   413
  Deferred revenue 16,273   13,644
  Installment on long-term debt 2,125   2,833
  Future income taxes 476   207
  31,649   29,152
Long-term debt 2,864   4,710
Leasehold inducements 285   279
Future income taxes 1,350   3,392
  36,148   37,533
SHAREHOLDERS' EQUITY      
Capital stock 58,346   58,569
Common stock options and warrants 1,709   1,553
Contributed surplus 1,040   1,050
       
Deficit (946)   (1,979)
Accumulated other comprehensive income 19,172   14,180
  18,226   12,201
  79,321   73,373
  115,469   110,906
 

20-20 Technologies Inc.
CONSOLIDATED EARNINGS
(Amounts in thousands of U.S. dollars, except per share data) 

 
 
  Three months ended   Nine months ended
  July 31   July 31
(Unaudited) 2011 2010   2011 2010
  $ $   $ $
           
           
Revenues 17,409 14,806   50,836 48,565
           
Cost of revenues 4,838 3,973   14,082 12,482
           
Gross margin 12,571 10,833   36,754 36,083
           
Operating expenses          
  Sales and marketing 5,347 4,126   15,107 12,891
  Research and development 2,978 3,091   8,638 9,333
  General and administrative 3,344 3,081   10,452 9,736
  Restructuration expense (3) -   (198) -
  Stock-based compensation 123 66   192 358
  11,789 10,364   34,191 32,318
             
Operating income 782 469   2,563 3,765
           
Financial expenses          
  Bank charges and interest expense, net 220 273   700 972
  Exchange loss (gain) 30 (838)   494 614
  250 (565)   1,194 1,586
           
Non-controlling interest - (4)   - 35
Earnings before income taxes 532 1,038   1,369 2,144
           
Income taxes          
  Current 133 328   1,144 1,128
  Future (4) (130)   (808) (559)
    129 198   336 569
Net earnings   403 840   1,033 1,575
           
Earnings per share          
  Basic and Diluted 0.02 0.04   0.05 0.08
         

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

 
 
  Three months ended   Nine months ended
  July 31   July 31
(Unaudited) 2011 2010   2011 2010
  $ $   $ $
           
OPERATING ACTIVITIES          
Net earnings 403 840   1,033 1,575
Non-cash items          
  Amortization 853 941   2,580 2,917
  Leasehold inducements (35) (20)   (78) (61)
  Stock-based compensation 110 54   167 324
  Capitalized interest on long term debt 12 12   36 52
  Non-controlling interest - (4)   - 35
  Future income taxes (4) (130)   (808) (559)
  Unrealized gain on  long term debt exchange - 245   - (314)
  Unrealized loss (gain) on  forward exchange          
    contracts and currency options (291) 43   (196) 26
  Changes in working capital items 270 (2,214)   (1,604) (3,759)
Cash flows from (used in) operating activities 1,318 (233)   1,130 236
           
INVESTING ACTIVITIES          
Business acquisition - -   (137) 98
Property and equipment - acquired (130) (268)   (726) (747)
Intangible assets - acquired (324) (24)   (879) (24)
Product of disposition of property and equipment 2 (2)   24 41
Other assets 8 (6)   3 (3)
Cash flows used in investing activities (444) (300)   (1,715) (635)
           
FINANCING ACTIVITIES          
Repayment of bank loan - -   (148) -
Long-term debt 1,047 -   1,152 1,300
Repayment of long-term debt (175) (2,000)   (4,253) (5,382)
Leasehold inducements 67 -   67 -
Common shares repurchased (205) -   (233) -
Cash flows from (used in) financing activities 734 (2,000)   (3,415) (4,082)
           
Effect of changes in exchange rate on          
  cash held in foreign currencies (135) (370)   929 1,051
           
Net increase (decrease) in cash and  cash equivalents 1,473 (2,903)   (3,071) (3,430)
Cash and cash equivalents,  beginning of period 10,137 22,694   14,681 23,221
Cash and cash equivalents, end of period 11,610 19,791   11,610 19,791
     

 

 

SOURCE 20-20 TECHNOLOGIES INC.

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