20-20 Technologies Reports Results for Fiscal 2010

LAVAL, QC, Jan. 18 /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 fourth quarter and fiscal year ended October 31, 2010.  All amounts are in US dollars unless otherwise indicated.

Fiscal 2010 Highlights

  • Fiscal 2010 revenues of $65.2 million, up 3.4% from $63.1 million last year
  • Overall license revenues increased by 18.5% year-over-year
  • EBITDA at $8.5 million ($11 million in constant dollars) compared to $9.3 million in 2009
  • Sold 27 solutions to manufacturers in China, up from 16 in 2009
  • Long-term debt reduced by $10.1 million during the year

"As we look back on 2010, the recovery in our main market, the U.S., proved to be much softer than anticipated as indicated by stable North American revenues when compared to 2009. This in no way reflects our competitive position, but rather a flat line U.S. economy," said Jean-François Grou, Chief Executive Officer. "The situation is brighter in new markets where we are investing for the future, such as China, Brazil and Russia. As for Europe, revenues have increased, reflecting strong momentum in Central Europe, partially offset by Southern Europe. 

Maintaining a certain level of short-term profitability while investing to maintain and grow our market share continued to be our focus throughout the year. In constant dollars, operating expenses in 2010 were unchanged when compared to the previous year and much reduced from the 2008 level. In 2010, the number of employees increased modestly as we redeployed resources to high potential and growth markets. We have often referred to the importance of new products and to the capacity of 20-20 to adapt its product roadmap to different economic realities and regional particularities. In 2010, new products accounted for over 60% of total overall license revenue growth."

Revenues increased 3.4% to $65.2 million, compared with $63.1 million a year ago. Home sector revenues grew in all geographic regions while revenues from the Manufacturing and Office sectors declined. For the full year, the incidence of exchange rates on revenues was immaterial.

Revenues in North America reported a small decline of 0.5%. Europe increased by 5.3% supported by the UK and Germany while International revenues increased by 44.2%, largely fuelled by continued strong momentum in China. In percentage of total revenues, North America, Europe and International markets represented 53.0%, 42.5% and 4.5% respectively.

Home sector revenues, accounting for 57.7% of total revenues, reached $37.6 million, up 16.9% over the previous year. All geographic regions posted growth with North America at 11.9%, Europe at 19.8% and International at 44.2%. In the U.S., the Company benefited from a large contract in the second quarter of 2010.

Manufacturing sector revenues which accounted for 26.5% of total revenue, declined by 9.7% to $17.3 million. While recurring license revenues, maintenance and other recurring revenues, and professional services were down, license revenues were up by 5.8%. China and Central Europe represented some of the bright spots in this business sector. At the end of 2010, the Company had 50 manufacturing customers in China. In 2010, the Company added 27 new customers compared to 16 in 2009 and 7 prior to 2009. Many of our new customers are among the largest manufacturers in that country and represent significant potential for add-on sales.

The Office sector remained weak reflecting an oversupply of office space with revenues reaching $10.3 million, down 12.4% over the previous year with most of the impact on professional services and on maintenance and other recurring revenues. License revenues were essentially at the same level as the previous year. 

License revenues increased 16.7% to $20.2 million largely attributable to International markets and Europe with increases of 52.9% and 20.9%, respectively. License revenues from North America increased by 6.3% fuelled by the Home sector. For the year, license revenues in the Home and Manufacturing sectors increased by 25.6% and 5.8%, respectively. Recurring license revenues increased by 26.2% to $4.9 million reflecting strong momentum of web solutions such as Virtual Planner in the Home sector in all geographic regions.

Considering that 2010 was the second year of a depressed business cycle for our industry, maintenance and other recurring services performed relatively well with revenues of $28.9 million, down 1.6%. While revenues of the Home sector which account for 57.8% of total revenues were up 7.4%, revenues were down in the other two business sectors. 

Professional services revenues remained under pressure and declined by 10.7% to $11.1 million. The Office sector was the hardest hit and accounts for a significant portion of the decline in revenues. 

EBITDA reached $8.5 million (13.0% of revenues) from $9.3 million (14.8% of revenues) a year ago. The impact of exchange rates on EBITDA was significant and reached $2.5 million. In constant dollars, EBITDA for 2010 would have been $11 million or 16.8% of revenues.

Net Earnings
The Company generated net earnings of $2.3 million, or $0.12 per share, compared with net earnings of $2.6 million or $0.14 per share, a year ago. The negative impact of exchange rates on earnings was $1.8 million or $0.09 per share.

Balance Sheet
The Company maintained a solid balance sheet with cash and cash equivalents of $14.7 million compared with $23.2 million for the previous year. Long-term debt was reduced by 59% or $10.1 million and stood at $7.5 million, including the current portion, as of October 31, 2010. At the end of 2010, the cash position, net of interest bearing debt, was $7.0 million compared with $5.4 million in 2009. For the year, working capital was $4.8 million compared to $12.6 million for the prior year. Working capital was negatively impacted by various factors but primarily by the reduction in long-term debt.

Revenues in the fourth quarter increased by 3.0% to $16.7 million compared to $16.2 million in 2009. The negative impact of exchange rates was $0.5 million; absent this impact, revenues would have increased by 6.4%.

For the quarter, revenues in North America were down by 7.5% while revenues in Europe and International markets increased by 14.9% and 26.2%, respectively. The introduction of new products in Europe (i.e. inSight, bathroom and closet) fuelled license revenue growth and also professional services. It should be noted that the contribution of International markets in percentage of total revenues reached 6.6%, a small but steadily growing percentage of revenues.

Home sector revenues reached $9.6 million, up 2.4% over the previous year. As indicated before, the introduction of bathroom and closet products in Europe were the primary drivers in this sector.

Manufacturing sector revenues increased by 8.5% to $4.4 million. Sales of inSight manufacturing solutions in Central Europe remained strong. Revenues of the Office sector decreased by 2.8% and appear to have stabilized. 

Overall license revenues and professional services increased by 18.1% and 10.3%, respectively. As for maintenance and other recurring services, revenues declined by 10.8% or 8.3% in constant dollars reflecting decreases in all geographic segments but more particularly in Europe. 

EBITDA was $1.8 million, down from $2.4 million a year ago. In constant dollars, EBITDA would have been $2.1 million.  

For the fourth quarter, net income was $0.7 million, or $0.04 per share, compared to $0.7 million, or $0.04 per share, for the same period in 2009. The Company benefited from approximately $600,000 in net tax benefits resulting from a series of items including adjustments to provisions, utilization of prior years' capital losses and tax rates applicable to taxable income outside of Canada.

"We enter fiscal 2011 with confidence in what we have accomplished to position 20-20 on the right course as we begin the implementation of our new strategic plan. Our win rates in our various market segments indicate that 20-20's competitive position has been enhanced and our objective is clearly to further improve it with a solid product roadmap, our end-to-end solution which is gaining traction and a more collaborative approach with existing and new partners. We will continue to proactively and prudently manage our operating expenses. As we have done in the past, we will react quickly to demand volatility. Balancing short-term profitability objectives while investing in our business to create increased value for shareholders remains our focus," concluded Jean-François Grou.

Conference Call Information
20-20 will host a conference call to discuss the fourth quarter results January 19, 2011 at 8:30 a.m. (EDT). The call will be accessible by telephone at 1-877-974-0445, or 514-940-2795. An audio replay of the conference call will be available until midnight, January 26, 2011. To access it, dial 1-877-289-8525 and enter the pass code: 4401837#.

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.

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.

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.
(Amounts in thousands of U.S. dollars)
       October 31,
  2010 2009
  $ $
Current assets    
  Cash and cash equivalents 14,681 23,221
  Accounts receivable 16,685 16,777
  Income taxes receivable 102 24
  Contracts in progress 178 253
  Prepaid expenses 1,019 1,243
  Income tax credits recoverable 984 2,133
  Future income taxes 263 421
  33,912 44,072
Property and equipment 2,345 2,322
Intangibles 6,968 9,099
Goodwill 61,472 58,161
Income tax credits recoverable 2,304 -
Future income taxes 2,745 3,131
Other assets 1,160 451
  110,906 117,236
Current liabilities    
  Bank loan 148 149
  Accounts payable 11,907 11,040
  Income taxes payable 413 1,674
  Deferred revenue 13,644 14,665
  Installments on long-term debt 2,833 3,024
  Future income taxes 207 903
  29,152 31,455
Long-term debt 4,710 14,645
Leasehold inducements 279 343
Non-controlling interest - 37
Future income taxes 3,392 3,853
  37,533 50,333
Capital stock 58,569 58,582
Common stock options and warrants 1,553 1,279
Contributed surplus 1,050 1,015
Deficit (1,979) (4,268)
Accumulated other comprehensive income 14,180 10,295
  12,201 6,027
  73,373 66,903
  110,906 117,236

20-20 Technologies Inc.
(Amounts in thousands of U.S. dollars, except per-share data)
     Years ended October 31,
  2010 2009
  $ $
Revenues 65,233 63,107
Cost of revenues 17,078 16,103
Gross margin 48,155 47,004
Operating expenses    
  Sales and marketing 17,731 16,587
  Research and development 12,399 12,015
  General and administrative 12,970 12,764
  Stock-based compensation 565 250
  Restructuring costs 515 (228)
  44,180 41,388
Operating Income 3,975 5,616
Financial expenses    
  Bank charges and interest expense 1,243 1,250
  Exchange loss 250 586
  1,493 1,836
Non-controlling interest 37 4
Earnings before income taxes 2,445 3,776
Income taxes    
  Current 948 1,894
  Future (792) (699)
  156 1,195
Net earnings 2,289 2,581
Earnings per share    
  Basic and diluted 0.12 0.14

20-20 Technologies Inc.
(Amounts in thousands of U.S. dollars)
     Years ended October 31,
  2010 2009
  $ $
Net earnings 2,289 2,581
Non-cash items    
  Amortization 3,894 3,961
  Gain on debt extinguishment (190) -
  Leasehold inducements (82) (63)
  Stock-based compensation 518 233
  Capitalized interest on long-term debt 66 29
  Non-controlling interest 37 4
  Future income taxes (792) (699)
  Unrealized gain on foreign exchange - (1,497)
  Unrealized loss (gain) on forward exchange contracts and currency options (24) 80
  Changes in working capital items (2,718) (29)
Cash flows from operating activities 2,998 4,600
Business acquisitions - (31)
Short-term investments - (1,719)
Short-term investment dispositions - 3,421
Property and equipment (1,239) (520)
Intangible assets - acquired (41) -
Proceeds on disposition of property and equipment 63 -
Other assets (669) (3)
Cash flows from (used in) investing activities (1,886) 1,148
Long-term debt 1,422 6,985
Repayment of long-term debt (11,909) (4,807)
Common shares repurchased (23) (31)
Cash flows from (used in) financing activities (10,510) 2,147
Effect of changes in exchange rates on cash held in foreign currencies 858 1,839
Net increase (decrease) in cash and cash equivalents (8,540) 9,734
Cash and cash equivalents, beginning of year 23,221 13,487
Cash and cash equivalents, end of year 14,681 23,221


For further information:

Media Relations:

Pierre Boucher
(514) 731-0000

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