George Davis, President and Chief Executive Officer of Avatech, commented, “Our business continues to be negatively affected by the downturn of the national economy. The design engineering markets and enterprises that we service remain fiscally challenged resulting in delays and interim reductions in the flow of the purchasing of technology and services that we provide. We remain committed to supporting our customers through these challenging times and are working diligently to bridge the gaps that currently exist with creative value added services that support the unique problems that our customers face. We intend to march side by side with our customers as we navigate through these unprecedented economic times to ensure that we are both uniquely positioned when the economy does turn more favorable.”
“The aggressive cost cutting measures that we implemented throughout the past fiscal year have helped us to offset the severity of the economic impacts on our current business. Additionally, we continue to maintain a healthy balance sheet and our liquidity remains strong supported by our cash balances and our recently-renewed $5 million credit facility.”
“Though we continue to be challenged by the decrease in sales, we believe that once the economy recovers our customers’ demand for our traditional technology solutions and services will rebound.”
“While our business has suffered in the short-term, we are looking at the long-term opportunities that this difficult economy offers from a competitive standpoint. At current demand levels many of our competitors are struggling to compete and don’t possess the same resources we have at our disposal that allows us to weather this difficult period and effectively serve the needs of our customers. As such, we believe there is an opportunity for us to build up our share of the existing market and emerge from this difficult period as an even stronger company,” concluded Mr. Davis.
For the second quarter of fiscal 2009 the Company reported revenues of $9.5 million, compared to $12.9 million in the prior-year quarter. Selling, general & administrative (SG&A) expenses decreased to $4.3 million in the three months ended December 31, 2008, compared to $4.7 million in the same period of the prior fiscal year.
The Company incurred a net loss of $223,000, or $(0.03) per fully diluted share, for the three months ended December 31, 2008, compared to net income of $855,000, or $0.04 per fully diluted share, in the same period in the prior year. Adjusted EBITDA (as defined) decreased to a loss of $67,000 in the second quarter of fiscal 2009, from adjusted EBITDA of $1,388,000 in the prior year period.
For the six months ended December 31, 2008 the Company reported revenues of $20.3 million, compared to $25.3 million in the prior-year period. Selling, general & administrative (SG&A) expenses decreased to $8.7 million in the first half of Fiscal 2009, compared to $9.3 million in the same period of the prior fiscal year.
For the six months ended December 31, 2008, Avatech reported a net loss of $70,000, or $(0.02) per fully diluted share, compared to net income of $1.3 million, or $0.07 per fully diluted share, for the same period in the prior year. Adjusted EBITDA (as defined) decreased to $380,000 in the first half of fiscal 2009 from adjusted EBITDA of $2,347,000 in the prior year period.
Conference Call Information
Avatech Solutions will hold a conference call to discuss its first quarter results at 11:00 a.m. ET on February 17, 2009. The dial-in numbers for the conference call are 888-679-8033 (domestic) or 617-213-4846 (international), and enter the passcode (25849409). A replay of the call will also be available through February 24, 2009, and can be accessed by dialing 888-286-8010 (domestic) or 617-801-6888, and dialing the passcode (16962474).
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.
A live webcast of the call will be broadcast in the Investor Relations section of the Company’s website, http://www.avatech.com. For those who cannot listen to the live broadcast, an audio replay of the call will also be available on the 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.
Forward-looking Statement
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 | Six Months Ended | |||||||
| December 31, | December 31, | |||||||
| 2008 | 2007 | 2008 | 2007 | |||||
| Revenues- | ||||||||
| Product sales | $4,759,000 | $7,365,000 | $10,871,000 | $14,619,000 | ||||
| Service revenue | 2,566,000 | 2,679,000 | 5,140,000 | 5,503,000 | ||||
| Commission revenue | 2,146,000 | 2,887,000 | 4,273,000 | 5,226,000 | ||||
| Total revenues | 9,471,000 | 12,931,000 | 20,284,000 | 25,348,000 | ||||
| Cost of revenues- | ||||||||
| Cost of product sales | 3,283,000 | 4,913,000 | 7,353,000 | 9,859,000 | ||||
| Cost of service revenue | 2,062,000 | 1,989,000 | 4,015,000 | 4,021,000 | ||||
| Total cost of revenues | 5,345,000 | 6,902,000 | 11,368,000 | 13,880,000 | ||||
| Gross margin | 4,126,000 | 6,029,000 | 8,916,000 | 11,468,000 | ||||
| Operating (loss) income | (332,000) | 1,121,000 | (118,000) | 1,765,000 | ||||
| Net (loss) income | (223,000) | 855,000 | (70,000) | 1,344,000 | ||||
| Earnings per share: | ||||||||
| Basic | $ (0.03) | $ 0.04 | $ (0.02) | $ 0.07 | ||||
| Diluted | $ (0.03) | $ 0.04 | $ (0.02) | $ 0.07 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 16,780,063 | 16,194,764 | 16,718,839 | 15,994,637 | ||||
| Diluted | 16,780,063 | 20,219,220 | 16,718,839 | 20,040,662 | ||||
| December 31, | June 30, | |||||||
| 2008 | 2008 | |||||||
| Current assets | $10,172,000 | $13,955,000 | ||||||
| Property and equipment | 1,032,000 | 781,000 | ||||||
| Other long-term assets | 7,637,000 | 7,860,000 | ||||||
| Total assets | $18,841,000 | $22,596,000 | ||||||
| Current liabilities | $6,554,000 | $9,425,000 | ||||||
| Long-term liabilities | 220,000 | 0 | ||||||
| Series F convertible preferred stock | 2,747,000 | 3,629,000 | ||||||
| Stockholders' equity | 9,320,000 | 9,542,000 | ||||||
| Total liabilities and stockholders' equity | $18,841,000 | $22,596,000 | ||||||
| Avatech Solutions, Inc. | ||||||||||||||||
| Reconciliation of non-GAAP financial measure | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||
| GAAP net income | $ | (223,000 | ) | $ | 855,000 | $ | (70,000 | ) | $ | 1,344,000 | ||||||
| Provision for income taxes | (99,000 | ) | 291,000 | (3,000 | ) | 458,000 | ||||||||||
| Income before income taxes | (322,000 | ) | 1,146,000 | (73,000 | ) | 1,802,000 | ||||||||||
| Stock-based compensation | 55,000 | 76,000 | 108,000 | 200,000 | ||||||||||||
| Net interest (income) expense | 5,000 | (14,000 | ) | (18,000 | ) | (10,000 | ) | |||||||||
| Depreciation and amortization | 195,000 | 180,000 | 363,000 | 355,000 | ||||||||||||
| Adjusted EBITDA | $ | (67,000 | ) | $ | 1,388,000 | $ | 380,000 | $ | 2,347,000 | |||||||
| 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 disclosures made in accordance with GAAP | ||||||||||||||||
Contact:
Avatech Solutions, Inc.
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