LAVAL, QUEBEC - 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
- 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 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.
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.
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.
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
Source: 20-20 Technologies Inc.