CIMdata PLM Industry Summary Online Archive

20 May 2008

Financial News

Cimatron Reports Record Revenues of $10.3 Million in Q1 2008 on a Non-GAAP Basis

Cimatron Limited announced financial results for the first quarter of 2008.

Following the merger and acquisition transactions with Gibbs in early 2008 and with Microsystem in 2007, Cimatron's results in the first quarter of 2008 consolidate Gibbs’ financials for the first time and consolidate Microsystem's results for the first time in a first calendar quarter. In addition, following these transactions, and due to business combination accounting rules that have a significant impact on Cimatron's financial results, Cimatron is, for the first time, also reporting non-GAAP financial data.

Financial Highlights:

Revenues on a GAAP basis for the first quarter of 2008 increased 88% to $10 million, as compared to $5.3 million in the first quarter of 2007. The increase was attributed both to organic growth and to the consolidation of Microsystem's and Gibbs' results.

Gross Income on a GAAP basis for the first quarter of 2008 was $8 million as compared to $4.5 million in the same period in 2007. Gross margin in the first quarter was 80%, compared to 84% in Q1 2007. The decrease in gross margin is mainly attributed to business combination accounting rules, and as expected, to Microsystem's lower margins on third party hardware products sales as compared to the margins on Cimatron sales.

Operating Loss on a GAAP basis in the first quarter of 2008 was $(218) thousand, compared to an operating income of $113 thousand in the first quarter of 2007.

Net Loss for the quarter on a GAAP basis was $(298) thousand, or $(0.03) per diluted share, compared to a net income of $181 thousand, or $0.02 per diluted share recorded in the same quarter of 2007.

Revenues on a non-GAAP basis for the first quarter of 2008 increased 92% to $10.3 million, as compared to $5.3 million in the first quarter of 2007.

Gross Income on a non-GAAP basis for the first quarter of 2008 was $8.4 million as compared to $4.5 million in the same period in 2007. Gross margin on a non-GAAP basis in the first quarter of 2008 was 82%, compared to 84% in Q1 2007.

Operating Income on a non-GAAP basis in the first quarter of 2008 was $277 thousand, as compared to non-GAAP operating income of $123 thousand in the first quarter of 2007.

Net Income on a non-GAAP basis in the first quarter of 2008 was $235 thousand, or $0.02 per diluted share, as compared to non-GAAP net income of $191 thousand, or $0.02 per diluted share in the first quarter of 2007.

Commenting on the results, Danny Haran, President and Chief Executive Officer of Cimatron, said, “We are pleased to show year-over- year revenue growth as a result of organic growth and the addition of Microsystem and Gibbs. The Gibbs merger process is well underway, as Cimatron's global distribution network has broadened its offering with GibbsCam solutions, and currently starting initial GibbsCAM sales.

During the first quarter of 2008 we have kept our business momentum, still, the strong devaluation of the US Dollar against the New Israeli Shekel resulted in a 20% increase in the costs of our Israeli operations in Q1 2008, as compared to Q1 2007. This devaluation effect was only partially offset by the more favorable Dollar to Euro exchange rate.

We are taking cost control measures to counter the weak Dollar effect on our financial results and expect to see the benefits of such measures during 2008.”

Reconciliation between results on a GAAP and Non-GAAP basis is provided here. Non-GAAP financial measures consist of GAAP financial measures adjusted to include recognition of deferred revenues of acquired companies and to exclude amortization of acquired intangible assets and deferred income tax, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of our performance exclusive of non-GAAP charges and other items that are considered by management to be outside our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe that these non- GAAP measures help investors to understand our current and future operating cash flow and performance, especially as our two most recent acquisitions have resulted in amortization and non-cash items that have had a material impact on our GAAP profits. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies.

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