CIMdata PLM Industry Summary Online Archive

22 April 2009

Financial News

SofTech Announces Improved Profitability for Third Quarter FY 2009

SofTech, Inc. announced financial results for the third quarter of Fiscal Year 2009 (quarter ended February 28, 2009). Revenue was approximately $2.2 million for Q3 2009, as compared to $2.4 million for Q3 2008 (quarter ended February 29, 2008).

The Company’s profitability improved substantially, with net income increasing by approximately $338,000, from a loss of $133,000 ($.01 per share) in Q3 2008, to net income of approximately $205,000 ($.02 per share) in Q3 2009. For the nine months ended February 28, 2009, the Company’s net income increased by approximately $1.3 million, from a loss of $350,000 ($.03 per share) in the comparable prior period to net income of approximately $972,000 ($.08 per share).

Net cash flows from operating activities also improved considerably during the first nine months of FY 2009, increasing approximately $1.2 million from negative $61,000 during the first nine months of FY 2008 to positive net operating cash flows of $1.1 million in the first nine months of FY 2009. The Consolidated Statement of Cash Flows for the nine months ended February 28, 2009 and February 29, 2008 is included in the attached Financial Summary.

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure, decreased $60,000, from $560,000 in Q3 2008 to $500,000 in Q3 2009, (an 11% decrease). For the first nine months of FY 2009, EBITDA increased $200,000, from $1.8 million in the comparable prior period to $2 million (a 9% increase). A reconciliation of EBITDA to Net Income (Loss) is provided on the attached Financial Summary.

The Company’s revenue is derived almost entirely from technology acquisitions completed between 1997 and 2002, and the Company’s operations are not capital intensive. As of February 28, 2009, approximately 2.8% of the Company’s assets represent amortizable intangible assets related to these historical acquisitions. The Company does not anticipate making further acquisitions in the foreseeable future. For the quarter ended February 28, 2009, amortization expense (a non-cash expense) related to these intangible assets were approximately 5% of total expenses, 4.5% of total revenue and 49% of net income. Further, the periods over which these intangible costs are expensed are highly judgmental.

The Company believes that EBITDA is useful supplemental information for investors, when considered along with net income and other income statement data. The Company believes that EBITDA is useful because it provides investors with information concerning the potential longer term profitability of the Company’s technology assets (subsequent to full amortization of costs), as amortization of acquisition costs has been added back to net income in arriving at EBITDA. Further, management believes that EBITDA provides a useful financial metric by which the Company can be compared with other companies that have different capital structures (interest (a cost of capital) has been added back to net income in arriving at EBITDA). It is also management’s belief that this non-GAAP measure of performance continues to be used in the investment community as a financial metric for business valuation purposes.

However, the Company believes that EBITDA is not a substitute for cash flow from operating activities, which is disclosed above and in the Company’s financial statements. Investors should carefully review the financial statements of the Company in their entirety in order to obtain a complete understanding of the Company’s financial condition and results of operations.

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