CIMdata PLM Industry Summary Online Archive

16 February 2010

Financial News

Avatech Solutions Reports Strong Second Fiscal Quarter Results

Avatech Solutions, Inc. announced financial results for its second fiscal quarter and for the six months ended December 31, 2009.

“With that said, we will continue to manage our costs and focus on maintaining a positive bottom line in the coming quarters.”

“We are very pleased with our strong performance for the quarter, which was the second consecutive quarter of positive net income and a significant improvement in the bottom line when compared to last year. These results clearly demonstrate our ability to manage our business in spite of this challenging economic environment and we remain cautiously optimistic about the continuing recovery. As we have said in the past, our staffing and expense levels allow us to remain profitable on lower revenue levels and deliver sound financial results,” commented President and Chief Financial Officer Lawrence Rychlak. “With that said, we will continue to manage our costs and focus on maintaining a positive bottom line in the coming quarters.”

Avatech reported total revenues of $7.7 million for its fiscal second quarter, compared to $9.5 million in the prior-year quarter. The Company’s overall gross margin percentage increased to 59.2% for the three months ended December 31, 2009 compared to 43.6% the quarter ended December 31, 2008. Despite realizing lowered revenues from the prior year, the Company increased its operating income by $1.2 million to $861,000 for the three months ended December 31, 2009 when compared to the same period in the prior fiscal year. For the second quarter of fiscal 2010, the Company reported net income of $482,000, or $0.02 per fully diluted share, as compared with a net loss of $223,000, or $(0.03) per fully diluted share, for the quarter ended December 31, 2008. Adjusted EBITDA (as defined) was $1,060,000, compared to negative adjusted EBITDA of $67,000 in the prior year period.

For the six months ended December 31, 2009, Avatech reported total revenues of $15.5 million, compared to $20.3 million in the prior-year period. The Company’s overall gross margin percentage increased to 52.7% for the six months ended December 31, 2009 compared to 44.0% for the same period in the prior fiscal year. Operating income increased to $1.1 million for the six months ended December 31, 2009 as compared with an operating loss of $118,000 the same period in the prior fiscal year. For the six months ended December 31, 2009, the Company reported net income of $608,000, or $0.02 per fully diluted share, as compared with a net loss of $70,000, or $(0.02) per fully diluted share, for the quarter ended December 31, 2008. Adjusted EBITDA (as defined) for the six month period ended December 31, 2009 was $1,487,000, compared to adjusted EBITDA of $380,000 in the prior year period.

Avatech’s balance sheet continues to strengthen as evidenced by cash of $3.2 million, working capital in excess of $1.8 million, and only $98,000 of long-term liabilities. In addition, the Company has redeemed all but $500,000 of its Series F Preferred Stock and expects to redeem the remaining amount by March 31, 2010. In addition, Avatech continues to maintain a $5 million line of credit but it has not needed to use any of the financing capacity during fiscal 2010.

George Davis, Chief Executive Officer, added, “It is very encouraging to see our core business continuing its recovery as Avatech is uniquely positioned to leverage the strength of its operating results and financial position to remain a leader in its markets. This strength will allow us to focus more time and resources on identifying and executing on growth and diversification initiatives in the coming quarters with the objective of increasing shareholder value.”

Conference Call Information

Avatech Solutions will hold a conference call to discuss its fiscal 2010 second quarter results at 11 a.m. ET on February 16, 2010. A replay of the call will also be available through February 23, 2010, and can be accessed by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international), and dialing the passcode (70993622).

A live webcast of the conference call will be available to all investors 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 Company’s 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 in the financial tables at http://www.avatech.com/aboutus/pressroom/releasemain.aspx?intreleaseID=249.

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