CIMdata PLM Industry Summary Online Archive
17 October 2005
Financial News
SofTech Reports Q1 FY 2006 Results; Total Revenue Up More Than 10%, Product Revenue Doubles from Prior Year; Results Exceed Prior Guidance
SofTech, Inc. announced results for its first quarter of fiscal year 2006. Revenue for the first quarter of fiscal 2006 was about $3.07 million as compared to about $2.78 million for the same period in the prior year, an increase of about 10.5%. The net loss for Q1 2006 was $(334,000) or $(.03) per share as compared to a net loss of $(459,000) or $(.04) per share for the prior year, an improvement of approximately 27%. The net loss adjusted for non-cash expenses related to amortization of intangible assets resulting from acquisitions, a Non-GAAP financial measure, was $276,000 in the first quarter of fiscal 2006 as compared to $152,000 in the same period in fiscal 2005, an increase of about 82%. A reconciliation of GAAP results to this non-GAAP financial measure for each of the periods is presented in a table below.
The Company's revenue is derived almost entirely from technology acquisitions completed between 1997 and 2002. As a result, management believes the Company's financial profile is very unique, at least in the industry in which it operates. Approximately 79% of its assets are composed of intangible assets related to these acquisitions. The amortization of these intangible assets was approximately 18% of its total expenses and 20% of its revenue. Further, the periods over which these intangible costs are expensed are highly judgmental.
It is management's opinion that comparing results of operations from period to period and to other companies in our industry absent these non-cash expenses related to acquisitions is a more meaningful measure of our performance given the Company's unique financial profile detailed above. It is also management's belief that this Non-GAAP measure of performance is one of the most critical measures of Company valuation for investors. Lastly, this measure of performance has been, and is expected to continue to be, a significant component of the incentive compensation plan for the Company's President.
"Fiscal 2006 is off to a fast start and we are optimistic that we can continue this performance over the course of the year" said Joe Mullaney, President and COO. "Product revenue in Q1 was especially strong with all three product lines experiencing growth. Our ProductCenter PLM technology was responsible for 65% of the product revenue increase. With Q1's double digit revenue growth and controlled expense increases, we were able to reduce our GAAP loss by 27% and improve our Non-GAAP financial measure of performance (net loss plus non-cash expenses related to acquisitions) by 82% as compared to the same period in fiscal 2005."
"Revenue generated in North America increased by about 12%, Europe by 6% and Asia by 4% in the current quarter as compared to the same quarter in fiscal 2005. There were many averaged sized product revenue orders with no individual order larger than $70,000 of product revenue. This was by far our best overall Q1 performance in five years."
"We reaffirm our outlook for full year 2006 revenue growth of between 4% and 7%, increased spending of between 3% and 4.5%, and a 40% increase in our Non-GAAP financial measure," Mullaney added.
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