CIMdata PLM Industry Summary Online Archive

10 November 2005

Financial News

Avatech Solutions Announces Profitable First Quarter

Avatech Solutions, Inc. announced earnings for its first quarter ended September 30, 2005, reporting its fourth consecutive quarter of profitability. The Company's earnings for the quarter were $205,000, or $0.02 per share, compared with a loss of ($813,000), or ($0.09) per share for the same period in 2004. Total revenues for the quarter were approximately $9.2 million, a 37% increase over revenues for the first quarter of 2004, and net income increased more than $1 million from the same period last year.

"On the heels of three consecutive profitable quarters and a profitable year-end, these first quarter results are further proof that our business strategy is generating bottom line results," said Avatech CEO Scotty Walsh.

"Historically, the first quarter of our fiscal year has been our weakest period in terms of overall revenues and earnings so we're off to a great start this year and we continue to enhance our position as a leading design and engineering systems integrator. Comparing the first quarter of this year to the same period in fiscal 2004 shows dramatic improvements in every area of our business in spite of the required expensing of employee stock options. Our revenues grew significantly, our gross margin percentage increased by almost five percentage points and our selling, general, and administrative expenses were up only slightly," continued Walsh. "I am particularly pleased with the huge growth in services revenues in this fast-growing piece of our business. These results should serve as a springboard for what we believe will be a very good year for the Company, our employees, and our shareholders."

The Company attributes its strong financial results to a dramatic growth in revenues coupled with a focus on controlling operating expenses. Avatech receives sales incentives from its principal supplier, Autodesk, based upon the achievement of Autodesk-defined sales targets. The Company indicated that as a result of its strong revenues in the first quarter, they realized significantly larger incentives this quarter when compared to the same period in 2004. Avatech officials also indicated that the Company achieved better utilization of services personnel, resulting in higher services revenues with a smaller increase in costs. Cost containment efforts resulted in increases in the Company's selling, general, and administrative expenses of less than 14% despite the addition of sales and management personnel.

"The market for our products and our consulting and implementation services remains strong and we expect to continue that trend for the rest of the fiscal year," commented Walsh. "Our much improved financial condition, as well as the recent increases in our stock's value, allows us to invest in the growth areas of our business and to continue our strategy of expansion through selected mergers and acquisitions." Avatech's stock closed on Wednesday at $1.22 per share, more than double the $0.50 closing price at its year end, June 30, 2005.

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