Rand Worldwide™ Announces 2006 Financial Results; Driven by acquisitions and organic growth, IMAGINiT sales increase 24%

CIMdata PLM Industry Summary Online Archive

12 March 2007

Financial News

Rand WorldwideT Announces 2006 Financial Results; Driven by acquisitions and organic growth, IMAGINiT sales increase 24%

Rand A Technology Corporation ("RAND WorldwideT " or the "Company") announced financial results for the three- and 12-month periods ended December 31, 2006.

2006 Highlights

• Revenue increased to $106.2 million, up 8.5% from $97.8 million in 2005

• Revenue from the IMAGINiT business was $81.9 million, up 24.1% from 2005

• Earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) was $2.5 million, compared to $4.0 million in 2005

• Reached a settlement agreement with Parametric Technology Corporation ("PTC")

• Income from continuing operations was $0.18 per share, including the net gain resulting from the PTC settlement, compared to $0.06 per share in 2005, and

• Acquired the Autodesk-related assets of Taylor Technologies and i-VEK Technology, and announced intention to acquire CAD/CAM Systems, which subsequently closed on January 2, 2007

"In 2006, we focused our resources on the primary growth drivers of our business and took the necessary steps to position the Company for top and bottom-line growth in 2007," said Frank Baldesarra, President and CEO of RAND Worldwide. "In addition to our organic growth, we have completed six acquisitions in the past two years, adding more than $25 million in annualized revenue to our IMAGINiT business. These acquisitions have fueled top-line growth, extended our geographic footprint in North America, and enabled us to penetrate new vertical markets, such as media and entertainment. Our IMAGINiT team has solidified its position as one of Autodesk's leading global resellers, and in 2007 we plan on continuing to invest in organic growth and acquisition opportunities in this business."

Mr. Baldesarra continued: "In 2006, we also made progress on two key corporate milestones that should have an impact on our ongoing profitability. In December, we reached a positive settlement with PTC in which we received net proceeds of approximately $2.9 million in cash and the return of 681,048 RAND Worldwide common shares. And more recently, we announced our intention to sell a majority ownership stake in certain of our European PLM operations. If successfully concluded, through this revised ownership position, we expect to retain the potential to participate in the ongoing growth of PLM deployments within those markets, while preserving relationships with Dassault Systèmes and our European employees and clients. We believe that both of these developments should enhance the 2007 bottom-line performance of the Company and will provide additional resources to invest in the most rapidly growing segments of our business."

Total revenue for 2006 was $106.2 million, an 8.5% increase from $97.8 million in 2005. Revenue from IMAGINiT was $81.9 million, an increase of 24.1% from 2005, while revenue from RAND PLM was $24.3 million, a decrease of 23.8% from 2005. IMAGINiT generated 77.2% of total 2006 revenue, up from 67.5% of total revenue in 2005. RAND Worldwide generates approximately 70% of its revenue in U.S. dollars and as a result, in 2006, the stronger Canadian dollar relative to the U.S. dollar negatively impacted revenue by approximately $6 million for the year.

RAND Worldwide's gross profit was 52.5% in 2006, compared to 55.1%, in 2005. Although the overall gross profit percentage decreased year-over-year, both the IMAGINiT and PLM business units' gross profit percentages improved. The overall decrease is due to the impact of the change in business mix, as the higher margin PLM revenue decreased from 32.5% to 22.8% of total revenues.

2006 operating expenses were $52.0 million or 49.0% of revenue, compared to $48.5 million, or 49.6% of revenue in 2005. The increase is due primarily to headcount growth in the IMAGINiT business, expansion of facility requirements in growing regions, and opening of new offices in strategic markets.

RAND Worldwide recorded EBITDA of $2.5 million in 2006, versus EBITDA of $4.0 million in 2005. Volume driven margin improvements were offset by the change in business mix, foreign exchange impact due to the stronger Canadian dollar during most of 2006, and growth in spending due to increased personnel costs and facilities expansion. The investments in personnel and facilities were made to support the Company's plans for growth. The stronger Canadian dollar relative to the U.S. dollar during 2006 had approximately a $0.6 million negative impact on EBITDA.

Income from continuing operations in 2006 was $3.6 million, or $0.18 per share, compared to $1.1 million, or $0.06 per share in 2005. In addition to those items mentioned above, included in the income from continuing operations for 2006 was the $2.9 million net gain on the PTC settlement, partially offset by a $0.4 million charge for the impairment of goodwill. In 2005, income from continuing operations included a $1.2 million property and equipment write-down and a $0.6 million charge related to severance and office closures.

Net earnings for 2006 was $3.6 million, or $0.18 per share, compared to a net loss of ($3.4) million, or ($0.19) per share in 2005. Net earnings in 2006 included the items noted above, while the net loss in 2005 included a loss from discontinued operations of ($4.5) million related to the sale of certain of RAND Worldwide's European subsidiaries to Dassault Systemes S.A and the closure of select European operations.

RAND Worldwide maintains a strong balance sheet from which it expects to support its anticipated growth activities. At December 31, 2006, the Company had cash and cash equivalents totaling $13.5 million compared with $14.3 million at December 31, 2005.

"We are pleased with our liquidity position. Notwithstanding paying $1.6 million in cash to fund acquisitions during the year, we maintained a strong cash balance throughout fiscal 2006, and were able to generate positive free cash flow," said Peter Gimon, Chief Financial Officer for RAND Worldwide.

"For 2007, we plan on continuing our investment in the business in order to generate profitable growth, while maintaining a focus on cost management."

Subsequent Events and Announcements

On January 2, 2007, RAND Worldwide announced that it completed the acquisition of certain assets and the Autodesk-related business of Atlantic Canada based CAD/CAM Systems Ltd. CAD/CAM Systems is a leading provider of Autodesk software and associated training, consulting and support services throughout the Atlantic Provinces. CAD/CAM Systems, an Authorized Autodesk Reseller, offers Autodesk products, as well as customized software and support services for the manufacturing, building, civil, and geospatial industries.

On January 31, 2006, RAND Worldwide announced its intention to acquire Dallas, Texas based CADVisions, Inc. CADVisions, an Authorized Autodesk Service and Support Center, is a leading provider of Autodesk software and associated training, consulting and support services, with offices in Dallas, Texas; Wichita, Kansas; and Tulsa, Oklahoma.

On February 15, 2007, RAND Worldwide announced, subject to customary closing conditions and approvals, its plans to sell a majority interest in certain of its European PLM operations to a European-based private consortium (the "Consortium").

Management's discussion and analysis, consolidated financial statements and notes thereto for 2006 can be obtained today from RAND's corporate website at http://www.rand.com/ . The documents will also be available at http://www.sedar.com/ .

(1) The Company has included earnings before interest, taxes, depreciation and amortization, and other non-recurring (income) expense ("EBITDA"), which is a non-GAAP financial measurement. EBITDA does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measurements presented by other issuers. EBITDA is provided as a supplement, and should not be considered an alternative to measurements required by GAAP. Management believes that, in addition to net earnings (loss), EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution prior to debt service, depreciation, amortization, other non-recurring expenses and income taxes. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings (loss) determined in accordance with GAAP, as an indicator of the Company's performance or cash flows from operating, investing and financing activities or as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other companies and, accordingly, EBITDA may not be comparable to measures used by other companies. EBITDA is part of the financial and other metrics used by management for purposes of the Company's operating plans.

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