CIMdata PLM Industry Summary Online Archive

14 February 2007

Financial News

Avatech Solutions Announces 31% Revenue Increase and Profitable Second Quarter

Avatech Solutions, Inc. announced financial results for its second fiscal quarter ended December 31, 2006.

Total revenues grew 31.3% over the same quarter in the prior fiscal year and totaled $12,412,000 compared to $9,451,000 in the prior period. For the three months ended December 30, 2006, Avatech reported net income of $507,000, or $0.02 per fully diluted share, compared to net income of $805,000, or $0.05 per fully diluted share, in the same period of the prior year.

For the six months ended December 31, 2006, the Company reported revenues of $24,457,000, a 30.9% increase over the six months ended December 31, 2005, with all categories of revenues posting significant increases. Avatech's net income for the six months ended December 31, 2006 was $543,000, or $0.02 per fully diluted share, compared to $1,010,000, or $0.06 per fully diluted share, for the same period in the prior fiscal year.

Chief Executive Officer Scotty Walsh commented, "Avatech's revenues grew in all three of our revenue categories during the past quarter, and we were pleased to post another profitable quarter. For the period, our commission revenue increased 51% on a year-over-year basis, rising to almost 23% of total revenue for the quarter. This revenue category also grew 29% on a sequential basis and directly increased our gross margin and net income for the period since this category is shown net of costs of revenue. While a portion of the increase in commission revenue was attributable to our May 2006 acquisition of Sterling Systems & Consulting, Inc., more than two-thirds was attributable to organic growth in this important revenue category.

"At the same time, the Company's productivity in the second quarter of fiscal 2007 continued to be impacted by new staff brought on in the fourth quarter of fiscal 2006 and the first quarter of fiscal 2007. In total, we hired 50 new sales professionals and technical engineers during these periods to support our goal of creating four industry-focused business units with in-depth knowledge of their markets and customers. We expect our revenues to accelerate as the new sales and technical staff reaches full productivity. In fact, we are achieving higher revenues and profits in our third fiscal third quarter as a result of their efforts.

"Although our third quarter is tracking well and we see continued strong demand in Avatech's markets, we are revising our revenue target for fiscal 2007 because of the time that was needed to ramp up our new sales staff. We now expect to generate revenue in the range of $51 - 55 million, excluding any additional acquisitions. We expect improved bottom-line performance in the second half of the year as our recently hired sales representatives reach full productivity and as we intensify our focus on increasing service-oriented and commission business. Our previous pay-off of virtually all of Avatech's long-term debt, with the associated reduction in interest expense, should also benefit our bottom line results."

Visit http://www.avatech.com for more information.

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