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20-20 Technologies
1. 20-20 Technologies Reports Second Quarter Results
LAVAL, QUEBEC, June 14, 2010 -- 20-20 Technologies Inc. (TSX: TWT), the world
leader in 3D interior design and furniture manufacturing software, today announced its
results for the second quarter and six months ended April 30, 2010. All amounts are in
US dollars unless otherwise indicated.
Second Quarter Highlights
Revenues of $17.2 million, up 13.2% from $15.2 million last year
EBITDA increased to $2.7 million or 15.9% of revenues from $2.3 million or
15.3% of revenues in 2009
Net Income of $273,000 ($928,000 on a constant currency basis) compared to
$621,000 in 2009
Healthy balance sheet with working capital of $13 million
“During the quarter we experienced gathering momentum in our business in general,
with notable strength in the Home sector,” said Jean-François Grou, Chief Executive
Officer. “In an improving economic context, we were able to sign a large contract with a
major retail chain. The transaction confirmed our prior assessment that a number of
large customers are ready to resume making strategic investments. This agreement with
a key reference customer also serves to emphasize our status as an industry leader.”
Revenues
Second quarter revenues increased 13.2% to $17.2 million, compared with $15.2 million
a year ago. The improvement was due to constant dollar growth (11.0%) mainly related
to improving market conditions in the U.S., particularly in the Home sector, and to a
lesser extent from favorable currency exchange rates (2.2%). Revenues for the six-
month period increased to $33.8 million or 9.7%.
For the quarter, all geographic sectors reported higher revenues, led by North America
and International markets with increases of 18.7% and 42.7%, respectively. The
increase in European revenues of 3.7% was more modest considering the slow pace of
the European recovery. In percentage of total revenues, North America, Europe and
International markets represented 59.5%, 37.4% and 3.1%, respectively.
For the quarter, Home sector revenues reached $10.7 million accounting for 62.2% of
total revenues, up 33.4% over the previous year, fuelled by improving economic
conditions in the U.S. market, which was a key factor in helping secure the above-
mentioned major contract with a leading retailer. As a result, license revenues in this
sector increased by 79.2%.
20-20 recently participated at KBIS, the world’s largest international trade show event
dedicated to the kitchen and bath industry. The mood among customers and industry
participants was markedly upbeat compared to last year. For the Company, the number
of licenses sold, quotes and leads was higher than last year, and a large percentage of
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2. the activity was related to existing customers. 20-20’s recent partnership with Cadsoft
targeting home builders attracted attention.
For the quarter, Manufacturing sector revenues accounting for 22.7% of total revenue,
declined by 8.3% to $3.9 million and were down 20.4% sequentially over good first
quarter 2010 results. Customers in this sector generally remain cautious on long-term
investments, which in turn impacts 20-20’s business on a short term basis. It should be
noted that the relatively large size of contracts in the Manufacturing sector currently
creates some volatility from one quarter to another.
After announcing the implementation of the inSight manufacturing solution at Möbelwerk
Svoboda, a leading Austrian office furniture manufacturer over one year ago, the client
went live with the system recently. Over the past year, 20-20 has sold eight
manufacturing solutions to European customers of which three were with existing clients.
Our relative success with this solution follows our investments made in Europe to train
our sales force and professional services group.
For the quarter, the Office sector remained soft reflecting continuing weak economic
conditions with revenues reaching $2.6 million, down 10.9% over the previous year and
essentially flat on a sequential basis. As previously disclosed, the Company believes
that this sector will lag the others in terms of recovery.
As indicated above, perpetual licenses growth for the quarter of 42.6% to $5.7 million
was largely attributable to the U.S. Home sector and the contribution of a large one-time
contract from a major retailer.
During the quarter, revenues from recurring licenses increased by 39.7% to $1.3 million
essentially due to our Virtual Planner and Virtual Showroom product sales in the Home
sector.
Maintenance and other recurring services performed relatively well with revenues of $7.4
million, up 4.6% over the prior year. While revenues from the Office sector declined by
4.0% compared to last year, the Home and Manufacturing sectors were up by 5.0% and
11.2% respectively.
For the second quarter, professional services revenues declined by 11.9% to $2.8
million with declines of $0.3 million for both the Manufacturing and Office sectors while
the Home sector was up by $0.2 million.
Operating Income
Operating income for the second quarter was $1.8 million, compared to $1.7 million last
year. For the quarter, EBITDA increased to $2.7 million (15.9% of revenues) from $2.3
million (15.3% of revenues) a year ago. The negative impact of currency exchange rates
on operating income was significant and totaled $0.9 million. In constant dollars, the
EBITDA margin for the quarter would have exceeded 20%.
Net Earnings
The Company generated net earnings of $273,000 for the second quarter, or $0.01 per
share, compared with net earnings of $621,000, or $0.03 per share, a year ago.
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3. Earnings were negatively impacted by exchange losses of $975,000 ($243,000 in 2009)
essentially attributable to the translation of financial statements of our subsidiaries,
which are denominated in European currencies. For the six-month period, net earnings
were $0.7 million, or $0.04 per share, compared to $0.8 million, or $0.04 per share for
the same period in 2009.
Balance Sheet
The Company maintained a solid balance sheet with cash and cash equivalents
reaching $22.7 million at the end of the second quarter compared with $12.6 million for
the previous year.
Outlook
“While solid second quarter licensing growth and many positive leading indicators are
encouraging for our prospects in coming quarters, we remain cautiously optimistic in
view of the current situation in Europe. Our caution is also informed by the fact that
revenues are mainly being derived from large customers, with smaller clients largely
remaining on the side lines,” said Jean-François Grou, Chief Executive Officer.
“The Home sector should continue to benefit from improving market conditions in the
U.S. and internationally, while the Manufacturing sector is showing some early signs of
recovery – there has been a good revival of interest from large manufacturers to make
selective investments. With regards to the office sector, we anticipate little change in
current market conditions.
“Maintenance and other recurring revenues have continued to perform well, representing
a large and stable portion of our revenue (45% of revenues after six months). While
Professional Services was the only area with negative growth for the quarter, the pickup
in manufacturing, improving market conditions and the anticipated update of some
catalogs should stimulate this lagging portion of our business.
“Although we are gradually returning to more intense sales and marketing activities with
our participation at a number of key industry events, we remain clearly focused on tight
expense control. Our current expense levels can support higher sales leading to some
margin expansion over time,” concluded Mr. Grou.
Conference Call Information
20-20 will host a conference call to discuss the second quarter results June 14, 2010 at
2 p.m. (EDT). The call will be accessible by telephone at 514-807-9895 and 1-888-231-
8191. An audio replay of the conference call will be available until midnight, June 21,
2010. To access it, dial 1-800-642-1687 and enter the pass code: 78144884.
Please note that 20-20 Technologies' full financials and MD&A are available on SEDAR
as well as on the Company's web site, www.2020technologies.com.
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4. About 20-20 Technologies Inc.
20-20 Technologies is the world's leading provider of computer-aided design, business
and software solutions tailored for the interior design and furniture industries. Dealers
and retailers use its desktop and Web-based products and solutions for the home and
office markets. 20-20 offers a unique proprietary end-to-end solution, integrating the
entire breadth of functions in interior design. It provides a bridge for data communication
from the point-of-sale to manufacturing, including computer-aided engineering and plant
floor automation software. Operating in eleven countries with more than 500 employees,
20-20 is a publicly traded company (TWT) on the Toronto Stock Exchange (TSX). For
more information, visit www.2020technologies.com.
NON-GAAP MEASURES
References in this press release to the term "EBITDA" are related to cash earnings.
EBITDA is defined for these purposes as Operating Income before restructuring charges
plus amortization and depreciation expenses. EBITDA is not a recognized measure
under GAAP in Canada and may not be comparable to similar measures used by other
companies.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this news release constitute forward-looking information
within the meaning of securities laws.
Implicit in this information, particularly in respect of future operating results and
economic performance of the Company are assumptions regarding projected revenue
and expenses. These assumptions, although considered reasonable by the Company at
the time of preparation, may prove to be incorrect. Readers are cautioned that actual
future operating results and economic performance of the Company are subject to a
number of risks and uncertainties, including general economic, market and business
conditions and could differ materially from what is currently expected.
For more exhaustive information on these risks and uncertainties, please refer to our
most recently filed annual information form, available at www.sedar.com. Forward-
looking information contained in this report is based on management's current estimates,
expectations and projections, which management believes are reasonable as of the
current date. You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While we may elect to do so,
we are under no obligation and do not undertake to update this information at any
particular time unless required by applicable securities law.
-- 30 --
Media Relations:
MaisonBrison
Rick Leckner
(514) 731-0000
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5. 20-20 Technologies Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. dollars)
April 30, October 31,
2010 2009
(Unaudited) (Audited)
$ $
ASSETS
Current assets
Cash and cash equivalents 22,694 23,221
Accounts receivable 22,029 18,910
Income taxes receivable 355 24
Contracts in progress 103 253
Prepaid expenses 907 1,243
Future income taxes 226 421
46,314 44,072
Property and equipment 2,385 2,322
Intangibles 8,311 9,099
Goodwill 61,843 58,161
Future income taxes 1,659 3,131
Other assets 744 451
121,256 117,236
LIABILITIES
Current liabilities
Bank loan 148 149
Accounts payable 10,373 11,040
Income taxes payable 1,200 1,674
Deferred revenue 17,978 14,665
Installment on long-term debt 3,212 3,024
Future income taxes 453 903
33,364 31,455
Long-term debt 12,861 14,645
Leasehold inducements 323 343
Non-controlling interest 81 37
Future income taxes 2,467 3,853
49,096 50,333
SHAREHOLDERS’ EQUITY
Capital stock 58,582 58,582
Common stock options and warrants 1,405 1,279
Contributed surplus 1,054 1,015
Deficit (3,533) (4,268)
Accumulated other comprehensive income 14,652 10,295
11,119 6,027
72,160 66,903
121,256 117,236
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6. 20-20 Technologies Inc.
CONSOLIDATED EARNINGS
(Amounts in thousands of U.S. dollars, except per share data)
Three months ended Six months ended
April 30 April 30
(Unaudited) 2010 2009 2010 2009
$ $ $ $
Revenues 17,155 15,158 33,759 30,778
Cost of revenues 4,242 3,815 8,509 7,892
Gross margin 12,913 11,343 25,250 22,886
Operating expenses
Sales and marketing 4,828 4,213 8,765 8,234
Research and development 2,941 2,703 6,242 5,881
General and administrative 3,158 2,623 6,655 5,434
Stock-based compensation 208 113 292 10
11,135 9,652 21,954 19,559
Operating income 1,778 1,691 3,296 3,327
Financial expenses
Bank charges and interest expense 348 307 699 601
Exchange loss 975 243 1 452 1 095
1 ,323 550 2 ,151 1 696
Non-controlling interest 29 (11) 39 (31)
Earnings before income taxes 426 1,152 1,106 1,662
Income taxes
Current 100 675 800 999
Future 53 (144) (429) (138)
153 531 371 861
Net earnings 273 621 735 801
Earnings per share
Basic 0.01 0.03 0.04 0.04
Diluted 0.01 0.03 0.04 0.04
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7. 20-20 Technologies Inc.
CONSOLIDATED CASH FLOWS
(Amounts in thousands of U.S. dollars)
Three months ended Six months ended
April 30 April 30
(Unaudited) 2010 2009 2010 2009
$ $ $ $
OPERATING ACTIVITIES
Net earnings 273 621 735 801
Non-cash items
Amortization 952 909 1,976 1,838
Leasehold inducements (21) 11 (41) 22
Stock-based compensation 187 107 270 (6)
Capitalized interest on long term debt 14 7 40 14
Non-controlling interest 29 (11) 39 (31)
Future income taxes 53 (144) (429) (138)
Unrealized loss (gain)
on long term debt exchange (425) 7 (559) 232
Unrealized loss (gain)
on forward exchange contracts (74) 6 (17) 69
Changes in working capital items 565 879 (1,545) (757)
Cash flows from operating activities 1,553 2,392 469 2,044
INVESTING ACTIVITIES
Business acquisitions 98 - 98 -
Short-term investments - 6 - (1,625)
Short-term investments dispositions - 1,619 - 3,235
Property and equipment (233) (67) (479) (146)
Product of disposition capital asset (net of gain) 9 - 43 -
Other assets 14 14 3 -
Cash flows from (used in) investing activities (112) 1,572 (335) 1,464
FINANCING ACTIVITIES
Long-term debt 600 - 1,300 -
Repayment of long-term debt (2,698) (1,037) (3,382) (4,789)
Common shares repurchased - - - (31)
Cash flows used in financing activities (2,098) (1,037) (2,082) (4,820)
Effect of changes in exchange rate on
cash held in foreign currencies 1,114 704 1,421 380
Net increase (decrease) in cash and cash
equivalents 457 3,631 (527) (932)
Cash and cash equivalents, beginning of period 22,237 8,924 23,221 13,487
Cash and cash equivalents, end of period 22,694 12,555 22,694 12,555
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