20-20 Technologies Inc.
TSX : TWT

20-20 Technologies Inc.

March 13, 2008 08:20 ET

20-20 Technologies Inc. Reports First Quarter Results for Fiscal 2008

LAVAL, QUEBEC--(Marketwire - March 13, 2008) - 20-20 Technologies Inc. (TSX:TWT), the world leader in 3D interior design and furniture manufacturing software, today announced its results for the first quarter ended January 31, 2008. All amounts are in U.S. dollars unless otherwise indicated.

First Quarter Highlights

- Revenues increased 7.6% to $16.8 million

- EBITDA decreased to $0.3 million impacted by foreign exchange loss of $0.8 million

- Net Earnings stood at $524,000, or $0.03 per share

- Acquired Planit Fusion for a total of $37.7 million

- Acquired 51% of Icovia for $1.6 million

"Through the acquisitions of Planit Fusion and Icovia we further consolidated our leadership position in the interior design industry," said Jean Mignault, Co-Chairman of the Board and CEO. "Our revenues also continued to increase, particularly in Europe, as we are steadily gaining market share. We believe that through their integration and the ongoing introduction of existing products in new markets, together with the sales of complementary products, we are well positioned to benefit from our global footprint."

"The difficult economic environment in the United States coupled with the high value of the Canadian dollar continued to affect our bottom line," added Jean-Francois Grou, President and COO. "We have recognized the need to take all necessary measures to improve our operating income, while leveraging our expanded organization resulting from the Planit Fusion acquisition."

Mr. Grou added: "We believe that our newly expanded installed base in Europe, combined with new market and new product opportunities worldwide, will enable us to progressively increase the license sales component in our revenue mix, thereby improving our gross margins and operating income."

Revenues

Revenues increased 7.6% to $16.8 million for the first quarter ended January 31, 2008. The increase is attributable to additional recurring maintenance services generated from a growing licensee base and $273,000 generated by PSI, Shanghai Rena, and Linkwood in fiscal 2008, for which there were no revenues in fiscal 2007. On an organic basis, excluding revenues from acquisitions in the quarter, revenues grew by 5.9% over the comparable period in 2007.

License sales for the first quarter increased by 5.2% to $5.6 million. License sales to customers in the manufacturing solutions market showed strong organic growth at 78.8% over 2007, contributing to overall organic growth of 29.5% in the manufacturing sector. Although license sales in the residential sector saw an organic decline of 17.5% compared to the first quarter in 2007, total revenues from the residential sector remained essentially the same, largely due to growth in recurring revenues derived from 20-20 s installed base. Revenues from commercial solutions saw a decline in the quarter of 9.6% as an important and non-recurring contract was completed in the first quarter of fiscal 2007.

Maintenance and other recurring revenues for the first quarter grew by 18.0% to $7.8 million, while revenues from professional services decreased by 7.6% to $3.4 million.

Revenues continued to be generated mainly in North America, which represented 61.9% of total sales for the three months ended January 31, 2008. However, revenues from European countries have risen by 25.2% in this quarter compared to last year.

The first quarter does not include any amounts related to the Planit Fusion and Icovia business acquisitions since these transactions took place at the end of the first quarter. However, the Planit Fusion business generated revenues of $3.6 million for the quarter and operating income of approximately $700,000, after deduction of what would have been the amortization expense for acquisition intangibles. EBITDA from the Planit Fusion business stood at $1.2 million for the quarter.

Operating Income

The operating loss for the first quarter was $600,000 compared to operating income of $664,000 during the same period last year. The decrease is primarily attributable to the negative impact of $833,000 due to the weakening U.S. dollar compared to the Canadian dollar, and an increase in research and development expenses due to higher capitalized costs net of amortization for the first quarter of 2007, amounting to $649,000.

Net Earnings

The Company recorded a translation exchange gain of approximately $480,000 for the first quarter (2007 - $109,000) relating principally to its net monetary asset holdings in various currencies and in particular the U.S. dollar, which gained in value against the Canadian dollar at quarter end. In addition, the Company recorded financial income in the quarter of $417,000 (2007 - $329,000) for a net other income of $854,000 compared to a net other income of $337,000 in fiscal 2007.

Consequently, net earnings for the three months ended January 31, 2008 stood at $524,000 or 3.1% of total revenues, compared to $780,000 or 5.0% of total revenues for the same period in 2007. Earnings per share for the quarter amounted to $0.03 on a fully diluted basis, compared to $0.04 the previous year.

EBITDA(i) decreased to $266,000 for the first quarter, compared to $791,000 for the same period in 2007.

At quarter end, the purchase considerations for the Icovia and Planit Fusion acquisitions had yet to be disbursed, resulting in a temporary negative working capital position. Early in the second quarter, the Company drew $15 million on its newly concluded 5-year term Credit facility with two major Canadian financial institutions in order to partially finance the purchase considerations which were disbursed at approximately the same time. The resulting liability will be accounted for as long term debt.

Acquisitions

Hookumu Inc. (Icovia)

On January 31, 2008 the Company concluded an agreement resulting in the acquisition of 51% of Hookumu Inc. (Icovia) for a cash consideration of $1,625,000, excluding related transaction costs, with management of Icovia holding the remaining 49%. Icovia provides interactive, online space planning solutions for the home furnishings, real estate and interior design industry. As part of the agreement, the Company has an option to acquire the remaining 49% from January 1, 2010 to September 1, 2010 based on a pre-determined formula.

Planit Fusion

On January 29, 2008 the Company concluded an agreement to acquire the Planit Fusion business from Planit Holdings Limited for an equivalent cash consideration of $37.7 million (pound sterling19 million) excluding related transaction costs. The acquisition consists of the worldwide kitchen and bath software business including 2 subsidiaries, Planit International Limited (U.K.), Planit S.A. (France) and all of their U.S. assets related to that business.

Shanghai Rena and DesignTec Co. Ltd.

As at November 1, 2007, the Company concluded an agreement to acquire all of the assets of Shanghai Rena and DesignTec Co. Ltd. for a total consideration in the form of a settlement of accounts receivable from the vendor of $399,000. Shanghai Rena and DesignTec Co. Ltd. are related companies with a common shareholder and they have been distributors for the Company in China and Taiwan respectively, since March 2002.

Planit Fusion Integration Update

While only one month since the closing of the Planit Fusion transaction, Mr. Grou said the company is acting upon many potential synergies. Since the acquisition strengthens our presence in existing markets we feel we can derive short term synergies in all aspects of our business such as sales and services leveraging both organizations teams and distributor networks, catalog libraries and facilities, and even research and development capabilities. Some of these initiatives are already underway. In fact, we have already jointly participated in two trade shows in North America and in the UK.

Outlook

"Following the acquisition of Planit Fusion and our software integration and localization efforts accomplished to date, our focus in product management and marketing is on launching products from our comprehensive portfolio in geographical markets where we can leverage our position in other components of our end-to-end solution and to sell our add-on products to our existing customer base. We also plan to expand our activities into adjacent markets in order to increase our license sales," said Mr. Mignault. "This will not only contribute to our organic growth but also progressively improve our gross margins over the coming quarters."

"In Europe, we will leverage an expanded catalog library to gain additional market share, and we will also propose to our newly acquired installed base additional point-of-sales and much needed web-based solutions," said Mr. Grou. "We will also pursue our efforts to enter the office furniture segment and develop the market for our web and manufacturing applications. In Benelux, Austria, Germany, Switzerland and Spain, we will team up with the highly successful distributors of Planit Fusion to fully exploit the opportunities in their respective markets with our extensive product portfolio, including our continued expansion in eastern European countries."

"In North America, we expect that the coming quarters will continue to be affected by the current economic conditions with respect to residential point-of-sale solutions and manufacturing markets. However, we anticipate that our initiatives to increase license sales and our efforts to improve operating income will help mitigate these factors," concluded Mr. Grou.

Annual and Special Meeting of Shareholders

20-20 Technologies holds its Annual and Special Meeting of Shareholders at 11 a.m. today at the Hotel Intercontinental, 360 St. Antoine West, Montreal, Salon Maisonneuve.

Conference Call Information

20-20 will host a conference call to discuss these results today, March 13, 2008 at 2 p.m. (EST). The call will be available by telephone at 514-807-8791 and 1-800-595-8550. The call will be webcast at www.2020technologies.com on the Investors page, Events Calendar section. An audio replay of the conference call will be available until midnight on Thursday, March 20, 2008. To access it, dial 416-640-1917 or 1-877-289-8525 and entering pass code 21265278#.

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.

About 20-20 Technologies Inc.

20-20 Technologies is the world's leading provider of computer-aided design, business and manufacturing software solutions tailored for the interior design and furniture industries. Dealers and retailers use its desktop and Web-based products and solutions for the residential and commercial 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 and world-leading enterprise resource planning (ERP) systems, including computer-aided engineering and plant floor automation software. Operating in thirteen countries with more than 600 employees, 20-20 is a publicly traded company (TWT) on the Toronto Stock Exchange (TSX). For more information, visit www.2020Technologies.com.

(i)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 plus amortization and depreciation expenses, less capitalized development costs. 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.

(i)Planit is a trademark of Planit Holdings Limited (used with permission).



20-20 Technologies Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. dollars)
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January 31, October 31,
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2008 2007
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$ $
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents 35,242 25,280
Short-term investments 6,750 18,495
Accounts receivable 22,684 16,629
Contracts in progress 338 378
Prepaid expenses 2,194 1,949
Future income taxes 210 167
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67,418 62,898
Property and equipment 4,184 3,941
Intangibles 15,220 5,665
Goodwill 61,643 29,407
Future income taxes - 995
Other assets 477 1,157
------------------------------------------------------------------------
148,942 104,063
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------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable 11,367 9,885
Income taxes payable 147 355
Purchase considerations payable 40,456 -
Deferred revenue 18,972 15,384
Long-term debt 138 54
Future income taxes 655 70
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71,735 25,748
Long-term debt 676 463
Leasehold inducements 402 410
Future income taxes 3,896 1,807
Non-controlling interest 109 -
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------------------------------------------------------------------------
76,818 28,428
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SHAREHOLDERS EQUITY
Capital stock 58,145 58,183
Common stock options 1,619 1,600
Contributed surplus 963 963
Deficit (3,989) (4,474)
Accumulated other comprehensive income 15,386 19,363
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72,124 75,635
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148,942 104,063
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20-20 Technologies Inc.
CONSOLIDATED EARNINGS
(Amounts in thousands of U.S. dollars, except earnings-per-share, unaudited)
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Three months ended January 31,
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2008 2007
----------------------------------------------------------------------------
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$ $
Revenues
License sales 5,643 5,365
Maintenance and other recurring revenues 7,774 6,587
Professional services 3,352 3,626
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16,769 15,578
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Cost of revenues
License sales 681 719
Maintenance and services 4,339 3,775
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5,020 4,494
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Gross margin 11,749 11,084
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Operating expenses
Sales and marketing 5,451 4,731
Research and development 3,586 2,497
General and administrative 3,261 3,078
Stock-based compensation 51 114
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12,349 10,420
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Operating income (Loss) (600) 664


Financial income 854 337
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Earnings before income taxes 254 1,001
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Income taxes
Current (178) 257
Future (92) (36)
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(270) 221
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Net earnings 524 780
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Earnings per share
Basic 0.03 0.04
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Diluted 0.03 0.04
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20-20 Technologies Inc.
CONSOLIDATED CASH FLOWS
(Amounts in thousands of U.S. dollars, unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Three months ended
January 31,
---------------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$ $
OPERATING ACTIVITIES
Net earnings 524 780
Non-cash items
Amortization 866 1,715
Leasehold inducements 14 8
Stock-based compensation 24 114
Future income taxes (92) (36)
Unrealized loss (gain) on forward exchange contracts (72) 301
Changes in working capital items 39,817 (279)
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Cash flows from operating activities 41,081 2,603
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INVESTING ACTIVITIES
Business acquisitions (40,723) (800)
Short-term investments - 1,856
Short-term investments dispositions 10,903 -
Property and equipment (239) (242)
Intangible assets - (1,588)
Other assets 682 (172)
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Cash flows from investing activities (29,377) (946)
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FINANCING ACTIVITIES
Repayment of long-term debt (3) (8)
Common shares buyback (77) -
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Cash flows from financing activities (80) (8)
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Effect of changes in exchange rate on cash held in
foreign currencies (1,662) (253)
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Net increase (decrease) in cash and cash equivalents 9,962 1,396
Cash and cash equivalents, beginning of period 25,280 5,337
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Cash and cash equivalents, end of period 35,242 6,733
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Contact Information

  • Media Relations:
    20-20 Technologies Inc.
    Jean Mignault
    Chief Executive Officer
    Laval: (514) 332-4110
    or
    20-20 Technologies Inc.
    Steve Perrone
    Chief Financial Officer
    Laval: (514) 332-4110
    Website: www.2020technologies.com