20-20 Technologies Reports Second Quarter Results for Fiscal 2012

LAVAL, QC, June 13, 2012 /CNW Telbec/ - 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 ended April 30, 2012. All amounts are in US dollars, unless otherwise indicated.

SECOND QUARTER 2012 RESULTS

Highlights

• Revenues of $17.9 million, up 5.2% compared to last year, with license revenues increasing by 19.9%
• Revenues in Europe, Middle East and Africa (EMEA) region up 15.5%
• Adjusted EBITDA remained stable at $1.7 million compared to 2011
• Net earnings stood at $0.2 million or $0.01 per share compared to $1.0 million or $0.05 per share last year

"One of the important engines of growth for the quarter was the Home sector in the EMEA region fuelled by a large contract with an existing customer further expanding the use of our solutions to all its entities and also to its resellers. Our capacity to address the needs and complexity of large customer requirements remains a key competitive factor and a compelling indicator of our industry leadership," said Jean-François Grou, Chief Executive Officer.

"The manufacturing sector continued to perform well in the EMEA and APAC regions but was partially offset by the decline in the Americas. Overall, the sales pipeline of the manufacturing sector remains solid. The Office sector continues to benefit from the introduction of Visual Impression last year with revenues reaching a stable base at current levels.

Our operating expenses have remained under tight control for the past few quarters.  Our gross margin benefited from higher license sales; however it was temporarily impacted by the reorganization of our professional services organization and lower utilization rates, mainly in North America. We will adapt our cost structure in the short term to restore a minimum level of profitability in our services activities," said Mr. Grou.

Revenues for the quarter increased 5.2% to $17.9 million, compared with $17.0 million a year ago. Without the negative impact of exchange rates revenues would have increased by 7.3%.

Based on the reorganization during 2011 of the Company's operations in three geographic areas, since the beginning of fiscal year 2012 revenues are reported in three segments: the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific (APAC). The regions represented 50.2%, 45.7% and 4.1% of total revenues, respectively.

Revenues in the Americas declined by 3.4% over the previous year due to continued soft market conditions in the U.S. affecting professional services and the manufacturing sector, however they were up 11.8% compared to the previous quarter. For the same period, EMEA revenues increased by 15.5% fuelled by a large contract in the U.K. with an existing customer, one of the largest vertically integrated manufacturers of kitchens in Europe, and new projects in France. APAC revenues increased by 3.6% over 2011 and by 24.9% sequentially over the first quarter of 2012. As already mentioned, in the APAC region, the Company is transitioning from selling third party solutions through distributors to direct selling of proprietary solutions, with the specific goal of improving our margins over time. As the transition proceeds, the growth rate in the region will continue to be temporarily impacted.

Home sector revenues, accounting for 56.8% of total revenues, reached $10.2 million, up 9.1% over the previous year. For the same period, overall license revenues increased by 34.3% and were partially offset by declines from maintenance and other recurring revenues of 3.6% due to unfavorable exchange rates, and professional services of 15.0%. Overall license revenues largely benefitted from the large contract in the U.K. referred to above.

Manufacturing sector revenues, which accounted for 27.0% of total revenues, increased by 1.2% to $4.8 million or 5.5% in constant dollars. For the EMEA and APAC regions, revenues in constant dollars increased by 10.7% and 65.3%, respectively, while the Americas recorded a decline of 22.9% as we see fairly low levels of activity currently in this region.

Overall manufacturing sector license revenues were up 8.8% while professional service revenues declined 3.2% reflecting lower revenues in the Americas. Maintenance and other recurring services remained relatively stable for the quarter. As mentioned, the sales pipeline for manufacturing solutions in the EMEA and APAC regions remains healthy.

Office sector revenues of $2.9 million remained essentially flat over the previous year. The year-over-year comparison is impacted by the pent-up demand experienced in the second quarter of 2011, when Visual Impression was released.

Operating expenses for the second quarter have remained relatively stable when compared with 2011 despite the increase in the headcount. As indicated before, in recent quarters, some research and development personnel were redirected to professional services for integration to address higher demand.

Adjusted EBITDA
Adjusted EBITDA reached $1.7 million or 9.4% of revenues, compared to $1.7 million or 10.0% of revenues a year ago. The margin decrease is due largely to a lower gross margin reflecting higher labor expenses when compared to 2011, combined with lower professional services revenues partially offset by the higher margin on overall licenses revenues. When compared to last year, provisions for bad debts increased by $0.4 million.

Net Earnings
The Company generated net earnings of $0.2 million or $0.01 per share, compared with net earnings of $1.0 million or $0.05 per share, a year ago.

Outlook
Considering a volatile market environment, we have maintained a balance between tight expense control and our ability to take advantage of market opportunities. As indicated with the release of our first quarter results, the professional service segment was under performing and we remained focused on increasing the margin; we also remained vigilant in terms of allocating resources to the best revenue opportunities.

"20-20 remains the clear industry leader, our global market position is unmatched, and we are confident of strong growth opportunities," concluded Mr. Grou.

Conference Call Information
20-20 will host a conference call to discuss first quarter results on June 13, 2012 at 2:00 p.m. (EST). The call will be accessible by telephone at 1-888-231-8191, or 514-807-9895. An audio replay of the conference call will be available until midnight on Wednesday, June 20, 2012. To access it, dial 1-855-859-2056 and enter the pass code: 90290080.

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.

REVIEW OF STRATEGIC AND FINANCIAL ALTERNATIVES

The Company's Board of Directors has initiated a review of strategic and financial alternatives with the objective of enhancing shareholder value and has appointed a Special Committee to review and consider such alternatives.

Please note that the Company's Board of Directors has not set any deadline for completing the review of such strategic alternatives, and may ultimately determine that its current business plan is the best means to enhance shareholder value.  Accordingly, there can be no assurance that the strategic review will result in the consummation of any agreement or transaction. The Company does not intend to make further announcements regarding the strategic review process unless it concludes they are warranted by the circumstances or are expressly required by law.

ABOUT 20-20 TECHNOLOGIES INC.
20-20 Technologies is the world's leading provider of computer-aided design, business and manufacturing software tailored for the interior design and furniture industries. Dealers and retailers use our desktop and Web-based products for the home and office markets. 20-20 offers a unique 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 and an extensive network of partners worldwide, 20-20 is a publicly traded company (TWT) on the Toronto Stock Exchange (TSX). For more information, visit www.2020technologies.com.

NON-IFRS MEASURE

Adjusted EBITDA is a non-IFRS measure related to cash earnings and is defined for these purposes as operating income plus amortization, adjusted for non-recurring items and other items such as restructuring costs. Adjusted EBITDA is reported for information purposes only and is a financial performance measure mainly used in the financial industry. This measure does not have a standardized meaning as prescribed by IFRS and therefore may not be comparable to similar measures reported by other public companies. The reader must know that Adjusted EBITDA is not a substitute to net earnings as an indicator of our operating results neither under IFRS nor to cash flows from operating and financing activities as a measure of liquidity and cash flows.

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 comprehensive 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.

20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of U.S. dollars)  (unaudited)

		April 30,	October 31,
		2012	2011
		$	$
ASSETS
Current assets
	Cash	9,803	11,362
	Trade and other receivables	20,631	15,461
	Income taxes receivable	133	115
	Contracts in progress	99	684
	Prepaid expenses	1,143	1,429
	Income tax credits recoverable	560	631
		32,369	29,682
Property and equipment		2,409	2,241
Intangibles		4,602	5,186
Goodwill		50,880	51,286
Income tax credits recoverable		3,533	3,551
Deferred tax assets		2,456	2,145
Other assets		1,179	1,215
		97,428	95,306
LIABILITIES
Current liabilities
	Trade and other payables	11,180	10,445
	Income taxes payable	-	186
	Deferred revenue	17,068	14,134
	Current portion of long-term debt	2,183	2,099
	Provisions	1,151	1,900
		31,582	28,764
Long-term debt		1,822	2,610
Leasehold inducements		289	350
Deferred tax liabilities		1,962	2,127
		35,655	33,851
EQUITY
Capital stock		58,466	58,154
Common stock options and warrants		1,477	1,622
Contributed surplus		1,096	1,058
Retained earnings (deficit)		551	228
Accumulated other comprehensive income		183	393
Equity attributable to owners of the Company		61,773	61,455
		97,428	95,306

20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of U.S. dollars, except per share data) (unaudited)

			Three months ended		Six months ended
			April 30		April 30
			2012	2011	2012	2011
			$	$	$	$
Revenues			17,873	16,988	34,512	33,323
Cost of revenues			5,401	4,538	10,601	9,237
Gross profit			12,472	12,450	23,911	24,086
Operating expenses
	Sales and marketing		5,480	5,135	9,873	9,767
	Research and development expenses		2,821	2,712	5,724	5,589
	General and administrative		3,387	3,443	7,035	6,880
			11,688	11,290	22,632	22,236
Operating income			784	1,160	1,279	1,850
Finance costs			359	220	669	524
Finance income			(22)	(272)	(44)	(248)
			337	(52)	625	276
Profit before income taxes			447	1,212	654	1,574
Income taxes			268	222	331	211
Net earnings			179	990	323	1,363
Other comprehensive income
	Foreign currency translation differences		1,106	1,697	(210)	1,623
Total comprehensive income for the period			1,285	2,687	113	2,986
Earnings per share
	Basic and Diluted		0.01	0.05	0.02	0.07

20-20 Technologies Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of U.S. dollars)  (unaudited)

		Three months ended		Six months ended
		April 30		April 30
		2012	2011	2012	2011
		$	$	$	$
OPERATING ACTIVITIES
Net earnings		179	990	323	1,363
Non-cash items
	Depreciation and amortization	746	735	1,527	1,549
	Leasehold inducements	(24)	(22)	(62)	(43)
	Stock-based compensation	240	38	344	57
	Accreted interest on long term debt	9	12	18	24
	Deferred taxes	(313)	(262)	(605)	(800)
	Interest expense, net	94	144	188	289
	Income taxes	581	484	936	1,011
	Unrealized forward exchange loss (gain)	80	(1)	474	42
	Changes in non-cash working capital items	(227)	(1,447)	(2,858)	(2,804)
	Cash from operating activities	1,365	671	285	688
	Interest paid	(94)	(141)	(218)	(377)
	Interest received	22	20	44	49
	Income taxes paid	(190)	(390)	(407)	(548)
Cash (used in) from operating activities		1,103	160	(296)	(188)
INVESTING ACTIVITIES
Business acquisition		-	(137)	-	(137)
Property and equipment - acquired		(330)	(382)	(543)	(596)
Intangibles - acquired		(41)	(527)	(136)	(555)
Proceeds from disposition of property and equipment		-	17	-	22
Other assets		(6)	(4)	(25)	(5)
Cash used in investing activities		(377)	(1,033)	(704)	(1,271)
FINANCING ACTIVITIES
Repayment of bank loan		-	(148)	-	(148)
Proceeds from issuance of long-term debt		-	105	-	105
Repayment of long-term debt		(554)	(2,770)	(747)	(4,078)
Warrants exercised		251	-	251	-
Common shares buyback		(24)	(28)	(92)	(28)
Cash  used in financing activities		(327)	(2,841)	(588)	(4,149)
Effect of changes in exchange rate oncash held in foreign currencies		187	835	29	1,064
Net increase (decrease) in cash and  cash equivalents		586	(2,879)	(1,559)	(4,544)
Cash and cash equivalents, beginning of period		9,217	13,016	11,362	14,681
Cash, end of period		9,803	10,137	9,803	10,137

 

 

Media Relations:
MaisonBrison Communications
Pierre Boucher
[phone]