Matrikon(TM) releases record results for the first quarter of fiscal 2010 and
declares $0.03 quarterly dividend
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Highlights
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- Record revenue of $25.45 million in Q1-10, representing growth of 30%
compared to Q1-09 revenue of $19.58 million
- Record consulting revenue of $13.19 million in Q1-10 compared to
$12.15 million in Q1-09
- Q1-10 net income of $2.77 million or $0.09 per share compared to
$2.76 million or $0.09 per share in Q1-09
- Several significant recent wins, including both high value consulting
and industry applications, along with a growing pipeline, indicate
strategy is bearing results and are expected to fuel growth throughout
the year
- Board of directors declares quarterly dividend of $0.03 per common
share
Matrikon president and CEO Nizar J. Somji commented on the quarter: "Riding on the momentum from activity that started to pick up late in Q4-09, our first quarter places us back on track. Some of our recently announced contract wins resulted in record consulting and equipment revenue and strong software revenue in the quarter. We expect that as we continue to execute these contracts and close other opportunities in our pipeline, we will continue to grow our top line and profitability throughout this fiscal year and beyond.
"These record results demonstrate the turning point we have reached as a company; we have built a sustainable business model based on high value consulting engagements and our integrated industry solutions. As a long-term business strategy, we expected it to bear fruit in the last fiscal year. However, the global economic downturn set things back by a year. Our results are now back on track and we expect projects of the magnitude we have announced recently to become the new norm rather than one-off occurrences as we continue to execute our strategy."
Revenue for the first quarter was a record
Matrikon's board of directors declared a quarterly dividend of
Additional Highlights:
- Consulting revenue increased by $1.04 million over Q1-09 and by
$2.32 million compared to Q4-09 as a result of new project wins which
led to improved utilization and a 6% increase in average daily rate
compared to Q1-09 and 18% compared to Q4-09.
- Record Equipment revenue: Equipment revenue was a record $5.63 million
in Q1-10 as we delivered a significant portion of the equipment (third
party hardware and software) on our major industrial security project.
We continue to work on the consulting components of this project. With
a lower margin than other revenue lines, this significant increase in
equipment revenue shifted our revenue mix and impacted both gross and
net margin.
- Subsequent to the quarter, we won and announced a US$15.7 million
contract to build a remote oil field monitoring program for a Middle
East oil company based on Matrikon's Well Performance Monitor industry
application. Also subsequent to the quarter, we announced a (euro)4.2
million contract win with Statoil to deliver Well Performance Monitor
to 35 offshore assets on the Norwegian Continental Shelf. These recent
wins, along with ongoing work with other global clients, establish
Matrikon as the vendor of choice for intelligent field solutions.
- During the quarter, we received additional change orders totaling
US$2.13 million on the US$14.61 million contract to deliver the
network foundation for cyber security for a major United States
electricity producer. We also entered a corporate license agreement
for our Control Performance Monitor and Alarm Manager products with a
major European chemicals company. The contract is worth approximately
(euro)1.36 million in software and services.
- Products revenue (comprised of software license and support revenue)
increased 4% compared to Q1-09 and 14% compared to Q4-09. Off-the-
shelf product sales grew 38% and support revenue increased 4% compared
to Q1-09. The new corporate license agreement with the major European
chemicals company mentioned above comprised the majority of this
increase. Industry application sales, which were depressed throughout
the latter half of FY-09 due to economic conditions, have begun to
gain traction again. While revenue from industry applications was
minimal in the quarter, we expect it to pick up significantly as we
begin to implement recently won projects.
- Gross margin was 54% in Q1-10, compared to 61% in Q1-09 and 54% in
Q4-09. Gross margin was significantly impacted by elevated equipment
revenue in Q1-10, which has a lower gross margin than other revenue
lines. The impact was a 7 percent point reduction, compared to a
typical gross margin impact of 1 to 2 percent. Combined overhead
expenses in Q1-10 were $9.58 million compared to $9.32 million in Q1-
09 and $8.92 million in Q4-09. Sales and marketing expenses were up
27% from Q1-09, as we continue to invest in sales and marketing to
drive top-line growth.
MD&A and Financial Statements
The MD&A and Financial Statements for the current quarter can be found on Matrikon's website at http://www.matrikon.com/about/corporate/investors/financial/q-reports.aspx or by contacting
Conference Call and Webcast
Matrikon President and CEO, Nizar J. Somji and CFO
A replay will be available until
The conference call will also be webcast and podcast (live and archived) at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2904880
About Matrikon
Matrikon (www.matrikon.com) provides industrial software solutions to process control industries, empowering their clients to achieve operational excellence. Matrikon products transform production data into knowledge and action that enable users to maximize performance while managing risk. With offices throughout
Matrikon is a registered trademark of Matrikon Inc.
Forward Looking Statements
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In order to provide our investors with an understanding of our current results and future prospects, our communications often include written or oral forward-looking statements. This new release, our MD&A, and other materials filed with the Canadian securities regulators contain statements that are forward-looking. These statements are made pursuant to the "safe harbor" provisions of applicable Canadian securities legislation. These statements represent Matrikon's intentions, plans, expectations and beliefs and are based on our experience and our assessment of historical and future trends and the application of key assumptions relating to future events and circumstances. These statements may include, but are not limited to, comments about: our objectives and priorities for 2010 and beyond, our strategies, expectations for our financial condition, the outlook for our operations, and external factors that may impact results, including global economies and industry trends.
Forward-looking statements require assumptions and involve risks and uncertainties related to our business and the general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from the targets, expectations, estimates or intentions expressed in the forward-looking statements. We caution readers of this news release and our MD&A not to place undue reliance on our forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic conditions in the countries in which we operate; currency fluctuations; market demand for our products and services; our ability to execute projects and deliver solutions; our ability to execute our strategic plans and to complete and integrate acquisitions; the degree of competition in the geographic and business areas in which we operate; our ability to attract and retain qualified employees and contain payroll costs; our ability to contain expenses; technological changes and research and development; the length of the sales cycle required to close larger solution contracts; availability of financial resources to carry out our strategy; our ability to protect our intellectual and intangible properties; legal claims; critical accounting estimates; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; and disruptions to public infrastructure, such as transportation, communications, power or water supply. We caution that this list is not exhaustive of all possible factors.
Other factors could adversely affect our results. For more information, please see the discussion on the principal risks that could affect our results on pages 45 - 48 of Matrikon's 2009 Annual Report.
The assumptions in this news release and MD&A pertaining to: our positive outlook for the remainder of 2010, our belief that business opportunities remain strong, and our expected effective tax rate to be in the range of 27% to 32% include: global economic and political stability at current levels, that certain opportunities in our pipeline will materialize as contracts, that our clients will continue to invest in initiatives that support efficiency and reduce costs, foreign exchange rates do not fluctuate excessively, and that we will continue to be able to inspire, motivate and maintain our employee base at a sufficient level to deliver on our objectives.
When relying on forward-looking statements to make decisions with respect to Matrikon, investors should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Unless required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the company or on its behalf.
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Management's Discussion and Analysis
January 11, 2010
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The following Management's Discussion & Analysis should be read in conjunction with the financial statements and notes to the consolidated financial statements for the quarter ended
Matrikon's Board of Directors, on the recommendation of the Audit Committee, approved the content of this MD&A on
All dollar amounts included in this MD&A are Canadian dollars unless otherwise specified.
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Non-GAAP Measures
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We refer to terms that are not specifically defined in the CICA Handbook and do not have any standardized meaning prescribed by GAAP. These non-GAAP measures may not be comparable to similar measures presented by other companies.
We believe that these non-GAAP measures are useful in assisting investors in understanding components of our financial results. The non-GAAP terms that we refer to in this analysis are defined below.
Gross margin is our total revenue minus the cost of sales, divided by the total revenue, and is expressed as a percentage. This measure is used to indicate the relative efficiency with which we earn revenue. Gross margin is a percentage based on two GAAP measures and as such has no quantitative reconciliation. Gross margin within our segmented reporting includes intercompany revenue/expenses as part of total revenue.
Net margin is our total net income (loss) divided by total revenue and is expressed as a percentage. This measure is used to indicate the relative efficiency with which we earn net income. Net margin is a percentage based on two GAAP measures and as such has no quantitative reconciliation.
Utilization or utilization rate measures the billable time for each employee against the total available time, based on a standard 260 work days per year and is expressed as a percentage. Utilization is used to demonstrate capacity to increase output rate in our Solutions business without adding resources. Utilization is a measure of working capacity and not a financial measure and therefore has no reconciliation to GAAP.
Average daily rate is consulting revenue divided by billable people multiplied by utilization rate divided by working days available in the period described. This measure is used by management to monitor overall project profitability and as an indication of progress in the transition of our business to higher margin engagements based on Matrikon technology. Average daily rate is based on non-financial measures and has no reconciliation to GAAP.
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Other Information
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Additional information about Matrikon, including our annual information form, information circular and quarterly reports, is available on SEDAR at www.sedar.com and in the investor relations section of our website at www.matrikon.com/investors.
Comparative Figures
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We have reclassified certain figures for FY-09 and Q1-09 to reflect the financial presentation adopted in the current quarter.
Strategic Progress Update
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Note: This section is forward-looking by nature. It is qualified entirely by the Forward-Looking Statements disclaimer at the beginning of this MD&A. It is also qualified by the principal risks that could affect our business (see pages 45 - 48 of our 2009 Annual Report).
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Each year, we present a set of performance indicators to communicate our priorities and serve as a benchmark to measure our progress against our strategy. The following table shows our progress on the performance indicators and objectives we set for 2010.
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2010 Objectives On 3 Month Results
Track?
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Grow top line while Yes - Revenue increased 44% to
maintaining $25.45 million in Q1-10
profitability compared to Q4-09
- Net income increased 466%
compared to Q4-09 as a result of
record Solutions revenue
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Continue building In - Intuition integration with
Matrikon Suite Progress Matrikon Suite applications
applications on the continues
Intuition platform
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Revenue from licenses In - Software license and support
& support at 35-40% Progress revenue was 25% of total revenue
of total revenue in Q1-10 (significant equipment
revenue skewed Q1- 10 results)
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Continue to sell and In - Well Performance Monitor: one new
deploy industry Progress corporate client
applications - Mobile Equipment Monitor: one new
pilot site
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Items of Note in Q1-10
- Record Consulting revenue: In Q1-10, we achieved record consulting
revenue of $13.19 million compared to $12.15 in Q1-09 million and
$10.87 million in Q4-09 as a result of higher utilization in our North
America region and increased average daily rates globally. Average
daily rate increases are a result of our shifting focus to high value
consulting engagements and integrated industry application
development.
- Record Equipment revenue: Equipment revenue was a record $5.63 million
in Q1-10 as we delivered a significant portion of the equipment (third
party hardware and software) on our major industrial security project.
We continue to work on the consulting components of this project. With
a lower margin than other revenue lines, this significant increase in
equipment revenue shifted our revenue mix and impacted both gross and
net margins.
- Significant contracts: During the quarter we received change orders,
adding US$2.13 million to the US$14.61 million contract to deliver the
network foundation for cyber security for a major United States
electricity producer. We also entered a corporate license agreement
for our Control Performance Monitor and Alarm Manager products with a
major European chemicals company. The contract is worth approximately
(euro)1.36 million in software and consulting. Subsequent to the
quarter, we won and announced a US$15.7 million contract to build a
remote oil field monitoring program for a Middle East oil company
based on Matrikon's Well Performance Monitor industry application.
Also subsequent to the quarter, we announced a (euro)4.2 million
contract win with Statoil to deliver Well Performance Monitor to 35
offshore assets on the Norwegian Continental Shelf. These recent wins,
along with ongoing work with other global clients, establish Matrikon
as the vendor of choice for intelligent field solutions.
- Costs in line with expectations: Overhead expenses represented 38% of
our revenue, compared to 48% in Q1-09 and 51% in Q4-09.
- Foreign exchange: In Q1-09, the Canadian dollar gained strength
compared to the US dollar, which resulted in a $0.21 million loss,
compared to a $1.14 million gain in Q1-09 and a $0.005 million gain in
Q4-09.
- Gross margin: Gross margin was 54% in Q1-10, compared to 61% in Q1-09
and 54% in Q4-09. Gross margin was significantly impacted by elevated
equipment revenue in Q1-10, which has a lower gross margin than other
revenue lines. The impact was a 7 percent point reduction to gross
margin, compared to a typical gross margin impact of 1-2 percent
points.
Summary of Results
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3 Months 30-Nov-09 30-Nov-08 31-Aug-09 Q1-10 Q1-10
Ended % % % vs vs
(CAD $000s) (Q1-10) revenue (Q1-09) revenue (Q4-09) revenue Q1-09 Q4-09
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Total
Revenue $25,450 100% $19,579 100% $17,622 100% 30% 44%
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Consulting
fees 13,190 52% 12,152 62% 10,866 61% 9% 21%
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Margin on
consulting
fees 44% 45% 34%
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Equipment
sales 5,632 22% 1,016 5% 993 6% 454% 467%
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Margin on
equipment
sales 31% 25% 22%
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Total
Solutions
revenue 18,822 74% 13,168 67% 11,859 67% 43% 59%
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Software
license
fees 3,738 14% 3,693 19% 3,041 17% 1% 23%
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Margin on
software
license
fees 99% 97% 99%
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Support 2,729 11% 2,521 13% 2,653 15% 8% 3%
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Margin on
support 89% 98% 88%
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Total
Products
revenue 6,467 25% 6,214 32% 5,694 32% 4% 14%
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Interest
income 161 1% 197 1% 69 1% (18%) 133%
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Consulting
headcount 295 275 269 7% 10%
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Gross
margin 54% 61% 54%
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Total
Expenses 9,579 38% 9,324 48% 8,919 51% 3% 7%
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Consulting 1,299 5% 1,668 9% 1,653 9% (22%) (21%)
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Sales &
marketing 2,329 9% 1,836 9% 2,007 11% 27% 16%
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Research &
development 1,560 6% 1,410 7% 1,235 7% 11% 26%
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General &
admini-
strative 3,822 15% 3,716 19% 3,360 19% 3% 14%
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Operations
headcount 275 270 254 2% 8%
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Stock-based
compensation 92 0% 318 2% 369 2% (71%) (75%)
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Amortization 477 2% 376 2% 295 2% 27% 62%
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Foreign
exchange
translation
gain (loss) (208) -1% 1,144 6% 5 0% (118%) (4260%)
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Net income 2,768 11% 2,757 14% 489 3% 0% 466%
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Earnings
per share
- basic 0.09 0.09 0.02 0% 350%
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Earnings
per share
- diluted 0.09 0.09 0.02 0% 350%
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Weighted
average
shares
outstanding
(000s) 31,298 30,949 30,936 1% 1%
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Total
assets 67,269 64,454 62,119 4% 8%
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Total
long term
liabilities 500 134 129 273% 288%
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Deferred
revenue 6,670 8,573 8,292 (22%) (20%)
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Contracts in
progress 7,049 6,070 6,894 16% 2%
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Note: This section is forward-looking by nature. It is qualified entirely
by the Forward-Looking Statements disclaimer at the beginning of this
MD&A. It is also qualified by the principal risks that could affect our
business (see page 45 - 48 of our 2009 Annual Report).
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Revenue
Total Solutions revenue (comprised of Consulting and Equipment revenue) increased by
The increase in our consulting fees is mainly attributed to our North American region as our Network Security business unit began executing on two large contracts won in Q4-09.
Total Products revenue (comprised of Software License and Support revenue) increased by 4% compared to Q1-09 and 14% compared to Q4-09. Off-the-shelf product sales increased by 38%. We entered a corporate license agreement with a major European chemicals company for Control Performance Monitor and Alarm Manager in the quarter, which contributed to this increase. Industry application sales, which were depressed throughout the latter half of FY-09 due to economic conditions, have begun to regain traction. While revenue from industry applications was minimal in the quarter, with recent large wins, we expect this revenue stream to grow throughout FY2010 as we execute these projects and close other opportunities in our pipeline. Support revenue grew by 8% compared to Q1-09 and by 3% compared to Q4-09.
Gross Margin
Gross margin in Q1-10 was 54%, compared to 61% in Q1-09 and 54% in Q4-09. Gross margin in Q1-10 was heavily influenced by exceptionally strong equipment sales of
Quarterly gross margin of 54% was comprised of 99% gross margin on software license revenue, 89% on support revenue, 44% on consulting revenue and 31% on equipment revenue.
Overhead Expenses
Combined overhead expenses in Q1-10 were
Despite a slight increase in headcount, consulting G&A decreased compared Q1-09 and Q4-09 due to a reduction in travel, general employee expenses and office expenses.
We have continued our investment in sales and marketing to support top line growth. We increased sales and marketing headcount by 12 compared to Q1-09 and 10 compared to Q4-09. Sales and marketing costs increased by 27% compared to Q1-09 and 16% compared to Q4-09 due to added staff and related rent allocations.
Research and development increased 11% compared to Q1-09 and 26% compared to Q4-09. During Q1-09, a Canadian Scientific Research and Experimental Development ("SR&ED") claim from a prior year was approved, resulting in an incremental reduction of R&D expenses of
General and administrative expenses had a small increase of 3% compared to Q1-09, but increased by 14% compared to Q4-09 as a result of increased general office expenses and professional fees.
Net Income
With record net income of
The following factors contributed positively to the Q1-10 net margin:
- Record total revenue as we continue to shift our business model to
high value consulting engagements. This shift, evidenced by several
recent large project wins, contributed to improvements in utilization
and average daily rate, strong consulting revenue margins of 44% and
overhead expenses that are in-line with our target range as a
percentage of revenue.
- Continued growth in high margin support revenue in the quarter.
- Recovery of income tax credits associated with research and
development programs in Canada and the United Kingdom.
- Decreases in stock-based compensation expenses compared to Q1-09 and
Q4-09 as the majority of Restricted Share Units (RSUs) have vested.
These positive influences to net income were offset by the significant increase in lower margin equipment revenue and a foreign exchange loss of
The following tables show the percentage of revenue by the various currencies in which we do business, and the period-end exchange rates.
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% Billings by Currency Period End Exchange
(3 Months Ended) Rate for $1.00 CAN
-------------------------- --------------------------
Q1-10 Q1-09 Q4-09 Q1-10 Q1-09 Q4-09
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Australian Dollar 31% 21% 26% 0.9638 0.8129 0.9190
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British Pound 10% 11% 20% 1.7538 1.9071 1.7772
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Canadian Dollar 7% 18% 20% 1.0000 1.0000 1.0000
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Euro 5% 2% 2% 1.5926 1.5747 1.5625
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United States Dollar 46% 47% 32% 1.0620 1.2402 1.0920
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Other Currencies 0% 1% 0% - - -
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Comprehensive Income
Other comprehensive income accounts for currency translation related to our self-sustaining foreign operations and resulted in a foreign currency gain of
Segment Results
We report four strategic business segments based on how we monitor and assess performance internally:
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3 Months Ended
November 30,
2009
North Asia-
CAN$ (000s) America Pacific EMEA Products Corporate Total
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External
revenue 12,537 5,435 5,425 2,053 - 25,450
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Intercompany
revenue (cost
of sales) (473) (177) (1,133) 1,783 - -
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% of revenue 49% 21% 21% 8% - 100%
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Gross profit 5,605 2,245 2,717 3,226 - 13,793
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Gross margin 46% 43% 63% 84% 54%
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Expenses (1,659) (1,833) (1,452) (2,144) (2,491) (9,579)
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Other income
(loss) &
foreign
exchange gain
(loss) (3) (12) 15 - (219) (219)
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Income (loss)
before taxes 3,943 400 1,280 1,082 (2,710) 3,995
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Employees at
November 30,
2009 146 138 127 107 52 570
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3 Months Ended
November 30,
2008
North Asia-
CAN$ (000s) America Pacific EMEA Products Corporate Total
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External
revenue 8,103 4,918 4,552 2,006 - 19,579
Intercompany
revenue
(expenses) (877) (194) (496) 1,567 - -
% of revenue 41% 25% 23% 10% - 100%
Gross profit 3,960 2,197 2,643 3,067 - 11,867
Gross margin 55% 47% 65% 86% - 61%
Expenses (1,770) (1,633) (1,615) (1,922) (2,384) (9,324)
Other income
(loss) &
foreign
exchange gain
(loss) (162) 125 161 - 1,155 1,279
Income (loss)
before taxes 2,028 689 1,189 1,145 (1,229) 3,822
Employees at
November 30,
2008 144 137 84 113 67 545
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North America: External revenue in the
In Q1-10 we began execution on the large contracts with the power and utility companies won in Q4-09 which has resulted in record Solutions (consulting & equipment) revenue. The increase in revenue is primarily attributed to equipment sales of
Software revenue increased by 13% compared to Q1-09 and 11% compared to Q4-09, due to strong sales of our off-the-shelf products.
Gross margin was lower at 46% compared to 55% in Q1-09 and 48% in Q4-09 as equipment sales made up 39% of the sales mix. The lower gross margin was offset by lower direct salaries as we are now utilizing the bench strength from our Professional Development Excellence program for which we began investment in Q3-09. Gross margins also decreased slightly compared to Q4-09 as commissions expense increased.
Overhead expenses have remained consistent with prior quarters.
Asia-Pacific: First quarter results were positively impacted by the strengthening of the Australian dollar compared to the Canadian dollar (0.9190 at
In natural currency, consulting revenue remained consistent compared to Q1-09 and Q4-09. Utilization increased 4% compared to Q1-09 and 15% compared to Q4-09, while the daily average rate increased 12%. On
Gross margin declined compared to Q1-09 as software revenue declined 41%, while all other costs of sales remained consistent with prior periods.
Overhead expenses remained consistent compared to prior periods in natural currency as we integrated the IAC business with existing Asia-Pacific operations; however, in Canadian dollars, overhead expenses increased 12% compared to Q1-09 and 13% compared to Q4-09 due to currency fluctuations.
EMEA: EMEA's external revenue increased 19% compared to Q1-09 and 18% compared to Q4-09. In natural currencies, external revenue increased 7% and 10%, respectively.
Strong software sales in
Consulting margins declined by 11 percent points compared to Q1-09 and was consistent with Q4-09. Consulting revenue remained consistent throughout EMEA in natural currencies.
Overhead expenses declined 10% compared to Q1-09 and increased by 12% compared to Q4-09 due to lower salary expenses, and non-recurring employee and professional expenses related to relocation costs to support growth in the
Products: External revenue in the Products segment represents direct software license and support sales and implementation services executed by the Products group. Intercompany revenue represents the software license and support fees paid by the other segments.
External revenue increased 2% compared to Q1-09, but was down 13% compared to Q4-09. Total revenue, including intercompany revenue, increased 7% compared to Q1-09 and 6% compared to Q4-09 as a result of increased software license sales in
Overhead expenses increased 12% compared to Q1-09 as result of increases in marketing investments and rent. Compared to Q4-09, overhead expenses decreased 8% as a result of a decrease in headcount.
In Q1-10, off-the-shelf software license revenue increased 38% compared to Q1-09 and 19% compared to Q4-09.
Corporate: The Corporate segment includes all shared corporate services (including executive management, finance, information technology and human resources) that are not allocated to other segments. In addition, the Corporate segment includes stock-based compensation, other income or expenses, foreign exchange translation gains and losses and amortization. Expenses in this segment fluctuate period by period based on corporate activity and foreign exchange rate fluctuations.
Corporate expenses increased 4% compared to Q1-09 and 15% compared to Q4-09. Corporate expenses in the comparative periods were reduced by SR&ED tax credits, which are recorded as an expense recovery in the quarter they are received. Excluding SR&ED credits, overhead expenses decreased 13% compared to Q1-09 and by 2% compared to Q4-09. Headcount since Q1-09 has decreased by 22%, contributing to the reduction in expenses.
The Corporate segment was impacted by a shift in foreign exchange in Q1-10, which resulted in a translation loss of
While amortization increased slightly, the increase was more than offset by a significant reduction in stock-based compensation expense as historic stock option programs near the end of their vesting periods.
Quarterly Results
The following table presents a summary of our unaudited consolidated operating results for the past eight quarters. This information should be read in conjunction with the applicable interim financial statements, notes to the financial statements and management's discussion and analysis.
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CAN $000s
except per
share FY 08 FY 09 FY 10
amounts Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
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Revenue 19,444 20,536 20,162 19,579 19,661 16,376 17,622 25,450
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Gross
profit 10,533 11,533 11,903 11,867 11,635 8,107 9,446 13,793
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Gross
margin 54% 56% 59% 61% 59% 50% 54% 54%
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Operating
income
(loss) 2,617 3,103 2,842 2,543 1,943 (1,770) 528 4,214
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Net income
(loss) 1,809 2,467 2,583 2,757 2,027 (2,959) 489 2,768
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Net margin 9% 12% 13% 14% 10% -18% 3% 11%
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Shares
outstand-
ing
(000s) 30,440 30,548 30,636 30,949 30,968 30,932 30,936 31,298
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Diluted
shares
outstand-
ing
(000s) 31,340 31,467 31,494 31,649 31,622 30,932 31,302 31,524
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EPS (loss)
- basic 0.06 0.08 0.09 0.09 0.07 (0.10) 0.02 0.09
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EPS (loss)
- diluted 0.06 0.08 0.08 0.09 0.06 (0.10) 0.02 0.09
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Headcount 501 506 521 545 542 559 523 570
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Management has not noted any change to the seasonality of our business as
reported in the 2009 annual MD&A.
Liquidity & Capital Resources
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At Q1-10 vs Q1-10 vs
(CAN $ 000s except Q4-09 Q1-09
ratios) 30-Nov-09 30-Nov-08 31-Aug-09 % Change % Change
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Cash & equivalents 5,165 10,551 8,734 (41%) (51%)
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Accounts receivable 29,287 25,067 23,456 25% 17%
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Trade receivables 22,133 19,690 15,790 40% 12%
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Average collection
period (trade
receivables) 88 days 81 days 92 days -4 days 7 days
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Contracts in progress 7,049 6,070 6,894 2% 16%
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Deferred revenue 6,670 8,573 8,292 (20%) (22%)
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Current liabilities 21,417 19,763 18,328 17% 8%
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Cash flow from
operations (932) (554) 1,180 179% (68%)
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Note: This section is forward-looking by nature. It is qualified entirely
by the Forward-Looking Statements disclaimer at the beginning of this
MD&A. It is also qualified by the principal risks that could affect our
business (see pages 45 - 48 of our 2009 Annual Report).
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The rolling 12-month average collection period (on trade receivables) was 88 days at the end of Q1-10, an improvement of 4 days compared to the end of Q4-09. This improvement is the result of a continued focus on collections. The average collection period at the end of Q1-10 is 7 days longer compared to the end of Q1-09. This is a result of increased revenues and the trend toward longer payment cycles that many of our clients adopted during the global economic slowdown.
Current liabilities increased to
Cash used in operations was
Our overall cash position declined
Our effective income tax rate was 30.7% in Q1-10 compared to 27.9% in Q1-09. This is within our expected range of 27% to 32%.
Management believes that we have the capital resources and liquidity necessary to meet our commitments, support our operations and finance our current growth strategies.
Acquisitions
Acquisitions completed subsequent to
On
On
Off Balance Sheet Arrangements
Matrikon is a lessee under several operating type leases for office space, office equipment and motor vehicles and is also a party to research funding arrangements with educational institutions in
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Payment Due
Less than After
At Nov 30, 2009 Total 1 year 2-3 years 4-5 years 5 years
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Operating lease
obligations
(CAN $000s) 5,974 2,451 3,233 290 -
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Other long term
obligations
(CAN $000s) 100 100 -
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Foreign exchange
forward contracts
(US $000s) - -
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Total contractual
obligations 6,074 2,551 3,233 290 -
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Normal Course Issuer Bid
Matrikon announced a normal course issuer bid on
During the three months period ended
Share Data
Matrikon is listed on the
Critical Accounting Estimates
These interim financial statements were prepared with the same critical accounting estimates and methods as fiscal year 2009 (please see pages 42 - 44 of Matrikon's annual MD&A for the fiscal year ended
- 1582 - Business Combinations
- 1601 - Consolidated Financial Statements
- 1602 - Non-Controlling Interests
- 3251 - Equity
- 1506 - Accounting Changes
- 3855 - Financial Instruments - Recognition and Measurement
Recent Accounting Pronouncements Issued and Not Applied
Comprehensive Revaluation of Assets and Liabilities
In
Financial Instruments - Disclosure
In
Convergence with International Financial Reporting Standards
Canada's Accounting Standards Board ratified a strategic plan that will result in GAAP, as currently used by Canadian public companies, being evolved and converged with IFRS over a transitional period to be completed by 2011. The official changeover date to IFRS is for interim and annual financial statements related to fiscal years commencing on or after
In addressing the impact and implementation of IFRS, we have completed preliminary planning and scoping and are currently working with external consultants to establish a detailed assessment of the conversion process. As of
We expect the implementation process and solutions development to be finalized before the end of fiscal 2010 in time to enable the recording of transactions under IFRS for comparative reporting purposes in 2012. At this time, we are not able to quantify the full financial reporting impact of the differences between Canadian GAAP and IFRS on our operations, except for the adoption of CICA Handbook section 1582. We will continue to assess the impact of the proposed standards on the consolidated financial statements and disclosure as additional information becomes available.
Risks Related to Our Business
There has been no significant change in our risk factors from those described in our 2009 Annual Report. Please see pages 45 - 48 of Matrikon's 2009 Annual Report.
Internal Control over Financial Reporting and Disclosure Controls
Management has evaluated whether there were changes in our Internal Controls over Financial Reporting (ICFR) during the three month period ended
At
Please see pages 45 - 48 of Matrikon's 2009 Annual Report for a discussion of internal controls over financial reporting and disclosure controls.
Subsequent Events
Subsequent to the quarter, our Board of Directors declared a dividend of
About Matrikon
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Founded in 1988, Matrikon is a growing international provider of
integrated industrial intelligence solutions that enable our industrial
customers to improve operating efficiency. Solutions include data
acquisition and storage, data analysis for plant optimization, decision
support systems, data connectivity and web delivered data presentation
for improved collaboration.
Matrikon is one of the largest industrial solution integrators in North
America with a client base diversified across a number of industries,
including oil and gas, power, forestry pulp and paper, refining and
petrochemicals and mining and mineral processing.
At November 30, 2009, Matrikon had 570 employees, including 98 in
corporate and administrative services, 78 in sales and marketing, 101 in
product development and support, and 293 in professional services
(Solutions).
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For further information: Nicole Sayler, Corporate Communications Director, (780) 945-4010, (877) 628-7456 x 4010, email: [email protected]
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