ProductCenter Double-Digit Revenue Increase;
Continued Debt Repayment and Balance Sheet Improvement
LOWELL, Mass. — (BUSINESS WIRE) — January 15, 2015 — SofTech, Inc. (OTCQB: SOFT), a proven provider of Product Lifecycle Management (PLM) solutions today announced its second quarter fiscal year 2015 operating results. Revenue for the three months ended November 30, 2014 was approximately $1.03 million as compared to approximately $1.41 million for the same period in the prior fiscal year. The net loss for the current quarter was approximately ($379,000) or ($.44) per share compared to net income of approximately $514,000 or $.59 per share for the same period in the prior fiscal year. The prior year included a one-time gain from the sale of the CADRA product line of $649,000.
EBITDA for current quarter was approximately $(139,000) as compared to approximately $3,920,000 for the same period in fiscal year 2014. Nearly all of the EBITDA in the prior fiscal year was generated from the sale of the CADRA product line.
Revenue for the six months ended November 30, 2014 was approximately $1.89 million as compared to approximately $2.79 million for the same period in the prior fiscal year. The net loss for the first six months of the current fiscal year was approximately ($952,000) or ($1.08) per share compared to net income of approximately $248,000 or $.28 per share for the same period in the prior fiscal year. The prior year operating results included a one-time gain from the sale of the CADRA product line of approximately $649,000.
EBITDA for the first six months of the current fiscal year was $(507,000) as compared to approximately $3,786,000 for the same period in fiscal 2014. The EBITDA generated by the sale of the CADRA product line totaled approximately $3,910,000 (gain of $649,000 which included non-cash expenses of $3,261,000) in the six months ended November 30, 2013.
The sale of the CADRA product line was completed on October 18, 2013. Because the Company continued to market and support the technology as a reseller in Europe, the sale did not qualify for presentation as discontinued operations. The decline in revenue and profitability for the three and six month periods ended November 30, 2014 compared to the same periods in the prior fiscal year is directly attributable to the sale of the CADRA product line. The following summarizes total revenue by product line for each of the periods (in thousands, except %):
| For three months ended | |||||||||||||
|
11/30/2014 |
11/30/2013 |
$ | Change | % Change | |||||||||
| ProductCenter | $ | 862 | $ | 731 | $ | 131 | 17.9 | % | |||||
| CADRA | 130 | 637 | (507 | ) | -79.6 | % | |||||||
| Other | 35 | 46 | (11 | ) | -23.9 | % | |||||||
| Total revenue | $ | 1,027 | $ | 1,414 | $ | (387 | ) | -27.4 | % | ||||
| For six months ended | |||||||||||||
|
11/30/2014 |
11/30/2013 |
$ | Change | % Change | |||||||||
| ProductCenter | $ | 1,518 | $ | 1,469 | $ | 49 | 3.3 | % | |||||
| CADRA | 286 | 1,265 | (979 | ) | -77.4 | % | |||||||
| Other | 87 | 56 | 31 | 55.4 | % | ||||||||
| Total revenue | $ | 1,891 | $ | 2,790 | $ | (899 | ) | -32.2 | % | ||||
The ProductCenter product line had its best total revenue performance since the third quarter of fiscal 2010. Product revenue increased to $193,000 as compared to $43,000 for the same period in the prior year. For the last ten consecutive quarters immediately preceding the current quarter, ProductCenter product revenue has averaged $45,000 per quarter. Based on the current forecast, we anticipate continued improvement for this product line over the remainder of the fiscal year.
“The increased revenue from our ProductCenter technology and our progress with new product development make this a very exciting time at SofTech,” said Joe Mullaney, SofTech’s CEO. “Based on the forecast, I expect ProductCenter to end the fiscal year with its first revenue increase in eight years as the economy improves and several of our long standing customers expand the use of the technology. In addition, we are developing a new product for a new market that leverages the skillset of our existing engineers and expect to be in beta testing by the fourth quarter.”
“Our balance sheet continues to improve. In December 2014 we made our final principal payment on the debt facility connected to the March 2011 recapitalization transaction. During the recently completed quarter, we were able to attract an additional $300,000 in equity investment from the sale of common stock. We continue to make steady progress in transforming the Company”, he added.
FINANCIAL STATEMENTS
The Statements of Operations for the three and six month periods ended November 30, 2014 compared to the same periods in the prior fiscal year are presented below. A reconciliation of Net (loss) income to EBITDA, a non-GAAP financial measure, is also provided.
During the fourth quarter of fiscal 2014, we changed our accounting policy with regard to certain deferred payments we expect to receive from the sale of the CADRA product line. The effects of this change have been made retrospectively to the prior year three and six month periods ended November 30, 2013 in accordance with ASC 250, Accounting Changes and Error Corrections.
Statements of Operations (unaudited)
(in thousands,
except % and per share data)
| For the three months ended | ||||||||||||||||||
|
November 30,
|
November 30,
|
Change | ||||||||||||||||
| $ | % | |||||||||||||||||
| Product revenue | $ | 199 | $ | 376 | $ | (177 | ) | -47.1 | % | |||||||||
| Service revenue | 828 | 1,038 | (210 | ) | -20.2 | % | ||||||||||||
| Total revenue | 1,027 | 1,414 | (387 | ) | -27.4 | % | ||||||||||||
| Cost of sales | 469 | 292 | 177 | 60.6 | % | |||||||||||||
| Gross margin | 558 | 1,122 | (564 | ) | -50.3 | % | ||||||||||||
| Gross margin % | 54.3 | % | 79.3 | % | ||||||||||||||
| R&D | 222 | 304 | (82 | ) | -27.0 | % | ||||||||||||
| SG&A | 645 | 866 | (221 | ) | -25.5 | % | ||||||||||||
| Gain on sale of CADRA product line | - | (649 | ) | 649 | - | |||||||||||||
| Change in fair value of deferred payments | (21 | ) | - | (21 | ) | - | ||||||||||||
| Operating (loss) income | (288 | ) | 601 | (889 | ) | -147.9 | % | |||||||||||
| Interest expense | 63 | 104 | (41 | ) | -39.4 | % | ||||||||||||
| Other expense (income) | 28 | (17 | ) | 45 | -264.7 | % | ||||||||||||
| (Loss) income from operations before income taxes | (379 | ) | 514 | (893 | ) | -173.7 | % | |||||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||||
| Net (loss) income | (379 | ) | 514 | (893 | ) | -173.7 | % | |||||||||||
| Weighted average shares outstanding | 867 | 875 | (8 | ) | -0.9 | % | ||||||||||||
| Basic and diluted net income per share: | $ | (0.44 | ) | $ | 0.59 | $ | (1.03 | ) | -174.6 | % | ||||||||
| Reconciliation of Net (loss) income to EBITDA: | ||||||||||||||||||
| Net (loss) income | $ | (379 | ) | $ | 514 | $ | (893 | ) | -173.7 | % | ||||||||
| Plus tax expense | - | - | - | - | ||||||||||||||
| Plus interest expense | 63 | 104 | (41 | ) | -39.4 | % | ||||||||||||
| Plus non-cash expense related to product line sale | - | 3,261 | (3,261 | ) | - | |||||||||||||
| Plus other non-cash expenses | 177 | 41 | 136 | 331.7 | % | |||||||||||||
| EBITDA | $ | (139 | ) | $ | 3,920 | $ | (4,059 | ) | -103.5 | % | ||||||||
Statements of Operations (unaudited)
(in thousands,
except % and per share data)
| For the six months ended | |||||||||||||||
|
November 30,
|
November 30,
|
Change | |||||||||||||
| $ | % | ||||||||||||||
| Product revenue | $ | 270 | $ | 618 | $ | (348 | ) | -56.3 | % | ||||||
| Service revenue | 1,621 | 2,172 | (551 | ) | -25.4 | % | |||||||||
| Total revenue | 1,891 | 2,790 | (899 | ) | -32.2 | % | |||||||||
| Cost of sales | 877 | 634 | 243 | 38.3 | % | ||||||||||
| Gross margin | 1,014 | 2,156 | (1,142 | ) | -53.0 | % | |||||||||
| Gross margin % | 53.6 | % | 77.3 | % | |||||||||||
| R&D | 494 | 639 | (145 | ) | -22.7 | % | |||||||||
| SG&A | 1,362 | 1,747 | (385 | ) | -22.0 | % | |||||||||
| Gain on sale of CADRA product line | - | (649 | ) | 649 | - | ||||||||||
| Change in fair value of deferred payments | (60 | ) | - | (60 | ) | - | |||||||||
| Operating (loss) income | (782 | ) | 419 | (1,201 | ) | -286.6 | % | ||||||||
| Interest expense | 127 | 199 | (72 | ) | -36.2 | % | |||||||||
| Other expense (income) | 43 | (28 | ) | 71 | -253.6 | % | |||||||||
| (Loss) income from operations before income taxes | (952 | ) | 248 | (1,200 | ) | -483.9 | % | ||||||||
| Provision for income taxes | - | - | - | - | |||||||||||
| Net (loss) income | (952 | ) | 248 | (1,200 | ) | -483.9 | % | ||||||||
| Weighted average shares outstanding | 882 | 888 | (6 | ) | -0.7 | % | |||||||||
| Basic and diluted net income per share: | $ | (1.08 | ) | $ | 0.28 | $ | (1.36 | ) | -485.7 | % | |||||
| Reconciliation of Net (loss) income to EBITDA: | |||||||||||||||
| Net (loss) income | $ | (952 | ) | $ | 248 | $ | (1,200 | ) | -483.9 | % | |||||
| Plus tax expense | - | - | - | - | |||||||||||
| Plus interest expense | 127 | 199 | (72 | ) | -36.2 | % | |||||||||
| Plus non-cash expense related to product line sale | - | 3,261 | (3,261 | ) | - | ||||||||||
| Plus other non-cash expenses | 318 | 89 | 229 | 257.3 | % | ||||||||||
| EBITDA | $ | (507 | ) | $ | 3,797 | $ | (4,304 | ) | -113.4 | % | |||||
The Balance Sheet as of November 30, 2014 compared to the audited fiscal year-end Balance Sheet as of May 31, 2014 is presented below.
Balance Sheets
(in thousands)
| As of | |||||||||
|
November 30,
|
|||||||||
|
May 31,
|
|||||||||
| (unaudited) | |||||||||
| Cash | $ | 517 | $ | 1,209 | |||||
| Accounts receivable | 733 | 666 | |||||||
| Receivable due from sale of CADRA product line | 304 | 547 | |||||||
| Other current assets | 214 | 343 | |||||||
| Total current assets | 1,768 | 2,765 | |||||||
| Property and equipment, net | 76 | 95 | |||||||
| Goodwill | 948 | 948 | |||||||
| Other non-current assets | 845 | 916 | |||||||
| Total assets | $ | 3,637 | $ | 4,724 | |||||
| Accounts payable | $ | 283 | $ | 483 | |||||
| Accrued expenses | 303 | 607 | |||||||
| Deferred maintenance revenue | 1,172 | 1,462 | |||||||
| Current portion of long term debt | 851 | 973 | |||||||
| Other current liabilities | 19 | 19 | |||||||
| Total current liabilities | 2,628 | 3,544 | |||||||
| Other non-current liabilities | 55 | 47 | |||||||
| Long term debt | 120 | - | |||||||
| Total liabilities | 2,803 | 3,591 | |||||||
| Redeemable common stock | 1,190 | 275 | |||||||
| Stockholders' (deficit) equity | (356 | ) | 858 | ||||||
| Total liabilities, redeemable common stock | |||||||||
| and stockholders' (deficit) equity | $ | 3,637 | $ | 4,724 | |||||
About SofTech
SofTech, Inc. (OTCQB: SOFT) is a proven provider of product lifecycle management (PLM) solutions, including its ProductCenter® PLM solution.
SofTech’s solutions accelerate productivity and profitability by fostering innovation, extended enterprise collaboration, product quality improvements, and compressed time-to-market cycles. SofTech excels in its sensible approach to delivering enterprise PLM solutions, with comprehensive out-of-the-box capabilities, to meet the needs of manufacturers of all sizes quickly and cost-effectively.
Over 100,000 users benefit from SofTech software solutions and services, including General Electric Company, Goodrich, Honeywell, AgustaWestland and the U.S. Army. Headquartered in Lowell, Massachusetts, SofTech ( www.softech.com) has locations and distribution partners in North America, Europe, and Asia.
SofTech and ProductCenter are registered trademarks of SofTech, Inc. All other products or company references are the property of their respective holders.
Forward Looking Statements
This press release contains forward-looking statements relating to, among other matters, our outlook for fiscal year 2015 and beyond. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) generate sufficient cash flow from our operations or other sources to fund our working capital needs and growth initiatives; (2) maintain good relationships with our lenders; (3) comply with the covenant requirements of the loan agreement; (4) successfully introduce and attain market acceptance of any new products and/or enhancements of existing products; (5) attract and retain qualified personnel; (6) prevent obsolescence of our technologies; (7) maintain agreements with our critical software vendors; (8) secure renewals of existing software maintenance contracts, as well as contracts with new maintenance customers; and (9) secure new business, both from existing and new customers.
These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. The Company undertakes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.
Use of Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains non-GAAP financial measures. Specifically, the Company has presented EBITDA, which is defined as Net income (loss) plus interest expense, tax expense, non-cash expenses such as depreciation, amortization and the goodwill write-off related to the sale of our CADRA product line, non-cash loss (gain) and stock based compensation expense. The Company believes that the inclusion of EBITDA helps investors gain a meaningful understanding of the Company’s core operating results and enhances comparing such performance with prior periods, without the effect of non-operating expenses and non-cash expenditures. Management uses EBITDA, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. EBITDA is also the most important measure of performance in measuring compliance with the Company’s debt facility. EBITDA is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of EBITDA to the most directly comparable GAAP financial measures are set forth in the text of, and the accompanying tables to, this press release.
Contact:
SofTech, Inc.
Joseph P. Mullaney, 978-513-2700
President &
Chief Executive Officer