SofTech Announces Q4 and FY 2013 Operating Results

Q4’13 Revenue Increase of 3.4% vs. Q4’12;

Q4’13 EBITDA Increase of Nearly 38% vs. Q4’12; &

FY’13 EBITDA Increase of 9.4% vs. FY’12

LOWELL, Mass. — (BUSINESS WIRE) — August 28, 2013 — SofTech, Inc. (OTCQB: SOFT), a proven provider of Product Lifecycle Management (PLM) solutions today announced its fourth quarter and fiscal year 2013 operating results. Revenue for the three months ended May 31, 2013 was approximately $1.56 million, an increase of more than 3% from the same period in the prior fiscal year. This was the first fiscal quarter since August 31, 2007 in which the Company experienced an increase in its quarterly revenue when compared to the same period in the prior fiscal year, excluding the revenue increase resulting from the sale of patents in Q1 and Q2 of fiscal year 2013. Net income(loss) for the current quarter was about ($51,000) or ($.05) per share compared to net income of $67,000 or $.07 per share for the same period in the prior fiscal year. Included in the current quarter operating results were the following non-recurring charges related to our Q4’13 debt refinancing:

a) Included in SG&A, a non-cash charge of $108,000 of unamortized debt issuance costs from our previous debt facility that was fully repaid during the quarter; and

b) Included in Interest expense, an accrual of $75,000 as an estimate of payments due our former lender equal to 1.5% of quarterly revenue for each of the first three fiscal quarters of 2014.

EBITDA for current quarter was about $292,000 as compared to about $212,000 for the same period in fiscal year 2012, an increase of 37.7%.

Revenue for fiscal year 2013 was approximately $6.36 million, down approximately 1.2% from the prior fiscal year. Net income for fiscal year 2013 was $360,000 or $.35 per share as compared to a net income of $444,000 or $.45 per share for the prior fiscal year. Fiscal year 2013 results included the above detailed non-recurring expenses totaling $183,000 related to the refinancing of our debt facility. EBITDA for fiscal year 2013 was approximately $1.12 million as compared to about $1.03 million for fiscal year 2012, an increase of about 9.4%.

Commenting on current year performance, Joe Mullaney, SofTech CEO since the March 2011 Recapitalization Transaction (described in the Form 10-K), said: “Fiscal 2013, our second full fiscal year since the Recapitalization Transaction, represented significant improvement on multiple fronts in our business including the following:

  • Experienced the first revenue increase in a current year quarter compared to prior year quarter from products and services since the quarter ended August 31, 2007;
  • Continued our investment in new products;
  • Won four new customers for our subscription based, Connector technology;
  • Increased EBITDA by more than 9%, cash flow from operations improved by a multiple of 10 times;
  • Secured a multi-million dollar, long term debt facility with reduced borrowing rates and principal repayments for two years;
  • Repurchased 16% of our outstanding shares in June 2013 (unregistered restricted shares held by largest shareholder); and
  • Aggressively pursued other alternatives for enhancing shareholder value while improving profitability.

In summary, we achieved organic revenue growth in Q4’13, strengthened our partnership agreement, improved our balance sheet while significantly increasing operating cash flows. Overall, a solid fiscal year and one that we believe we can continue to improve upon.”

FINANCIAL STATEMENTS
The Statements of Operations for the three and twelve month periods ended May 31, 2013 compared to the same periods in the prior fiscal year are presented below. A reconciliation of Net income(loss) to EBITDA, a non-GAAP financial measure, is also provided.

Statements of Operations
(in thousands, except % and per share data)
                     
For the three months ended
May 31, May 31, Change
2013     2012       $     %
Product revenue $ 347 $ 255 $ 92 36.1 %
Service revenue 1,211 1,252 (41 ) -3.3 %
Royalties on sale of patents   -         -           -       -  
Total revenue   1,558         1,507           51       3.4 %
 
Cost of sales   363         330           33       10.0 %
Gross margin 1,195 1,177 18 1.5 %
Gross margin % 76.7 % 78.1 %
 
R&D 288 285 3 1.1 %
SG&A   795         729           66       9.1 %
 
Operating income 112 163 (51 ) -31.3 %
Interest expense 144 69 75 108.7 %
Other (income) expense   4         24           (20 )     -83.3 %
Income(loss) from operations before income taxes (36 ) 70 (106 ) -151.4 %
Provision for income taxes   15         3           12       400.0 %
Net income(loss)   (51 )       67           (118 )     -176.1 %
 
Weighted average shares outstanding   1,045         995           50       5.0 %
Basic and diluted net income per share: $ (0.05 )     $ 0.07         $ (0.12 )     -172.5 %
 
Reconciliation of Net income to EBITDA:
 
Net income(loss) $ (51 ) $ 67 $ (118 ) -176.1 %
Plus interest expense 144 69 75 108.7 %
Plus tax expense 15 3 12 400.0 %
Plus non-cash expenses 184 73 111 152.1 %
Plus non-recurring professional fees   -         -           -       -  
EBITDA $ 292       $ 212         $ 80       37.7 %
 
 
Statements of Operations
(in thousands, except % and per share data)
             
For the fiscal years ended
May 31,     May 31,       Change
2013     2012       $     %
Product revenue $ 1,284     $ 1,420       $ (136 ) -9.6 %
Service revenue 4,784 5,015 (231 ) -4.6 %
Royalties on sale of patents   290         -           290       -  
Total revenue   6,358         6,435           (77 )     -1.2 %
 
Cost of sales   1,375         1,410           (35 )     -2.5 %
Gross margin 4,983 5,025 (42 ) -0.8 %
Gross margin % 78.4 % 78.1 %
 
R&D 1,087 1,243 (156 ) -12.6 %
SG&A   3,186         2,984           202       6.8 %
 
Operating income 710 798 (88 ) -11.0 %
Interest expense 342 320 22 6.9 %
Other (income) expense   (7 )       31           (38 )     -122.6 %
Income from operations before income taxes 375 447 (72 ) -16.1 %
Provision for income taxes   15         3           12       400.0 %
Net income   360         444           (84 )     -18.9 %
 
Weighted average shares outstanding   1,019         995           24       2.4 %
Basic and diluted net income per share: $ 0.35       $ 0.45         $ (0.09 )     -20.8 %
 
Reconciliation of Net income to EBITDA
 
Net income $ 360 $ 444 (84 ) -18.9 %
Plus interest expense 342 320 22 6.9 %
Plus tax expense 15 3 12 400.0 %
Plus non cash expenses 334 201 133 66.2 %
Plus non-recurring professional fees   71         58           13       22.4 %
EBITDA $ 1,122       $ 1,026         $ 96       9.4 %
 
 
Balance Sheets
(in thousands)
             
As of
May 31, May 31,
2013       2012
Cash $ 1,188 $ 595
Restricted cash 100 -
Accounts receivable 895 757
Other current assets   299         308
Total current assets   2,482         1,660
 
Property and equipment, net 61 42
Goodwill 4,249 4,246
Other non-current assets   922         600
Total assets $ 7,714       $ 6,548
 
Accounts payable $ 137 $ 266
Accrued expenses 602 333
Deferred maintenance revenue 2,088 2,194
Current portion of long term debt - 720
Other current liabilities   102         75
Total current liabilities   2,929         3,588
 
Other non-current liabilities 98 51
Long term debt   2,700         1,480
Total liabilities   5,727         5,119
 
Redeemable common stock   275         -
 
Stockholders' equity   1,712         1,429

Total liabilities, redeemable common stock and stockholders' equity

$ 7,714       $ 6,548
 
 

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