On August 17, 2010, Avatech acquired all the outstanding common stock of Rand Worldwide, Inc. ("Rand Worldwide") in a reverse merger transaction. As a result of this merger and in accordance with US GAAP, the consolidated financial statements represent a continuation of Rand Worldwide and thus include the results of Rand Worldwide for the full quarter ended September 30, 2010 and the results of Avatech from the date of acquisition through September 30, 2010. The balances reported for prior years reflect the accounts of Rand Worldwide only.
The Company reported total consolidated revenues of $16.8 million for the three months ending September 30, 2010 compared with $13.7 million in the prior period. The overall gross margin percentage for the quarter was 42.8% which is slightly lower than the 45.0% reported in the same period in the prior fiscal year largely due to changes in revenue mix and lower achievement of sales rebates from its principal supplier, Autodesk. The Company also reported that the first quarter results include approximately $1.7 million of one-time merger-related costs consisting primarily of legal, accounting and investment banking fees and severance and other restructuring costs. Therefore, for the first fiscal quarter, the Company realized a net loss from continuing operations of $2.2 million, or $(0.06) per fully diluted share, as compared with a net loss from continuing operations of $530,000, or $(0.04) per fully diluted share in the same period in the prior year.
"As we move forward, we remain very positive about the impact that this merger will have on our business and operations and we continue to make significant progress on executing our integration and restructuring plans," commented Lawrence Rychlak, President and Chief Financial Officer of Avatech. "We expect that the integration of the companies will continue through March of 2011 at which time we expect to begin realizing the operating results that we projected for the combined operations," continued Mr. Rychlak. "Beginning in the fourth quarter of this fiscal year, we should see the full benefits of the merged operations including an expanded scope of products and services to our customers and a leaner, more efficient organization."
Company CEO Marc Dulude added, "I am very pleased with the pace at which our integration is progressing. We have fully integrated our Sales and Services organizations as well as most of our administrative groups and have made major advances in combining our internal business systems for managing and reporting on financial, sales and marketing data. Immediately following the merger, we began to see significant, tangible benefits of the merger and as the integration process continues, we see continuing validation of the reasons for putting these two great companies together."
Conference Call Information
Avatech Solutions will hold a conference call to discuss its first quarter results at 11:00 am ET on November 15, 2010. The dial-in numbers for the conference call are 1 (866) 356-3095 (domestic) or 1 (617) 597-5391 (International), and enter the passcode (47851272). A live, listen-only Webcast of the conference call will be available to all investors in the Investor Relations section of the Company's Web site.
Note Regarding Use of Non-GAAP Financial Measure
This news release contains the non-GAAP measure Adjusted EBITDA. Adjusted EBITDA represents earnings (or losses) before interest, income taxes, depreciation and amortization, and stock-based compensation expense.
Adjusted EBITDA is used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA as adjusted eliminates the effect of financing, income taxes, stock-based compensation costs, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.
Avatech believes this non-GAAP measure provides useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measure included in this press release has been reconciled to the GAAP results in the accompanying table.
About Avatech Solutions and Rand Worldwide
Rand Worldwide and Avatech Solutions have combined to form one of the world's leading professional services and technology companies for the engineering community, targeting organizations in the building, infrastructure, and manufacturing industries. The combined company advances the way organizations design, develop, and manage building, infrastructure, and manufacturing projects. Fortune 500 and Engineering News Record's Top 100 companies work with the company to gain a competitive advantage through technology consulting, implementation, training, and support services. One of the world's largest integrators of Autodesk software, the company designs systems that accelerate innovation while improving quality and profitability. For more information see ( www.avatech.com) and ( www.rand.com)
This press release contains forward-looking statements about the expectations, beliefs, plans, intentions, and strategies of Avatech Solutions, Inc. There are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Statements that are not historical in nature, including those that include the words "goal," "expect," "anticipate," "estimate," "should," "believe," "intend," and similar expressions, are based on current expectations, estimates and projections about, among other things, the industry and the markets in which Avatech operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; changes in interest rates, and demand for our products and services; changes in our competitive position or competitive actions by other companies; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or, if substantially realized, will have the expected consequences on our business or operations.
Avatech Solutions, Inc. Summary Consolidated Financial Data Three Months Ended September 30, 2010 2009 ------------ ------------ Revenues- Product sales $ 9,328,000 $ 7,547,000 Service revenue 4,495,000 4,102,000 Commission revenue 2,999,000 2,016,000 Total revenues 16,822,000 13,665,000 Cost of revenues- Cost of product sales 6,363,000 4,529,000 Cost of service revenue 3,256,000 3,037,000 Total cost of revenues 9,619,000 7,566,000 Gross margin 7,203,000 6,099,000 Operating income (loss) (1,794,000) (320,000) Income (loss) from continuing operations (2,171,000) (530,000) Net income (loss) (2,171,000) 2,384,000 Earnings (loss) per share from continuing operations: Basic $ (0.06) $ (0.04) Diluted $ (0.06) $ (0.04) Earnings (loss) per share: Basic $ (0.06) $ 0.05 Diluted $ (0.06) $ 0.05 Weighted average common shares outstanding: Basic 42,701,339 34,232,672 Diluted 42,701,339 34,232,672 September 30, June 30, 2010 2010 ------------ ------------ Current assets $ 17,925,000 $ 11,016,000 Property and equipment 2,289,000 1,823,000 Other long-term assets 22,709,000 9,276,000 Total assets $ 42,923,000 $ 22,115,000 Current liabilities $ 22,436,000 $ 22,563,000 Other long-term liabilities 2,052,000 6,210,000 Series A redeemable preferred stock - 38,086,000 Stockholders' equity 18,435,000 (44,744,000) Total liabilities and stockholders' equity $ 42,923,000 $ 22,115,000
Company Contact: Chantale Marchand Rand Worldwide Phone: (508) 663-1411 Email: Email Contact