The Company’s profitability improved substantially, with net income increasing by approximately $566,000 from a loss of $218,000 ($.02 per share) in Q2 2008, to net income of approximately $348,000 ($.03 per share) in Q2 2009. For the six months ended November 30, 2008, the Company’s net income increased by approximately $984,000, from a loss of $217,000 ($.02 per share) in the first half of FY 2008 to net income of approximately $767,000 ($.06 per share).
Net Cash flows from operating activities also improved considerably during the first half of FY 2009, increasing approximately $654,000 from negative $235,000 during the first half of FY 2008 to positive net operating cash flows of $419,000 in the first half of FY 2009. The Consolidated Statement of Cash Flows for the six months ended November 30, 2008 and 2007 is included in the attached Financial Summary.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure, also improved considerably during Q2 2009, increasing from $498,000 in Q2 2008 to $688,000 in Q2 2009, a 40% increase. For the first half of FY 2009, EBITDA was $1.5 million, compared to $1.2 million in the comparable prior period. A reconciliation of EBITDA to Net Income (Loss) is provided on the attached Financial Summary.
The Company’s revenue is derived almost entirely from technology acquisitions completed between 1997 and 2002, and the Company’s operations are not capital intensive. As of November 30, 2008, approximately 4.3% of the Company’s assets represent amortizable intangible assets related to these historical acquisitions. The Company does not anticipate making further acquisitions in the foreseeable future. For the quarter ended November 30, 2008, amortization expense (a non-cash expense) related to these intangible assets was approximately 4.7% of total expenses, 4% of total revenue and 29% of net income. Further, the periods over which these intangible costs are expensed are highly judgmental.
The Company believes that EBITDA is useful supplemental information for investors, when considered along with net income and other income statement data. The Company believes that EBITDA is useful because it provides investors with information concerning the potential longer term profitability of the Company’s technology assets (subsequent to full amortization of costs), as amortization of acquisition costs has been added back to net income in arriving at EBITDA. Further, management believes that EBITDA provides a useful financial metric by which the Company can be compared with other companies that have different capital structures (interest (a cost of capital) has been added back to net income in arriving at EBITDA). It is also management’s belief that this non-GAAP measure of performance continues to be used in the investment community as a financial metric for business valuation purposes.
However, the Company believes that EBITDA is not a substitute for cash flow from operating activities, which is disclosed above and in the Company’s financial statements. Investors should carefully review the financial statements of the Company in their entirety in order to obtain a complete understanding of the Company’s financial condition and results of operations.
SofTech, Inc. (OTCBB: SOFT) is a proven provider of product lifecycle management (PLM) solutions, including its flagship ProductCenter™ PLM solution, and its computer-aided design and manufacturing (CAD/CAM) products, including CADRA™ and Prospector™.
SofTech's solutions accelerate products 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, including General Electric Company, Goodrich, Honeywell, Siemens, Sikorsky Aircraft, U.S. Army, and Whirlpool Corporation. Headquartered in Lowell, Massachusetts, SofTech ( www.softech.com) has locations and distribution partners throughout North America, Europe, and Asia.
SofTech, CADRA, ProductCenter and Prospector are trademarks of SofTech, Inc. All other products or company references are the property of their respective holders.
Forward Looking Statements
The statements made herein may represent “forward looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934 and are subject
to a number of risks and uncertainties. These include, among other risks
and uncertainties, whether we will be able to generate sufficient cash
flow from operations to fund working capital needs, maintain the
existing relationship with our lender, successfully introduce and attain
market acceptance of planned new products, attract and retain qualified
personnel, in an extremely competitive environment, both in our existing
markets and in new territories, and the potential obsolescence of our