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SofTech Announces Q2FY 2016 Operating Results

Jan 14, 2016

OTC Disclosure & News Service

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SofTech, Inc. (OTCQB: SOFT), a proven provider of Product Lifecycle Management (PLM) solutions, today announced its second quarter operating results for the three months ended November 30, 2015.

For the second quarter of fiscal year 2016, the Company generated revenue of approximately $1.3 million as compared to approximately $1.0 million in the same period in fiscal year 2015, an increase of about 27.0%. The net loss for the second quarter of fiscal year 2016 was approximately $(22,000) or $(0.02) per share as compared to a net loss of approximately $(379,000) or $(.44) per share for the same period in fiscal year 2015. EBITDA for the current quarter was approximately $141,000 as compared to approximately $(159,000) for the same period in fiscal year 2015, an improvement of approximately 188.7%.

Current Quarter Activity:

  • ProductCenter revenue increased by 16.4% in the current quarter as compared to the same period in the prior fiscal year representing the fifth consecutive quarter in which revenue for this product line experienced double-digit revenue growth as compared to the same period in the prior fiscal year;
  • Revenue from the Connector product line increased by 78.1% in the current quarter as compared to the same period in the prior fiscal year. While still a small portion of total revenue, the billings for this product line have gained significant traction following its recent launch and continues to attract new customers;
  • Gross margins improved significantly to 66.0% in the current quarter as compared to 54.3% for the same period in the prior fiscal year;
  • In the current quarter we took a non-cash charge of $61,000 to write down the fair value of our royalty payments due from Mentor Graphics related to the sale of the CADRA product line in October 2013. This charge was necessitated by the reduced revenue forecast based on CADRA’s revenue for the trailing twelve months. The Company is due a royalty of 10% of CADRA revenue through October 31, 2016; and
  • In December 2015, the HomeView mobile app was made available on iTunes.

Revenue for the six months ended November 30, 2015 was approximately $2.3 million as compared to approximately $1.9 million for the same period in the prior fiscal year, an increase of 20.8%. The net loss for the first six months of the current fiscal year was approximately ($196,000) or ($.22) per share compared to approximately $(952,000) or $(1.08) per share for the same period in the prior fiscal year. EBITDA for the first six months of the current fiscal year was approximately $19,000 as compared to approximately $(567,000) for the same period in fiscal 2015.

“This was by far our best quarterly performance since the sale of our CADRA product line in October 2013,” said Joe Mullaney, SofTech’s CEO. “Our ProductCenter technology continued its double-digit revenue growth with several existing customers expanding their use of the technology while maintenance renewal rates exceeded 97%. The Connector product line continued its strong revenue growth momentum and we were able to launch our new HomeView product on iTunes. We accomplished all of this while keeping our spending unchanged resulting in solid EBITDA performance,” he added.

The Company will be demonstrating HomeView at Inman Connect, a real estate focused event in New York City at the end of this month. We will be located in Start-Up Alley at Booth # S17.

“Data management has been our core business for more than 20 years and our new HomeView technology brings our expertise to the residential property market. HomeView lets homeowners have their information in one place, keep track of everything and even get automatic notifications about things needing attention,” said Bob Anthonyson, President and CEO of HomeView. “This is also information that every homebuyer should ideally have prior to purchase. No consumer product is allowed on the U.S. market unless every component can be identified, but about 5 million existing homes were sold in the U.S. last year with little to no information about their components. HomeView wants to change that by offering a free, easy-to-use technology that allows for complete transparency of all of the information about the property including architectural drawings, owner’s manuals, warranty periods, make, model and age of the appliances and systems and all the other data that helps a buyer maintain and operate their home. Improved safety, enhanced security and increased market value can be direct results of using HomeView. We can’t wait to show our solution to the Realtor community at Inman Connect,” he added.

Additional information supporting the need for the HomeView technology in today’s real estate marketplace can be found at www.HomeView.com under the Newsfeed tab.

FINANCIAL STATEMENTS
The Statements of Operations for the three and six month periods ended November 30, 2015 compared to the same periods in the prior fiscal year are presented below. A reconciliation of Net 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
November 30, November 30, Change
2015   2014   $   %
Product revenue $ 354 $ 199 $ 155 77.9 %
Service revenue   950       828       122     14.7 %
Total revenue   1,304       1,027       277     27.0 %
 
Cost of sales   443       469       (26 )   -5.5 %
Gross margin 861 558 303 54.3 %
Gross margin % 66.0 % 54.3 %
 
R&D 137 222 (85 ) -38.3 %
SG&A 634 645 (11 ) -1.7 %
Change in fair value of deferred payments   61       (21 )     82     -390.5 %
 
Operating income (loss) 29 (288 ) 317 -110.1 %
Interest expense 28 63 (35 ) -55.6 %
Other expense   23       28       (5 )   -17.9 %
Loss from operations before income taxes (22 ) (379 ) 357 -94.2 %
Provision for income taxes   -       -       -     -  
Net loss   (22 )     (379 )     357     -94.2 %
 
Weighted average shares outstanding   899       867       32     3.7 %
Basic and diluted net loss per share: $ (0.02 )   $ (0.44 )   $ 0.42     -95.5 %
 
Reconciliation of Net loss to EBITDA:
 
Net loss $ (22 ) $ (379 ) $ 357 -94.2 %
Plus tax expense - - - -
Plus interest expense 28 63 (35 ) -55.6 %
Plus other non-cash expenses   135       157       (22 )   -14.0 %
EBITDA $ 141     $ (159 )   $ 300     -188.7 %
 

Statements of Operations

(in thousands, except % and per share data)

         
 
For the six months ended
November 30, November 30, Change
2015   2014   $   %
Product revenue $ 408 $ 270 $ 138 51.1 %
Service revenue   1,877       1,621       256     15.8 %
Total revenue   2,285       1,891       394     20.8 %
 
Cost of sales   849       877       (28 )   -3.2 %
Gross margin 1,436 1,014 422 41.6 %
Gross margin % 62.8 % 53.6 %
 
R&D 291 494 (203 ) -41.1 %
SG&A 1,233 1,362 (129 ) -9.5 %
Change in fair value of deferred payments   51       (60 )     111     -185.0 %
 
Operating loss (139 ) (782 ) 643 -82.2 %
Interest expense 41 127 (86 ) -67.7 %
Other expense   16       43       (27 )   -62.8 %
Loss from operations before income taxes (196 ) (952 ) 756 -79.4 %
Provision for income taxes   -       -       -     -  
Net loss   (196 )     (952 )     756     -79.4 %
 
Weighted average shares outstanding   896       882       14     1.6 %
Basic and diluted net loss per share: $ (0.22 )   $ (1.08 )   $ 0.86     -79.6 %
 
Reconciliation of Net loss to EBITDA:
 
Net loss $ (196 ) $ (952 ) $ 756 -79.4 %
Plus tax expense - - - -
Plus interest expense 41 127 (86 ) -67.7 %
Plus other non-cash expenses   174       258       (84 )   -32.6 %
EBITDA $ 19     $ (567 )   $ 586     -103.4 %
 
Balance Sheets
(in thousands)
     
As of
November 30, May 31,
2015   2015
Cash $ 104 $ 310
Accounts receivable 969 587
Receivable due from sale of CADRA product line 200 243
Other current assets   206       315  
Total current assets   1,479       1,455  
 
Property and equipment, net 86 57
Goodwill 948 948
Other non-current assets   1,033       833  
Total assets $ 3,546     $ 3,293  
 
Accounts payable $ 265 $ 137
Accrued expenses 393 268
Deferred maintenance revenue 1,289 1,732
Current portion of long term debt 926 446
Other current liabilities   24       34  
Total current liabilities   2,897       2,617  
 
Other non-current liabilities   55       40  
Total liabilities   2,952       2,657  
 
Redeemable common stock   1,260       1,190  
 
Stockholders' deficit   (666 )     (554 )
Total liabilities, redeemable common stock
and stockholders' deficit $ 3,546     $ 3,293  

About SofTech

SofTech, Inc. (OTCQB: SOFT) is a proven provider of product lifecycle management (PLM) solutions, including its ProductCenter® PLM solution and its Connector technology.

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 and service solutions, 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.

HomeView, our most recent software and service solution, is a secure, intelligent home asset management and maintenance system. HomeView allows homeowners to create a virtual home manual that logs, manages and tracks personal assets and attributes about the property. Home ownership is made easier by managing user manuals, warranty periods, service records, maintenance reminders and other projects with HomeView.

SofTech, ProductCenter and HomeView 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 2016 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 terms of our loan agreements; (4) successfully introduce and attain market acceptance of any new products and/or enhancements of existing products including HomeView; (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, 2015 and the Form 10-Q’s for the three month periods ended August 31, 2015 and November 30, 2015, each as filed with the U.S. Securities and Exchange Commission. 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 loss plus interest expense, tax expense, non-cash expenses such as depreciation and amortization, non-cash foreign currency losses (gains) 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 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.

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