Avatech Solutions reported results today that show times may be getting better for the vast majority of users of engineering software.This announcement was a few days ahead of Wednesday’s report by Autodesk, and I wonder why there aren’t more people on the call — Avatech is likely a “canary in the coal mine”, reporting what a lot of Autodesk resellers are seeing in the market, and therefore offering a precursor to Autodesk’s results.
Avatech reported that total revenue for its fiscal third quarter increased 5% to $8.4 million — the first year-over-year increase since June 2008. Perhaps even better, revenue in FQ3 was up 8% from FQ2 this year. Product sales revenue was up 11% over last year up 9% sequentially. A favorable revenue mix and sales rebates from Autodesk led to a nice increase in gross margin, from 50% a year ago to 58% this year.
One not-so-bright element of the report was services revenue, which was flat with FQ2 and down significantly from last year. The biggest decrease was in training revenue, which Avatech attributes to lower personnel levels at customers, requiring less customized training.
Revenue by sector was relatively constant with prior periods. Building services accounted for 37% of total revenue; civil, 17%; manufacturing, 32% and facilities management, 4%. The company reports that it is starting to see demand increasing in the building sector as customers ramp up subscription renewals.
All of this leads Avatech to report FQ3 net income of $592,000 as compared to a net loss of $146,000 last year, marking the third consecutive quarter of positive net income. To date, the company is ahead of last year’s FQ4 (which started April 1) and expects to see growth and profitability again in FQ4.
Lawrence Rychlak, President and CFO, said that the FQ3 results “reflect not only the continued progress of the recovery of the overall economy, but also the steps that we have taken in response to changes in our business levels. This is the third consecutive quarter of profitability and each quarter’s results have been better than the prior quarter, with this period 23% higher than our December quarter.”
Looking forward to fiscal 2011, CEO George Davis said that the company is “gaining confidence in the improving economy and in the advanced solutions we’re bringing to the market. Our focus is on profitably growing and expanding the core business, creating unique technologies and evaluating and executing on strategic opportunities that will provide shareholder value.”
