Update: Avatech sees signs of recovery after dismal FY09

Avatech reported results for the year ended June 30 that highlight the fragility of the VAR channel. For the fiscal year revenue declined 29% to $35.4 million, leading to a net loss of $313,000, or $(0.05) per fully diluted share for the prior year. For the fourth quarter, revenue was down 37%. As CEO George Davis told me earlier this year,cash management is critical to survival in an uncertain economy; the Company reported today that its balance sheet continues to be strong, with a cash balance of $2.7 million, with only $160,000 in long-term liabilities.

Mr Davis, in the earnings press release, said that “[t]he building and manufacturing markets were significantly impacted by the global recession throughout fiscal 2009, which resulted in an unprecedented reduction in spending on the types of software and services we provide. Through a proactive management approach, we quickly reduced our costs to adapt to the current business environment … During the past year we have been developing our consulting and services offerings into a stand alone business, MSD Consulting, which taps into our highly-trained staff of engineers. While it was still in its early stages of development in the past fiscal year, this new initiative helped supplement our revenues for the year, generating approximately $1 million in incremental revenue.”

There is hope: “The economy is starting to show early signs of recovery and we are beginning to experience greater interest from customers in our software and services. However, while we are excited about these latest indicators, we are still taking a conservative business approach to fiscal 2010,” said Mr. Davis.

Update: CFO Lawrence Rychlak, citing data from Autodesk, said on the earnings call that Avatech’s 38% revenue decline in the second half of fiscal 2009 (through June 30) didn’t cause it to lose share to competitors. That’s good for Avatech but not for Autodesk.

Update: Investors seem pleased. Avatech’s share price was up 50% on Friday and is up another 2% this morning, albeit on very small volume.