Avatech Solutions yesterday announced results for its second fiscal quarter 2010 (ended December 31, 2009). Like its peers, Avatech saw FQ2 revenue far below last year’s level but on a flattening trajectory – perhaps signaling that the worst of the recession is over. Investment analysts on the call praised the executive team for its tight control of costs in uncertain times and the executives, in turn, were cautiously optimistic about the future. As a result, Avatech shares were up 46% for the day.

Avatech reported total revenue of $7.7 million for the quarter, down 19% from the prior year and essentially flat when compared to the September quarter. Due to what Avatech characterized as “the achievement of significant sales incentives from our principal supplier” [Ed: Autodesk] the company’s overall gross margin increased to 59% for the second quarter as compared to 44% in the year-ago quarter. By vertical, the AEC group saw 20% sequential growth, manufacturing was flat and infrastructure dropped quarter to quarter. On a geographic basis, Avatech reports seeing Detroit “starting to come back” and strength in the broader Midwest but continuing weakness in Florida.

The company has seen the recovery continue in the current quarter and sounded generally optimistic about the future, citing increased activity for bidding and services engagements.

CEO George Davis said that he was focusing on exploring ways to grow the company and is investigating geographic expansion, sales and services resource growth, possible mergers and acquisition activity in both products and services. Of particular interest is the continued development of Avatech’s internal IP, especially advancing technical development related to 3D scanning and its interface with 3D modeling, “leveraging the power of advanced scanning techniques like BIM, creating a seamless interface between scanning and modeling data to manage new and retrofit projects.”

But the company is not loosing sight of what delights investors: "We are very pleased with our strong performance for the quarter, which was the second consecutive quarter of positive net income and a significant improvement in the bottom line when compared to last year. These results clearly demonstrate our ability to manage our business in spite of this challenging economic environment and we remain cautiously optimistic about the continuing recovery. As we have said in the past, our staffing and expense levels allow us to remain profitable on lower revenue levels and deliver sound financial results," said Chief Financial Officer Lawrence Rychlak. "With that said, we will continue to manage our costs and focus on maintaining a positive bottom line in the coming quarters."