Avatech Solutions Inc. Avatech Solutions Inc. (OTC BB: AVSO) (OTC BB: AVSO) Scotty Walsh CHIEF EXECUTIVE OFFICER George Davis EXECUTIVE VICE CHAIRMAN Lawrence Rychlak CHIEF FINANCIAL OFFICER December 2006 Exhibit 99.2 |
2 Forward-Looking Statement Forward-Looking Statement Statements contained herein and the information incorporated by reference herein may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "expect," "anticipate," "estimate," "would be," "believe," or "continue" or the negative or other variations of comparable terminology. We intend such forward-looking statements to be covered by the safe harbor provisions applicable to forward-looking statements contained in Section 21E of the Exchange Act. Such statements (none of which is intended as a guarantee of performance) are subject to certain assumptions, risks and uncertainties, which could cause our actual future results, achievements or transactions to differ materially from those projected or anticipated. Such risks and uncertainties are set forth herein. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions and other statements, which are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demands and acceptance, changes in technology, economic conditions, the impact of competition and pricing, and government regulation and approvals. Avatech Solutions cautions that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties. There can be no assurance, however, that our expectations, beliefs or projections will result, be achieved, or be accomplished. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no duty to update these forward-looking statements. |
3 Mission To be the recognized leader in delivering solutions and services that drive product innovation, productivity and collaboration in target vertical markets. |
4 Investment Highlights Investment Highlights Dominant provider in the U.S. Design Automation software and services market. • Installed base of 25,000+ customers; 90% repeat purchasers. • Largest U.S. Autodesk VAR. Favorable industry dynamics creating strong Product and Service growth opportunities. • Next generation Autodesk products driving conversion to 3D. • Accelerating SMB market adoption. Targeting $100MM revenue run rate over 3-5 years. • Leverage installed base to offer diversified set of software solutions and services. • Expand geographic footprint through opportunistic acquisitions. Expanding Service revenues. • Focus on increasing service revenues from 19% in FY2006 to 30-40% over 3-5 years. Turned the corner on profitability in FY2005. Proven management team supported by strong Board of Directors. |
5 As the largest U.S. VAR of Autodesk (ADSK) software, Avatech provides high-end software solutions and value-added engineering consulting services… …enabling businesses to optimize productivity and innovation with a fully integrated solution. Enabling Productivity and Innovation Enabling Productivity and Innovation SOLUTIONS SERVICES • Design Automation • Product Lifecycle Mgmt • Facilities Mgmt • Training • Installation/Integration • Consulting • Custom Software Devl. |
6 Enabling Customers In: Enabling Customers In: Building Infrastructure Manufacturing • Automotive • Aerospace • Building and Plant Machinery • Consumer Prod • Architecture • Engineering • Construction • Utilities • Public Works • Transportation |
7 Market Opportunities Market Opportunities • Gov’t-driven Infrastructure Improvements • Improve Site Development $1.5BN CAD Solutions • Collaboration • Urban Renewal • Suburban Expansion $3BN CAD Solutions • Globalization + Collaboration PDM • Shorter Product Lifecycles • 2D to 3D • PLM • FM $12BN PLM Solutions $8BN CAD/CAM Solutions Sector Drivers Market Drivers Global Market Size* Building Infrastructure * Source: Daratech and Autodesk Internal Research Manufacturing |
8 Avatech Solutions Overview Avatech Solutions Overview Avatech is the leading design automation and engineering systems integrator in the U.S. Avatech enables organizations to more effectively design, develop and manage projects, products and facilities. Typical projects include: • Implementation of Design Automation, Product Lifecycle Management and Facilities Management Software. • Design and development of business rules, workflows and design standards for major projects in architecture/building, civil development and manufacturing. • Enterprise-level education and training for designers, engineers and architects. |
9 Strong Customer Base Strong Customer Base 25,000+ customers with 90% repeat business. No customer represents more than 2% of revenues. Prominent customers include: |
10 Avatech’s Avatech’s History History * Excluding Proprietary Software Sale of $1.9MM $0 $10 $20 $30 $40 $50 $60 $70 FY03 FY04 FY05 FY06 FY07 (Est.) $23MM $28MM $32MM* $40MM $55-60MM |
11 Largest Integrator of Autodesk Solutions in the U.S. Largest Integrator of Autodesk Solutions in the U.S. 21 Offices Nationwide 30 Training Centers and Mobile Labs Focused Vertical Industry Teams • Manufacturing • Infrastructure/Civil • Building Solutions National Technical Support Center Autodesk Authorized Training Center 175+ Sales and Service Personnel |
12 The Opportunity The Opportunity Conversion to 3D Modeling The Computer-Aided Design (CAD) Market is growing driven by the need for 3D conversions. Diversification The Facilities Management (FM) and Product Lifecycle Management (PLM) markets are high growth with the potential for high service blends. Shortage of Solutions Integrators There is an extreme shortage of solutions integrators with scale to serve the market. Avatech is well positioned to become the leading solutions integrator to Small and Medium Businesses (SMB). |
13 Computer Aided Design - Computer Aided Design - CAD CAD Convert to 3D to Compete – Customers who used 2D design software products are converting to 3D solutions to compete. Conversion to 3D systems will drive at least half of all CAD software spending and produce substantial new revenues and services opportunities. The CAD and Collaborative Design software market exceeds $7.5BN in revenues and needs more services companies to drive growth. 3D solutions allow designers to picture how the finished product will look and perform before it is built. |
14 Product Lifecycle Management – Product Lifecycle Management – PLM PLM PLM is the process of collecting, integrating and managing all the data related to a product over its lifecycle. PLM expected to equal ERP solutions in importance for manufacturers in multiple vertical industries over the next decade. Services revenues expected to equal 1.5-2X software revenues. The SMB market will account for a majority of the PLM spending through Avatech’s planning horizon. Avatech is converting manufacturing clients today. |
15 Facilities Management - Facilities Management - FM FM FM solutions provide an organization with the capability to track and manage their fixed assets and human capital. High growth practice. Value Added Services generate 2-5X more revenue than software. Customers include NASA, NIH, Auburn University. MARKET TRENDS Allows access to facilities data for emergency situations and to share that data with emergency services. Homeland Security Enable Corporations to make decisions that optimize ROI and increase overall productivity and profitability. Corporate Real Estate Public grants require organizations to submit detailed facilities reports to maintain funding. Educational/ Government |
16 Case Study: Baltimore Gas & Electric Company Case Study: Baltimore Gas & Electric Company Company Profile: A premier utility service provider in Maryland, BGE serves more than one million business and residential electric customers and more than 600,000 gas customers. It is a division of Constellation Energy (NYSE: CEG), the #1 supplier of energy in competitive markets and the largest wholesale power provider in North America. Challenge Results Scope of AVSO’s Services • Develop a streamlined, error-free process for BGE’s Real Estate Facilities Services division to manage the company’s extensive real estate assets. • Meet CEG’s application and database requirements. • Facilitate importation of financial and personnel data. • Business and implementation planning for replacement of Aperture system with Archibus/FM and OSIS Enterprise. • Needs analysis and consulting services for systems integration of Archibus/FM, OSIS and Map Guide applications. • Pilot site development for testing and validation. • Application training and project management. • Improved access to facility and infrastructure information. • Reduced errors and eliminated data maintenance issues between multiple systems. • Conformed to all CEG standards. • Facilitated access of financial and accounting data. • Open information project. |
17 Growth Strategy Growth Strategy Focuses on expanding our products, geography and people with a clear emphasis on growing our Services business. Profitable operations in new geographic regions and the potential to be accretive to Avatech’s Service revenues (e.g., Sterling acquisition in May 2006). Opportunistic Acquisitions Add new software manufacturers, offer additional services and continue development of new proprietary software products to fill voids in existing markets. Diversification Organic expansion into underserved geographic areas where Avatech can profitably provide value added solutions and services. Organic/ Geographic Expansion |
18 Financials |
19 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 FY2003 FY2004 FY2005 FY2006 Product Services Commission 12.4 5.9 4.2 17.7 5.5 4.8 20.7 6.1 5.5 25.4 7.4 6.9 $22.5 $28.0 $32.2 $39.6 Revenue Growth from FY2003 Revenue Growth from FY2003 23% 19% of Revs * Services 22% of Revenues, Q1 2007 |
20 Earnings Trend Earnings Trend $(3.8) $(0.9) $2.2 $0.1* $(5.0) $(4.0) $(3.0) $(2.0) $(1.0) $- $1.0 $2.0 $3.0 FY2003 FY2004 FY2005 FY2006 * Excludes one-time proprietary software sale to Autodesk. |
21 $1.06 $0.96 $0.04 $0.05 $0.04 $- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Long-term debt has been reduced… …while shareholder’s equity has improved to $4.9MM. $(1.3) $(0.3) $1.1 $4.7 $4.9 $(2.0) $(1.0) $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Enhanced Balance Sheet Enhanced Balance Sheet |
22 Financial Highlights Financial Highlights 23% Annual Revenue Growth from FY2005 • 14.8% CAGR since FY2003 2 nd Profitable Year • 8 th Sequential Quarter of Operating Profit Enhanced Balance Sheet • Reduction of Long Term Debt • $4.9MM positive Shareholder’s Equity as of Q1 FY2007 vs. $1.3MM deficit in Q1 FY2006. $4.4MM in Cash Flow from Operating Activities in FY2006 |
23 Future Direction Future Direction Our financial goals include: 10-20% annual revenue growth to achieve a $100MM revenue run rate in the next 3-5 years. Increasing net income to 10-12% of total revenues. Increasing Services revenues to 30-40% of total revenues and raising the Services gross margin by 4-5%. • Offer other non-CAD software solutions and services to existing customers. • Continue FM and PLM Divisions expansion. • Increase variety of value added services. DIVERSIFICATION • Leverage extensive customer base to sell add’l services. • Increase utilization of technical personnel. • Opportunistically acquire companies with the potential of increasing services. SERVICES Growth Drivers |
24 Investment Highlights Investment Highlights Dominant provider in the U.S. Design Automation software and services market. • Installed base of 25,000+ customers; 90% repeat purchasers. • Largest U.S. Autodesk VAR. Favorable industry dynamics creating strong Product and Service growth opportunities. • Next generation Autodesk products driving conversion to 3D. • Accelerating SMB market adoption. Targeting $100MM revenue run rate over 3-5 years. • Leverage installed base to offer diversified set of software solutions and services. • Expand geographic footprint through opportunistic acquisitions. Expanding Service revenues. • Focus on increasing service revenues from 19% in FY2006 to 30-40% over 3-5 years. Turned the corner on profitability in FY2005. Proven management team supported by strong Board of Directors. |