EXHIBIT 99.1
FOR IMMEDIATE RELEASE
SOFTECH REPORTS Q4 & FY 2006 RESULTS
PRODUCTCENTER REVENUE GROWTH OF 18% FOR THE YEAR;
SIGNIFICANT NEW CUSTOMER GROWTH
TEWKSBURY, Mass.--(BUSINESS WIRE)--AUGUST 29, 2006--SofTech, Inc. (OTCBB:SOFT -
NEWS), a proven provider of product lifecycle management (PLM) solutions, today
announced results for its fourth quarter and fiscal year 2006. Revenue for the
fourth quarter of fiscal 2006 was about $3.1 million essentially unchanged from
the same period in fiscal 2005. The net loss for Q4 2006 was $(315,000) or
$(.03) per share as compared to a net loss of $(482,000) or $(.04) per share for
Q4 of the prior year. The net loss adjusted for non-cash expenses related to
amortization of intangible assets resulting from acquisitions, a Non-GAAP
financial measure, was $39,000 in the fourth quarter of fiscal 2006 as compared
to $126,000 for the same period in fiscal 2005. A reconciliation of GAAP results
to this non-GAAP financial measure for each of the periods is presented in a
table below.
Revenue for fiscal year 2006 was about $12.5 million as compared to about $12.1
million for fiscal year 2005. The net loss for fiscal 2006 was about $(1.33)
million as compared to about $(1.43) million for fiscal 2005. The net loss
adjusted for non-cash expenses related to amortization of intangible assets
resulting from acquisitions, a Non-GAAP financial measure, was about $.5 million
for fiscal 2006 as compared to about $1.0 million for fiscal 2005.
The Company's revenue is derived almost entirely from technology acquisitions
completed between 1997 and 2002. As a result, management believes the Company's
financial profile is very unique, at least in the industry in which it operates.
At May 31, 2006, approximately 73% of its assets are composed of intangible
assets related to these acquisitions. For fiscal year 2006, the amortization of
these intangible assets was approximately 14% of its total expenses and 15% of
its revenue. Further, the periods over which these intangible costs are expensed
are highly judgmental.
It is management's opinion that comparing results of operations from period to
period and to other companies in our industry absent these non-cash expenses
related to acquisitions is a more meaningful measure of our performance given
the Company's unique financial profile detailed above. It is also management's
belief that this Non-GAAP measure of performance is one of the most critical
measures of Company valuation for investors. Lastly, this measure of performance
has been, and is expected to continue to be, a significant component of the
incentive compensation plan for the Company's President.
The revenue increase from fiscal 2005 to 2006 was due to an 18% year-over-year
increase in the Company's ProductCenter offering which was partially offset by
decreases of 11% and 4% from its CADRA and AMT product lines, respectively. The
majority of the increase in ProductCenter revenue was the result of 11 new
customer wins, mostly in very competitive situations, during fiscal 2006. This
followed 12 new customer wins for this product line from 2005.
The Company's expenses for 2006 increased by $265,000 or 2% from the prior year.
Non-cash amortization expense decreased by $568,000 which was offset by
increased spending related to R&D expenditures aimed at broadening the
addressable market for ProductCenter and increased Sales and Marketing expenses
also for that product line. The increase in the prime rate during fiscal 2006
increased our year-over-year cost of borrowing by 35% despite lower average debt
balances.
"We had a great year in expanding the capability of ProductCenter and in winning
new business," said Joe Mullaney, President of SofTech, Inc. "Additional sales
resources and new marketing initiatives in fiscal 2006 focused on that
technology have increased our revenue and our pipeline of identified
opportunities. Unfortunately, the combination of increases in the prime rate,
which increased our borrowing costs, and reduced software maintenance renewal
rates for our other product lines resulted in financial performance below our
expectations for the fiscal year. This was especially true in the second half of
fiscal 2006."
"We remain optimistic that our ProductCenter technology can compete effectively
as an affordable, easy to use and easy to install, data management and
collaboration technology especially applicable to the multi-CAD design
environment. It is our belief that the majority of manufacturing companies
operate in this kind of environment. As the migration from 2D to 3D CAD
authoring tools accelerates over the next several years, we believe
ProductCenter has the opportunity to get its share of the market," Mullaney
added.
ABOUT SOFTECH
SofTech, Inc. (OTCBB: SOFT) is a proven provider of product lifecycle management
(PLM) solutions with its flagship ProductCenter(TM) PLM solution, and its
computer-aided design and manufacturing (CAD/CAM) products, including CADRA(TM)
and Prospector(TM).
SofTech's solutions accelerate products 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 solutions, including General Electric
Company, Goodrich, Honeywell, Siemens, Sikorsky Aircraft, U.S. Army, and
Whirlpool Corporation. Headquartered in Tewksbury, Massachusetts, SofTech
(WWW.SOFTECH.COM) has locations and distribution partners throughout North
America, Europe, and Asia.
SofTech, CADRA, ProductCenter and Prospector are trademarks of SofTech, Inc. All
other products or company references are the property of their respective
holders.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements made above with respect to SofTech's outlook for fiscal 2007 and
beyond represent "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act
of 1934 and are subject to a number of risks and uncertainties. These include,
among other risks and uncertainties, general business and economic conditions,
generating sufficient cash flow from operations to fund working capital needs,
potential obsolescence of the Company's technologies, maintaining existing
relationships with the Company's lender, remaining in compliance with debt
covenants, successful introduction and market acceptance of planned new products
and the ability of the Company to attract and retain qualified personnel both in
our existing markets and in new territories.
Contact: Joseph P. Mullaney
President and COO
(978) 640-6222 extension 224
SOFTECH, INC.
FINANCIAL SUMMARY
FOR THE THREE MONTH PERIODS ENDED
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MAY 31, MAY 31,
(in thousands) 2006 2005
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Revenue $ 3,095 $ 3,112
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Income (loss) from
operations 52 (261)
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Net loss (315) (482)
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Loss per share (.03) (.04)
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FOR THE FISCAL YEARS ENDED
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MAY 31, MAY 31,
(in thousands) 2006 2005
---- ----
Revenue $ 12,478 $ 12,120
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Loss from operations (115) (522)
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Net loss (1,332) (1,425)
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Loss per share (.11) (.12)
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RECONCILIATION OF NET LOSS TO NON-GAAP FINANCIAL MEASURES:
The net loss calculated in accordance with GAAP is adjusted below by non-cash
expenses related to amortization of intangible assets resulting from
acquisitions. It is management's view that this Non-GAAP financial measure
provides important information in understanding the Company's financial
performance.
FOR THE THREE MONTH PERIODS ENDED
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MAY 31, MAY 31,
(in thousands) 2006 2005
---- ----
Net loss $(315) $(482)
Plus: Non-cash amortization 354 608
Non-GAAP financial measure
39 126
FOR THE FISCAL YEARS ENDED
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MAY 31, MAY 31,
(in thousands) 2006 2005
---- ----
Net loss $(1,332) $(1,425)
Plus: Non-cash amortization 1,872 2,440
Non-GAAP financial measure
540 1,015