SofTech Announces Q3 FY 2016 Operating Results

Consulting Revenue Increased 30% Compared to Q3’15;

HomeView Technology Launched

LOWELL, Mass.--(BUSINESS WIRE)-- SofTech, Inc. (OTCQB: SOFT), a proven provider of Product Lifecycle Management (“PLM”) solutions today announced its third quarter fiscal year 2016 operating results. Revenue for the three months ended February 29, 2016 was approximately $912,000 as compared to approximately $925,000 for the same period in the prior fiscal year. The net loss for the current quarter was approximately ($310,000) or ($.34) per share compared to approximately $(356,000) or $(.40) per share for the same period in the prior fiscal year. EBITDA for current quarter was approximately $(249,000) as compared to approximately $(171,000) for the same period in fiscal year 2015.

Product revenue for the current quarter was down by about $117,000 as compared to the same period last year which was offset by an increase of $104,000 in services revenue. Product revenue has been generating approximately $500,000 per year for the last two fiscal years, however, the quarterly product revenue has been erratic and difficult to forecast. The increase in services revenue is the result of an increase in maintenance and subscription revenue of 9.5% and an increase of 30.3% in consulting revenue.

Gross margins improved to 61.3% in the current quarter as compared to 53.5% in the same period last year. Increased sales and marketing expenditures primarily related to the launch of the HomeView product more than offset that improvement in gross margin.

Revenue for the nine months ended February 29, 2016 was approximately $3.2 million as compared to approximately $2.8 million for the same period in the prior fiscal year. The net loss for the first nine months of the current fiscal year was approximately $(505,000) or ($.56) per share compared to a net loss of approximately $(1,307,000) or $(1.47) per share for the same period in the prior fiscal year. EBITDA for the first nine months of the current fiscal year was $(280,000) as compared to approximately $(686,000) for the same period in fiscal 2015.

For the nine month period ended February 29, 2016, product revenue increased by about 4.6% as compared to the same period in the prior year and services revenue increased by about 15.2%. The product revenue increase was primarily from our ProductCenter technology with several existing customers expanding their usage of the solution. The increase in services revenue was the result of a 6% increase in maintenance and subscription revenue and a 47.1% increase in consulting revenue. The increase in consulting revenue is primarily related to the previously announced contract award at AgustaWestland.

Gross margins improved to 62.4% in the nine month period ended February 29, 2016 as compared to 53.6% for the same period last year generating an additional $486,000 of gross margin. Operating expenses declined by about $235,000 thereby significantly reducing the operating loss for the current nine month period as compared to the same period in the prior fiscal year.

“Our revenue for the current quarter was essentially flat compared to the same period last year while our operating expenses increased as expected with the launch of the HomeView technology,” said Joe Mullaney, SofTech’s CEO. “Product revenue has been erratic from quarter to quarter but our annual run rate for the last two years has been about $500,000 and our pipeline of qualified proposals suggests that annual trend will continue. Services revenue has been performing very well during fiscal 2016 on all fronts: maintenance, subscriptions and consulting. We see that trend continuing.”

“The launch of our HomeView technology this quarter has been very exciting. We believe there is a significant market opportunity for this technology and the feedback from builders, Realtors and homeowners alike has been very positive. We will be continuing our market outreach activities over the coming quarters,” Mullaney added.

FINANCIAL STATEMENTS

The Statements of Operations for the three and nine month periods ended February 29, 2016 compared to the same periods in the prior fiscal year are presented below. A reconciliation of Net loss to EBITDA, a non-GAAP financial measure, is also provided.

The Balance Sheet as of February 29, 2016 compared to the audited fiscal year-end Balance Sheet as of May 31, 2015 is presented below.

About SofTech

SofTech, Inc. (OTCQB: SOFT) is a proven provider of product lifecycle management (PLM) solutions, including its ProductCenter® PLM solution and its Connector technology.

SofTech’s solutions accelerate productivity 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 software and service solutions, including General Electric Company, Goodrich, Honeywell, Finmeccanica and the U.S. Army. Headquartered in Lowell, Massachusetts, SofTech (www.softech.com) has locations and distribution partners in North America, Europe, and Asia.

HomeView, our most recent software and service solution, is a secure, intelligent home asset management and maintenance system. HomeView allows homeowners to create a virtual home manual that logs, manages and tracks personal assets and attributes about the property. Home ownership is made easier by managing user manuals, warranty periods, service records, maintenance reminders and other projects with HomeView.

SofTech, ProductCenter and HomeView are registered trademarks of SofTech, Inc. All other products or company references are the property of their respective holders.

Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our outlook for fiscal year 2016 and beyond. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) generate sufficient cash flow from our operations or other sources to fund our working capital needs and growth initiatives; (2) maintain good relationships with our lenders; (3) comply with the terms of our loan agreements; (4) successfully introduce and attain market acceptance of any new products and/or enhancements of existing products including HomeView; (5) attract and retain qualified personnel; (6) prevent obsolescence of our technologies; (7) maintain agreements with our critical software vendors; (8) secure renewals of existing software maintenance contracts, as well as contracts with new maintenance customers; and (9) secure new business, both from existing and new customers.

These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2015 and the Form 10-Q’s for the three month periods ended August 31, 2015, November 30, 2015 and February 29, 2016, each as filed with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains non-GAAP financial measures. Specifically, the Company has presented EBITDA, which is defined as Net loss plus interest expense, tax expense, non-cash expenses such as depreciation and amortization, non-cash foreign currency losses (gains) and stock based compensation expense. The Company believes that the inclusion of EBITDA helps investors gain a meaningful understanding of the Company’s core operating results and enhances comparing such performance with prior periods, without the effect of non-operating expenses and non-cash expenditures. Management uses EBITDA, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. EBITDA is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of EBITDA to the most directly comparable GAAP financial measures are set forth in the text of, and the accompanying tables to, this press release.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160414006713/en/

SofTech, Inc.
Joseph P. Mullaney, 978-513-2700
President & Chief Executive Officer

Source: SofTech, Inc.

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