Acceleware Reports Third Quarter, Fiscal 2009 Results For Immediate Release
CALGARY, Alberta – November 24, 2009 – Acceleware® Corp. (“Acceleware” or the “Company”) (TSX-V: AXE), a leading developer of high performance computing applications, today announced results for the three and nine months ended September 30, 2009 (all figures are in Canadian dollars unless otherwise noted).
Acceleware continues to see significant improvement in both top line revenue and bottom line net loss resulting from the restructuring implemented by the Company in 2008. Top line revenue has increased 66% in the three months ended September 30, 2009 (“Q3, 2009”) compared to the same period a year ago, while net loss for Q3, 2009 has decreased 85% to $480,468 compared to a net loss of $3,108,208 for the three months ended September 30, 2008 (“Q3, 2008”). During the nine months ended September 30, 2009 net loss decreased 89% to $869,512 from $8,181,266 during the nine months ended September 30, 2008. The improvement in net loss for both the three month and nine month periods is principally a result of restructuring efforts undertaken in the second half of fiscal 2008. During Q3, 2009 the Company recognized revenue of $782,207 representing a 66% increase over the $472,620 recognized during Q3, 2008, and a 22% decrease over the $1,000,372 recognized in the three months ended June 30, 2009 (“Q2, 2009”). Revenue for the nine months ended September 30, 2009 was $2,988,113 an increase of 3% over the $2,900,910 recorded in the same period a year earlier. Since the Company has implemented its software only business model, it has seen significant sales of software and consulting services that have offset the decline in hardware sales compared to the same periods in fiscal 2008. In comparing revenue for the three and nine months ended September 30, 2009 with the same periods a year earlier, it should be noted that the economic downturn severely impacted revenue beginning in the last half of Fiscal 2008, and that the economic climate has only marginally improved to date in Fiscal 2009.
"We are encouraged that Acceleware continues to see increased revenue year over year, both in our electromagnetic design business and oil and gas markets. Also encouraging is that the growth is comprised of higher margin software and consulting services revenue,” said Michal Okoniewski, Interim President and CEO. “While our profitability is still not meeting our expectations, I would like to single out the tremendous work done by all our employees in successfully executing on our restructuring program resulting in an 85% reduction in net loss over the same quarter last year.”
At September 30, 2009 Acceleware had a working capital deficit of ($30,393), including $564,511 in cash and cash equivalents, and $406,480 in short term debt. This is a decrease from December 31, 2008 when the Company had $334,670 in working capital including $1,052,724 in cash and cash equivalents, and $355,587 in short term debt. The decrease in cash and cash equivalents is primarily due to cash used in operating activities and to an increase in accounts receivable.
Third Quarter Highlights and Events
On July 14, 2009 – Acceleware announced that it entered into a consulting engagement that will enable a major oil company to run one of its seismic migration algorithms on GPUs. The consulting agreement (which is denominated in US dollars) is valued at approximately $347,095 CDN.
On September 24, 2009 - Acceleware announced that Jens Horstmann was appointed to the Company’s board of directors.
Third Quarter Results of Operations
During the three months ended September 30, 2009, the Company reported total revenues of $782,207, a 66% increase compared to $472,620 for the three months ended September 30, 2008. The increase in recognized revenue over the same period in the prior year was due to an increase in consulting revenue. As the Company continued to market its consulting services offerings, $380,497 in consulting revenue was recognized in Q3, 2009 with no consulting revenue recognized in Q3, 2008 and $432,464 in Q2, 2009. Recognized revenue decreased 22% in Q3, 2009 compared to $1,000,372 recognized in Q2, 2009 due a decrease in product sales and consulting revenue. Product sales decreased due to a general slowdown over the summer months. Consulting revenue decreased as the Company substantially completed the services component of a large software and consulting services sale agreement in Q2, 2009. Maintenance revenue increased 19% to $104,476 in Q3, 2009 from $88,160 in Q3, 2008 and increased 1% from $103,938 in Q2, 2009. As the Company sells additional software licenses the installed base increases, resulting in increased maintenance revenue. Interest revenue decreased significantly from $28,511 in Q3, 2008 to $3,992 in Q3, 2009 due to reduced cash and cash equivalents and investments earning interest.
Expenses decreased 65% during the three months ended September 30, 2009 to $1,262,675 from $3,580,828 for the three months ended September 30, 2008. The decrease is a result of the significant reductions in expenses brought about by the restructuring program implemented by the Company in the second half of 2008. Expenses increased slightly from the $1,260,693 recorded in Q2, 2009.
Cost of revenue for Q3, 2009 decreased 27% to $313,013 from $429,238 in Q3, 2008. The reduction is due to a reduction in hardware cost of revenue brought on by the Company’s implementation of a software-only business model, partially offset by the direct costs for personnel associated with consulting services. The Company continues to supply hardware to customers out of its inventory as opportunities arise. Cost of revenue decreased 9% compared to the $343,860 recorded in Q2, 2009. The decrease is a result of decreased direct costs for consulting services. In anticipation of growth, the Company made a significant investment in computer hardware inventory during the first half of 2008. This investment was subsequently written down as revenue did not grow as quickly as expected, and much of the inventory has become obsolete as suppliers have introduced new models. The risks associated with investing in hardware inventory (sales forecasting risk and hardware obsolescence risk, among others) and the recent availability of third party hardware which is compatible with Acceleware’s software has led management to implement the software-only business model.
General and administrative expenses (“G&A”) include all salaries (excluding consulting and research and development personnel) and related expenses (including benefits and payroll taxes); sales and marketing activities; facility costs; stock-based compensation; and professional fees. For the three months ended September 30, 2009 G&A expenses decreased 69% to $635,105 from $2,036,721 recorded in Q3, 2008. The decrease is as a result of the Company’s restructuring program resulting in significantly lower staff levels, reduced marketing expenditures, and reduced facility costs. G&A expense increased 1% in Q3, 2009 compared to the $627,632 recorded in Q2, 2009. The increase is a result of increased sales expense related to hiring a salesperson in Houston, Texas to focus on sales to customers in the oil and gas sector.
For the three months ended September 30, 2009, research and development (“R&D”) expenditures decreased 69% to $298,305 from $950,443 for the three months ended September 30, 2008. The decrease is a result of three factors. Firstly, R&D expenses decreased as a result of the restructuring program undertaken in the second half of 2008, which included a focus on fewer markets and fewer new product development programs. Second, some R&D staff were reassigned to consulting services projects during Q3, 2009. Third, the Company benefited from an increase in government funding from National Research Council’s – Industrial Research Assistance Program (“NRC-IRAP”) during Q3, 2009. R&D increased 18% compared to the $253,767 recorded in Q2, 2009. The increase is a result of fewer personnel assigned to consulting services projects, partially offset by an increase in government funding from NRC-IRAP.
During the three months ended September 30, 2009, the Company recorded a $12,183 ($nil for Q3, 2008) gain on its investment in asset-backed commercial paper (“ABCP”) (see note 5 to the unaudited financial statements for the three months ended September 30, 2009 for further details). The gain is a result of decrease in estimated time to maturity, and changes in valuation assumptions such as expected interest rates. Continuing uncertainties regarding the value of the assets which underlie the ABCP, the amount and timing of cash flows and the outcome of the restructuring could give rise to a further material change in the value of the Company’s investment in ABCP which could impact the Company’s earnings in future periods.
Amortization decreased 52% to $29,660 in Q3, 2009 from $62,278 in Q3, 2008. The reduction is due to the disposal of excess property and equipment as part of the restructuring program.
Additional information, including the annual audited financial statements for the year ended December 31, 2008, the unaudited financial statements for the period ended September 30, 2009 and management’s discussion and analysis relating thereto are available on SEDAR at www.sedar.com.
Acceleware develops and markets solutions that enable software vendors to leverage heterogeneous, multi-core processing hardware without rewriting their applications for parallel computing. This acceleration middleware allows customers to speed-up simulation and data processing algorithms, benefitting from high performance computing technologies available in the market such as multiple-core CPUs, GPUs or other acceleration hardware.
Acceleware solutions are deployed by companies worldwide such as Philips, Boston Scientific, Samsung, Kodak, General Mills, LG, Medtronic, Hitachi, Fujifilm, FDA, Mitsubishi, Sony Ericsson, AGC, NTT DOCOMO, P-Wave Seismic and Renault to speed up product design, analyze data and make better business decisions in areas such as consumer electronics, industrial design, seismic data processing, imaging for the medical, industrial testing and security, defense, financial, and academic research.
Acceleware is a public company on Canada's TSX Venture Exchange under the trading symbol AXE.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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For further information:
Marketing Manager at Acceleware Corp.
+1 (403) 249-9099 ext. 287,
Acceleware Corp 1600 - 37th St SW
Calgary, AB T3C 3P1 Ph: 1.403.249.9099