Cimatron Reports Record Revenues

$5.0 Million Net Cash Generated by Operating Activities in the First Half of 2008, an Increase of 101% Year-Over-Year

GIVAT SHMUEL, Israel, August 27 /PRNewswire-FirstCall/ -- Cimatron Limited (NASDAQ: CIMT), a leading provider of integrated CAD/CAM solutions for the toolmaking and manufacturing industries, today announced financial results for the second quarter and first six months of 2008.

    Financial Highlights:

    - Revenues on a non-GAAP Basis: $10.9 million in Q2/08 as
      compared to $5.5 million in Q2/07
    - Net Income on a non- GAAP Basis: $0.74 million in Q2/08 as
      compared to $0.30 million in Q2/07
    - Revenues on GAAP Basis: $10.7 million in Q2/08 as compared to
      $5.5 million in Q2/07
    - Net Income on GAAP Basis: $0.20 million in Q2/08 as compared to
      $0.29 million in Q2/07

Cimatron presents record 99% year-over- year revenue growth in Q2 2008 on a non-GAAP basis, and as a result, 146% year-over-year growth in the quarterly net income on a non-GAAP basis, despite unfavorable currency exchange rates and a challenging global economic environment. Furthermore, net cash generated in the first half of 2008 was $5.0 million, an increase of 101% as compared to the first half of 2007. The revenue growth was attributed to both organic growth and the accretive impact of the merger transactions with Microsystem and Gibbs.

Revenue on a non-GAAP basis in 2008 excludes the effect of business combination accounting rules on the acquired deferred maintenance revenue balance of Gibbs. Expenses on a non-GAAP basis exclude the non-cash amortization of acquired intangible assets of Microsystem and Gibbs and the deferred taxes related to these acquisition- related items.

The following provides further details on Cimatron's GAAP and non-GAAP figures in the second quarter and the first half of 2008:

Revenues for the second quarter of 2008 increased 94% to $10.7 million, as compared to $5.5 million in the second quarter of 2007. For the first six months of 2008, revenue increased by 91% to $20.7 million, compared to $10.8 million in the same period of 2007. The increase was attributed both to organic growth and to the consolidation of Microsystem's and Gibbs' results.

Gross Income for the second quarter of 2008 was $8.8 million as compared to $4.7 million in the same period in 2007. Gross margin in the second quarter was 82%, compared to 85% in Q2 2007. For the first six months of 2008, gross income was $16.8 million, compared to $9.2 million in the same period of 2007. Gross margin for the six months ended on June 30th, 2008 was 81% of revenues as compared to 85% of revenues in the same period of 2007.

The decrease in gross margin is mainly attributed to business combination accounting rules, and as expected, to Microsystem's lower margins on third party hardware products sales as compared to the margins on Cimatron software sales.

Operating Income in the second quarter of 2008 was $73 thousand, compared to operating income of $282 thousand in the second quarter of 2007. In the first six months of 2008, Cimatron recorded an operating loss of $(145) thousand, compared to operating income of $395 thousand in the first six months of 2007.

Net Income for the quarter was $205 thousand, or $0.02 per diluted share, compared to net income of $291 thousand, or $0.04 per diluted share recorded in the same quarter of 2007. In the first six months of 2008 net loss was $(93) thousand, or $(0.01) per diluted share, compared to net income of $472 thousand, or $0.06 per diluted share, in the first six months of 2007.

Revenues on a non-GAAP basis for the second quarter of 2008 increased 99% to $10.9 million, as compared to $5.5 million in the second quarter of 2007. For the first six months of 2008, revenue increased by 96% to $21.2 million, compared to $10.8 million in the same period of 2007.

Gross Income on a non-GAAP basis for the second quarter of 2008 was $9.2 million as compared to $4.7 million in the same period in 2007. Gross margin on a non-GAAP basis in the second quarter of 2008 was 84%, compared to 85% in Q2 2007. In the first six months of 2008, gross income on a non-GAAP basis increased 92% to $17.6 million, compared to $9.2 million in the first six months of 2007. Gross margin on a non-GAAP basis for the six months ended on June 30th, 2008 was 83% of revenues as compared to 85% of revenues in the same period of 2007.

The decrease in gross margin is mainly attributed to Microsystem's lower margins on third party hardware products sales as compared to the margins on Cimatron software sales.

Operating Income on a non-GAAP basis in the second quarter of 2008 was $568 thousand, as compared to non-GAAP operating income of $292 thousand in the second quarter of 2007. In the first six months of 2008, Cimatron reports operating income increase to $844 thousand, compared to operating income of $415 thousand in the first six months of 2007.

Net Income on a non-GAAP basis in the second quarter of 2008 increased 146% to $740 thousand or $0.08 per diluted share, as compared to non-GAAP net income of $301 thousand, or $0.04 per diluted share in the second quarter of 2007. In the first six months of 2008, net profit increased by 98% to $974 thousand, or $0.10 per diluted share, compared to a net profit of $492 thousand, or $0.06 per diluted share, in the first six months of 2007.

Commenting on the results, Danny Haran, President and Chief Executive Officer of Cimatron, said, "We are pleased to present another quarter of record revenues and year-over-year record revenue growth. 98% net income growth on a non-GAAP basis in the first half of 2008 and 101% growth in net cash generated from operating activities in the same period represent the continuous improvement of our core business attributed both to the merger transactions with Microsystem and Gibbs, as well as to continuous organic growth. Cimatron's global distribution network is broadening its product offering with GibbsCam solutions and already recorded initial GibbsCam sales. We face a challenging currency environment, and are continuously monitoring and dealing with its effects on our financial results," concluded Mr. Haran.

Reconciliation between results on a GAAP and Non-GAAP basis is provided in a table immediately following the Consolidated Statements of Operation (Non-GAAP basis). Non-GAAP financial measures consist of GAAP financial measures adjusted to include recognition of deferred revenues of acquired companies and to exclude amortization of acquired intangible assets and deferred income tax, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of our performance exclusive of non-GAAP charges and other items that are considered by management to be outside our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe that these non- GAAP measures help investors to understand our current and future operating cash flow and performance, especially as our two most recent acquisitions have resulted in amortization and non-cash items that have had a material impact on our GAAP profits. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies.

Conference Call

Cimatron's management will host a conference call with the investment community tomorrow, Thursday, August 28th, 2008, at 9:00 EST, 16:00 Israel time.

To participate, please call one of the following teleconferencing numbers. Please begin placing your call at least 5 minutes before the conference call commences.

                                                     USA:  +1-888-668-9141
                                                              Israel:  03-9180610
                                                    International:  +972-3-9180610

 


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