XETA Technologies, Inc. Reports First Quarter Financial
Results
GlobeNewswire
2010-02-25
BROKEN ARROW, Okla., Feb. 25, 2010 (GLOBE NEWSWIRE) --
-- 1Q10 Revenue Increased 24% to $23.0 Million vs. 1Q09 Revenue of $18.6
Million
-- 1Q10 GAAP EPS: $0.06 vs. 1Q09 GAAP EPS $0.00
XETA Technologies, Inc. (Nasdaq:XETA) today reported earnings of
$633,000, or $0.06 per diluted share, on revenue of $23.0 million for
the first fiscal quarter ended January 31, 2010. This compares to
earnings of $2,000, or $0.00 per diluted share, on revenue of $18.6
million for the first fiscal quarter ended January 31, 2009. During the
first quarter of FY09, the Company estimated and recorded a $350,000
reserve related to unpaid receivables due from Nortel Networks, Inc.
Excluding this reserve, net income during the quarter ended January 31,
2009 was $218,000, or $0.02 per diluted share.
%
Line of Business 1Q10 1Q09 Change
------------------ ------ ------ ------
Maintenance &
Repair 8,218 6,980 18%
Design &
Implementation 3,042 2,181 39%
Cabling 857 832 3%
Total Services 12,117 9,993 21%
Commercial 10,039 6,297 59%
Hospitality 828 2,289 -64%
Total Systems 10,867 8,586 27%
Other Revenue 60 1 nmf
Total Revenue 23,044 18,580 24%
Total revenue increased 24% during the first quarter of fiscal 2010
primarily due to an increase in demand for commercial systems and
services revenue. Commenting on revenue trends, Greg Forrest, CEO and
President said, "We announced long-term service contracts with over $7
million in annual revenue last year, and our first quarter's results
are indicative of the ramp in these contracts. Services revenue
increased by 21 percent to $12.1 million, which is the highest
quarterly level in the Company's history. Benefiting from an improved
environment for communications equipment spending and end-of-year
budget spending, commercial systems sales were also strong during the
first quarter and exceeded our expectations. While we are cautiously
optimistic about our ability to grow systems sales during the remainder
of the fiscal year, our hospitality vertical faces strong headwinds and
the timing of orders could make our systems sales growth uneven in the
coming quarters."
Gross Margin Table
1Q10 1Q09
Gross Gross
Line of Business Margin Margin Change
----------------------- ------ ------ ------------------
Services 32.1% 30.1% + 200 basis points
Systems 25.7% 26.1% - 40 basis points
Overall Gross Margin 27.5% 25.9% + 160 basis points
During the first quarter of FY10, gross margin was 27.5 percent of
revenue versus 25.9 percent during the first quarter of FY09. "Our
systems gross margin remained above our targeted levels, as we
continued to focus on business where we compete based on our
differentiated offering, instead of price," Mr. Forrest commented. "Our
services margins were within our targeted range due to improved
operating efficiencies and utilization. Services margin also benefited
from increased sales of high-value-added professional services, such as
advanced design and consulting."
Operating expenses during the first quarter of FY10 increased to $5.3
million, or 23.1 percent of sales, compared to $4.8 million, during the
first quarter of FY09. Excluding non-cash charges, operating expenses
during the first quarter of FY09 were $4.4 million, or 23.8 percent of
sales. "While operating expenses as a percentage of sales remain above
our targeted levels, we showed 70 basis points of improvement as sales
growth outpaced the expense increase," said Mr. Forrest.
"Additionally, we were able to grow revenue by 24% without a
significant change in working capital. As a result, during the first
quarter we generated $2.1 million in operating cash flow, repaid the
remaining balance on our mortgage and increased our cash balance to
$5.4 million," said Mr. Forrest. "Given the improving environment for
communications equipment spending and the momentum we are building with
our wholesale partners, we are confident that our current strategies --
to continue investing in the business during the downturn, to focus on
operational excellence, and to grow our value-added and recurring
revenue services business -- have positioned us well to outpace the
growth of the overall market."
The Company will host a conference call and webcast to discuss these
results at 5:00 p.m. EST, 4:00 p.m. CST on Thursday, February 25, 2010.
Interested parties may access the conference call via telephone by
dialing 877-407-8033. The call is being webcast and can be accessed at
XETA's website www.xeta.com under the Investor Relations section of the
website. A replay of the webcast will be archived on the Company's
website for 60 days.
Condensed Consolidated Statements of Income
Three Months Ended
January 31,
-----------------------------
2010 2009
----------- ----------------
(Unaudited)
Sales Services $ 12,117 $9,993
Systems 10,867 8,586
Other 60 1
Total 23,044 18,580
Cost of Sales Services 8,231 6,984
Systems 8,077 6,342
Other 397 448
Total 16,705 13,774
Gross Profit 6,339 4,806
Gross Profit Margin 28% 26%
Operating Expense
Selling, General and
Administrative 5,125 4,456
Amortization 187 322
Total Operating Expenses 5,312 4,778
Income from Operations 1,027 28
Interest Expense (6) (30)
Interest and Other Income 21 11
Total Interest and Other
Income (Expense) 15 (19)
Income Before Provision for
Income Taxes 1,042 9
Provision for Income Taxes 409 7
Net Income after Tax $ 633 $ 2
Basic Earnings Per Share $ 0.06 $ 0.00
Diluted Earnings Per Share $ 0.06 $ 0.00
Wt. Avg. Common Shares
Outstanding 10,237 10,222
Wt. Avg. Common Equivalent
Shares 10,277 10,222
(The information is unaudited and is presented in thousands except
percentages and
per-share data.)
Consolidated Balance Sheet Highlights
(Unaudited)
January 31, October
31,
2010 2009
----------- ---------
Cash and Cash
Assets Current Equivalents $ 5,409 $ 4,732
Receivables (net) 13,648 13,832
Inventories (net) 4,919 5,036
Other 4,146 3,704
Subtotal 28,122 27,304
Non-Current PPE (net) 6,616 6,826
Goodwill &
Intangibles (net) 12,532 12,603
Noncurrent Deferred
Tax Asset 311 739
Other 349 336
Subtotal 19,808 20,504
Total Assets $ 47,930 $ 47,808
Revolving Line of
Liabilities Current Credit $ -- $ --
Notes Payable -- 1,183
Accounts Payable 6,091 5,785
Accrued Liabilities 4,045 3,599
Unearned Revenue 5,060 5,195
Subtotal 15,196 15,762
Non-Current Other 264 287
Subtotal 264 287
Total
Liabilities 15,460 16,049
Equity $ 32,470 $ 31,759
(The information is unaudited and is presented in thousands.)
Reconciliation of
EBITDA(1) to Net Quarter Ending
Income January 31,
----------------- ---------------------
2010 2009
------- ------------
Net Income $ 633 $ 2
Interest 6 30
Provision for
Income Taxes 409 7
Depreciation 286 225
Amortization 187 322
EBITDA(1) $1,521 $ 586
(The information is presented in
thousands.)
1The Company uses EBITDA (earnings before net interest, income taxes,
depreciation and amortization) as part of its overall assessment and
comparison of financial performance between accounting periods. XETA
believes that EBITDA is often used by the financial community as a
method of measuring the Company's performance and of evaluating the
market value of companies considered to be in similar businesses.
EBITDA is a non-GAAP financial measure and should not be considered an
alternative to net income or cash provided by operating activities, as
defined by accounting principles generally accepted in the United
States ("GAAP"). A reconciliation of EBITDA to net income is provided
above.
The following table reconciles reported GAAP net income per the income
statement to non-GAAP net income:
Quarter Ending
January 31,
------------------------------------------------- --------------------
2010 2009
------- -----------
Net Income as Reported $ 633 $ 2
Reserve for Bad Debt (Net of Tax) -- 216
Non-GAAP net income $ 633 $ 218
(The information is presented in thousands.)
The following table reconciles reported GAAP diluted earnings (loss)
per share ("EPS") to non-GAAP diluted EPS:
Quarter Ending
January 31,
------------------------------------------------------------------- ------------------
2010 2009
------- ---------
EPS, Diluted - as Reported $ 0.06 $0.00
EPS Impact of Reserve for Bad Debt, Net of Tax -- 0.02
EPS, Diluted - Non-GAAP $ 0.06 $0.02
About XETA Technologies, Inc.
XETA Technologies, Inc. sells, installs and services advanced
communication technologies for small, medium, and Fortune 1000
enterprise customers. The Company maintains the highest level of
technical competencies with multiple vendors including Avaya, Mitel,
Nortel, Hitachi and Samsung. With a 28-year operating history and over
16,000 customers from coast to coast, XETA has maintained a commitment
to extraordinary customer service. The Company's in-house 24/7/365
contact center, combined with a nationwide service footprint offers
customers comprehensive equipment service programs that ensure network
reliability and maximized network up-time. More information about XETA
Technologies (Nasdaq:XETA) is available at www.xeta.com. Click on the
following link to join our e-mail alert list:
http://www.b2i.us/irpass.asp?BzID=1585&to=ea&s=0.
The XETA Technologies Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7103
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
include statements concerning the outlook for growth and the pace of
such growth. These and other forward-looking statements (generally
identified by such words as "expects," "plans," "believes," "likely,"
"anticipates" and similar words or expressions) reflect management's
current expectations, assumptions, and beliefs based upon information
currently available to management. Investors are cautioned that all
forward-looking statements are subject to certain risks and
uncertainties which are difficult to predict and that could cause
actual results to differ materially from those projected. These risks
and uncertainties include, but are not limited to: the condition of the
U.S. economy and its impact on capital spending in the Company's
markets; reduced availability of credit; the Nortel Networks bankruptcy
filing and the impact that such action will continue to have on the
Company's Nortel products and services offering; unpredictable quarter
to quarter revenues; changes in Avaya's strategies regarding the
provision of equipment and services to its customers, and in its
policies regarding the availability of tier IV hardware and software
support; continuing success of our Mitel product and service offerings;
the Company's ability to maintain and improve upon current gross profit
margins; intense competition and industry consolidation; dependence
upon a few large wholesale customers for the recent growth in the
Company's Managed Services offering; and the availability and retention
of revenue professionals and certified technicians. Additional factors
that could affect actual results are described in the "Risk Factors"
section of the Company's Form 10-K and Form 10-Q filings with the SEC.
CONTACT: Three Part Advisors, LLC
Dave Mossberg
817-310-0051
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