Exhibit 99.1
NEWS RELEASE
| Date: | March 7, 2011 | |
| Contact: | Dave Mossberg Three Part Advisors, LLC 817-310-0051 |
XETA Technologies, Inc. Reports First Quarter Financial Results
| • | 1Q11 Revenue increased 19% to $27.4 million vs. 1Q10 revenue of $23.0 million | |
| • | 1Q11 GAAP EPS: $0.05 vs. 1Q10 GAAP EPS: $0.06 | |
| • | 1Q11 Non-GAAP EPS: $0.07 |
XETA Technologies, Inc. (Nasdaq: XETA) today reported earnings of $571,000, or $0.05 per diluted
share, on revenue of $27.4 million for the first fiscal quarter ended January 31, 2011. This
compares to 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.
During the first quarter of fiscal 2011, the Company recorded $324,000 of non-recurring expenses
for professional fees and other costs related to corporate development activities. Excluding
non-recurring expenses recorded during the first quarter ended January 31, 2011, non-GAAP net income
was $768,000, or $0.07 per diluted share.
| Line of Business | 1Q11 | 1Q10 | % Change | |||||||||
Maintenance & Repair |
11,254 | 8,218 | 37 | % | ||||||||
Design & Integration |
3,137 | 3,042 | 3 | % | ||||||||
Cabling |
905 | 857 | 6 | % | ||||||||
Total Services |
15,296 | 12,117 | 26 | % | ||||||||
Commercial |
9,711 | 10,039 | -3 | % | ||||||||
Hospitality |
2,276 | 828 | 175 | % | ||||||||
Total Systems |
11,987 | 10,867 | 10 | % | ||||||||
Other Revenue |
122 | 60 | Nmf | |||||||||
Total Revenue |
27,406 | 23,044 | 19 | % | ||||||||
Total revenue increased 19% during the first quarter of fiscal 2011 primarily due to the
contribution from business acquired during the past nine months. The effect of supply chain issues
from a major supplier and unusually strong comparisons with the prior year negatively impacted
Commercial systems revenue and resulted in a 3% decrease in that category year over year.
Hospitality systems revenue increased $1.4 million to $2.3 million as a result of improved capital
spending in that market sector and a large data and voice network order received from a new
customer associated with the Company’s new high speed internet product offering.
The company said that it completed the move to its new St. Louis-based network operating center
(“NOC”) during the first quarter. The 23,000 square foot facility houses staff and technology to
provide proactive network and application monitoring, help desk services, and 24/7 technical
support for a wide variety of industries. The NOC also houses the Company’s primary logistics and
staging facility to support our standard nationwide implementation protocol. Greg Forrest, CEO,
said, “This world class facility greatly expands our service offering and gives XETA the capability
to proactively monitor and resolve issues often before they can escalate.”
During the first quarter of FY11, gross margin was 25.5 percent of revenue versus 27.5 percent
during the first quarter of FY10. Systems margin remained relatively unchanged year over year and
within targeted ranges. Services margin decreased to 28.0 percent of sales versus 32.1 percent
during the same period a year ago. Operating expenses during the first quarter of FY11 were $6.1
million, up from $5.3 million reported during the first quarter of FY10. Excluding non-recurring
expenses during the first quarter, operating expenses were 21 percent of revenues in the first
quarter of fiscal FY11 compared to 23 percent of revenues in the first quarter of fiscal 2010.
Excluding non-recurring expenses during the first quarter of 2011, net income increased to
$768,000, or 2.8 percent of sales, versus $633,000, or 2.7 percent of sales during the first
quarter of 2010.
Forrest continued, “During the first quarter, which is typically our seasonally weakest, we reported the highest
quarterly revenue in more than 10 years and the third largest quarterly revenue in the Company’s
history. Momentum built during the quarter and revenue was back-end loaded. This trend, combined
with supply chain issues at one of our major vendors, affected utilization and profitability of our
implementation services during the first quarter. In addition, duplicate costs associated with the
move into our new NOC affected our services margin. Operating expenses, excluding non-recurring
items, were lower as a percentage of revenues in comparison with the prior year, which reflects the
cost efficiency programs we implemented last year, as well as acquisition related synergies.”
| Three Months Ended | ||||||||
| January 31, | ||||||||
| Condensed Consolidated Statements of Income | 2011 | 2010 | ||||||
| (Unaudited) | ||||||||
Sales |
||||||||
Services |
$ | 15,296 | $ | 12,117 | ||||
Systems |
11,988 | 10,867 | ||||||
Other |
122 | 60 | ||||||
Total |
27,406 | 23,044 | ||||||
Cost of Sales |
||||||||
Services |
11,017 | 8,231 | ||||||
Systems |
8,945 | 8,077 | ||||||
Other |
448 | 397 | ||||||
Total |
20,410 | 16,705 | ||||||
Gross Profit |
6,996 | 6,339 | ||||||
Gross Profit Margin |
26 | % | 28 | % | ||||
Operating Expense |
||||||||
Selling, General and Administrative |
5,838 | 5,125 | ||||||
Amortization |
312 | 187 | ||||||
Total Operating Expenses |
6,150 | 5,312 | ||||||
Income from Operations |
846 | 1,027 | ||||||
Interest Expense |
(19 | ) | (6 | ) | ||||
Interest and Other Income |
113 | 21 | ||||||
Total Interest and Other Income |
94 | 15 | ||||||
Income Before Provision for Income Taxes |
940 | 1,042 | ||||||
Provision for Income Taxes |
369 | 409 | ||||||
Net Income after Tax |
$ | 571 | $ | 633 | ||||
Basic Earnings Per Share |
$ | 0.05 | $ | 0.06 | ||||
Diluted Earnings Per Share |
$ | 0.05 | $ | 0.06 | ||||
Wt. Avg. Common Shares Outstanding |
10,742 | 10,237 | ||||||
Wt. Avg. Common Equivalent Shares |
10,810 | 10,277 | ||||||
(The information is unaudited and is presented in thousands except percentages and per-share data.)
| (Unaudited) | ||||||||
| Consolidated Balance Sheet Highlights | January 31, 2011 | October 31, 2010 | ||||||
Assets |
||||||||
Current |
||||||||
Cash |
$ | 722 | $ | 1,003 | ||||
Receivables (net) |
18,328 | 17,806 | ||||||
Inventories (net) |
6,430 | 6,715 | ||||||
Other |
4,708 | 4,637 | ||||||
Subtotal |
30,188 | 30,161 | ||||||
Non-Current |
||||||||
PPE (net) |
7,571 | 6,932 | ||||||
Goodwill & Intangibles (net) |
21,203 | 20,946 | ||||||
Other |
233 | 326 | ||||||
Subtotal |
29,007 | 28,204 | ||||||
Total Assets |
$ | 59,195 | $ | 58,365 | ||||
Liabilities |
||||||||
Current |
||||||||
Revolving Line of Credit |
$ | 3,392 | $ | 1,756 | ||||
Notes Payable |
338 | 338 | ||||||
Accounts Payable |
7,803 | 10,032 | ||||||
Accrued Liabilities |
5,087 | 4,006 | ||||||
Unearned Revenue |
5,977 | 6,529 | ||||||
Subtotal |
22,597 | 22,661 | ||||||
Non-Current |
||||||||
Long Term Debt |
173 | 255 | ||||||
Noncurrent Deferred Tax Liability |
396 | 12 | ||||||
Other |
137 | 193 | ||||||
Subtotal |
706 | 460 | ||||||
Total Liabilities |
23,303 | 23,121 | ||||||
Equity |
$ | 35,892 | $ | 35,244 | ||||
(The information is unaudited and is presented in thousands.)
| Quarter Ending | ||||||||
| Reconciliation of Adjusted EBITDA(1) to | January 31, | |||||||
| Net Income | 2011 | 2010 | ||||||
Net Income |
$ | 571 | $ | 633 | ||||
Interest |
19 | 6 | ||||||
Provision for Income Taxes |
369 | 409 | ||||||
Impact of Non-recurring Corporate Development
Related Costs |
324 | — | ||||||
Depreciation |
429 | 286 | ||||||
Amortization |
312 | 187 | ||||||
EBITDA(1) |
$ | 2,024 | $ | 1,521 | ||||
(The information is presented in thousands.)
| 1 | The 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, | ||||||||
| 2011 | 2010 | |||||||
Net Income as Reported |
$ | 571 | $ | 633 | ||||
Non-recurring Corporate Development Related Costs
(Net of Tax) |
197 | — | ||||||
Non-GAAP net income |
$ | 768 | $ | 633 | ||||
(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, | ||||||||
| 2011 | 2010 | |||||||
EPS, Diluted — as Reported |
$ | 0.05 | $ | 0.06 | ||||
Non-recurring Corporate Development Related Costs
(Net of Tax) |
0.02 | — | ||||||
EPS, Diluted — Non-GAAP |
$ | 0.07 | $ | 0.06 | ||||
###
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.
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 our
markets; the successful integration of recently acquired businesses into ours and realization of
anticipated synergies and growth opportunities from these transactions; changes in Avaya’s
marketing and dealer channel strategy; unpredictable quarter to quarter revenues; our 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 our Managed
Services offering; the availability and retention of revenue professionals and certified
technicians; failure to obtain shareholder approval or failure to satisfy other conditions required
for the consummation of the pending merger with PAETEC Holding Corp.; failure or delay in
consummation of the pending merger for other reasons. 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.