EX-99.1 2 a06-12514_1ex99d1.htm EX-99

Exhibit 99.1

 

 

NEWS RELEASE

 

Date:

 

May 24, 2006

 

 

FOR IMMEDIATE RELEASE

 

 

 

Contact:

 

Cheryl Moll

 

 

XETA Technologies

 

 

(918) 588-4624

 

XETA TECHNOLOGIES REPORTS

SECOND QUARTER RESULTS

 

Broken Arrow, OK —XETA Technologies (NASDAQ: XETA) today announced fiscal 2006 second quarter earnings of $0.056 million, or $0.01 per share diluted, on revenues of $14.9 million for the period ending April 30, 2006. This compares to earnings of $0.165 million or $0.02 per share diluted, on revenues of $14.2 million for the period ending April 30, 2005.

 

For the six months year-to-date, the Company reported a loss of $0.084 million, or $0.01 per share diluted, on revenues of $27.6 million compared to earnings of $0.243 million, or $0.02 per share diluted, on revenues of $28.1 million for the period ending April 30, 2005.

 

“Our second quarter results show some dramatic and important improvements over the first quarter of this year,” stated Jack Ingram, XETA’s CEO. “We are pleased with our strong systems sales growth, but more importantly, our robust growth in gross profit from our managed services revenues is definitely encouraging. This continuing build-up in our recurring revenue stream is the very soul of our business model and we are seeing the benefits of our commercial segment transition plan. This is cause for optimism as we guide the company’s revenue balance from our three principle lines of business to the desired proportions throughout the remainder of this fiscal year.”

 

According to Greg Forrest, President, “The focus on recurring revenue is beginning to bear significant fruit. New service customer acquisitions are the principle driver contributing to increased service revenues. Also, gross margins in services are growing as a result of higher revenues and improved utilizations as we work through the start-up costs associated with servicing the Nortel product line. As a result of this favorable combination, our gross profit from the recurring portion of our managed services segment increased nearly $600,000 (38%) during the quarter. Other than commission expense, this increase comes with essentially no increase in SG&A, so the increase falls through to the operating margin without significant dilution.

 

“Also, as discussed in our first quarter earnings release, systems sales did rebound in the second quarter. Both our Avaya and Nortel lines of business contributed to a 32% quarter-over-quarter systems sales growth. On a year-to-date basis, our Nortel systems are up 90%, our Avaya systems sales are up slightly and our lodging systems sales, comprised of both Avaya and Nortel are up 28%.”

 

“Looking ahead,” continued Forrest, “we are maintaining focus on these key areas of business:  first, the build up of our managed services; second, closing new system sales in both product lines; third, continued improvement in gross margins; all while closely monitoring and controlling operating expenses.”

 


 

“As we have previously stated,” said Ingram, “we plan to continue to steadily increase our commitments to systems sales, but, at the same time increase our recurring revenue stream at a much more rapid growth rate. The results are beginning to show and by the end of this fiscal year, we plan to have this final leg of our transition plan essentially in place. Once in place, the vulnerability of earnings predictability will be greatly reduced.

 

“With that understanding, we are targeting our third quarter earnings at 1 to 3 cents per share. Unless we exceed this target we will have trouble overcoming our weak first quarter and achieving the annual earnings guidance of 8 to 20 cents per share previously published. In any event, we remain extremely optimistic regarding the longer-range future of our company.”

 

XETA Technologies will host a conference call to discuss these fiscal 2006 second quarter results along with issues presented in our News Release issued of May 15, 2006 at 10 a.m.(TZ: Central) on Thursday, May 25, 2006. The media, analysts and investors are invited to participate by dialing 800-611-1148. A replay of  the call will be available from 1:30 p.m. (TZ: Central) that day through 11:59 p.m. (TZ: Central)  on June 2, 2006 by dialing 800-475-6701, access code 825160.

 

 

 

Quarter Ending April 30th

 

Six Months Ending April
30th

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

Systems

 

7,556

 

6,282

 

13,258

 

12,634

 

Services

 

7,248

 

7,369

 

13,667

 

14,300

 

Other

 

89

 

553

 

652

 

1,185

 

Total

 

14,894

 

14,204

 

27,577

 

28,119

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

23.7

%

27.4

%

22.9

%

26.3

%

 

 

 

 

 

 

 

 

 

 

Operating Expense

 

3,418

 

3,602

 

6,346

 

7,092

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

118

 

286

 

(34

)

303

 

 

 

 

 

 

 

 

 

 

 

Interest And Other Income (Exp)

 

(15

)

(15

)

(78

)

97

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) After Tax

 

57

 

165

 

(84

)

243

 

Basic Earnings (Loss) Per Share

 

$

0.01

 

$

0.02

 

$

(0.01

)

$

0.02

 

Diluted Earnings (Loss) Per Share

 

$

0.01

 

$

0.02

 

$

(0.01

)

$

0.02

 

 

 

 

 

 

 

 

 

 

 

Wt. Avg. Common Shares Outstanding

 

10,215

 

10,049

 

10,202

 

10,038

 

Wt. Avg. Common Equivalent Shares

 

10,215

 

10,084

 

10,205

 

10,079

 

 

 (The information is presented in thousands except percentages and per-share data.)

 


 

 

 

 

 

 

 

April 30, 2006

 

October 31, 2005

 

 

 

 

 

 

 

 

 

 

 

Assets

 

Current

 

Cash

 

57

 

177

 

 

 

 

 

Receivables (net)

 

10,801

 

11,634

 

 

 

 

 

Inventories (net)

 

4,620

 

5,650

 

 

 

 

 

Other

 

2,051

 

2,289

 

 

 

 

 

Subtotal

 

17,529

 

19,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

Receivables (net)

 

137

 

167

 

 

 

 

 

PPE (net)

 

10,459

 

10,411

 

 

 

 

 

Goodwill & Intangibles

 

26,609

 

26,656

 

 

 

 

 

Other

 

22

 

35

 

 

 

 

 

Subtotal

 

37,227

 

37,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

 

54,756

 

57,019

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

Current

 

Notes Payable

 

604

 

1,123

 

 

 

 

 

Revolving Line of Credit

 

3,707

 

4,395

 

 

 

 

 

Accounts payable

 

3,446

 

4,848

 

 

 

 

 

Unearned Revenue

 

2,234

 

1,506

 

 

 

 

 

Accrued Liabilities

 

2,558

 

2,398

 

 

 

 

 

Subtotal

 

12,549

 

14,270

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

Long Term Debt

 

1,611

 

1,697

 

 

 

 

 

Other

 

3,514

 

3,954

 

 

 

 

 

Subtotal

 

5,125

 

5,651

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 

17,674

 

19,921

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

37,082

 

37,098

 

 

 

 

 

 

 

 

 

 

 

 

(The information is presented in thousands.)

 

# # #

 

About XETA Technologies

 

XETA Technologies is a leading provider of enterprise-class communications solutions, installation and service in the emerging, highly technical world of converged communications solutions for voice and data applications. XETA has sales and service locations nationwide. XETA is one of the largest providers of Avaya voice and data communication solutions and has recently added the Nortel voice and data product line. XETA markets a line of proprietary call accounting systems to the hospitality industry and has long been recognized as the leading provider of call accounting solutions to that industry. More information about XETA (NASDAQ:  XETA) is available at www.xeta.com.

 


 

This news release contains forward-looking statements, which are made subject to the provisions of the Private Securities Litigation Reform Act of 1995.  These statements include statements concerning systems sales, the Company’s focus on recurring revenue and other aspects of its business plan, and revenues and earnings expectations.  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 Company’s ability to continue to improve systems sales while maintaining gross profit margins; increased competition; the Company’s ability to successfully exploit the Nortel  market, and the long term success of the Company’s growth strategies; the Company’s ability to continue to add new service customers and reverse the decline in gross margins on service revenues; the impact of any additional operating losses upon the Company’s ability to comply with the financial covenants in its credit facility; and the availability and retention of sales professionals and certified technicians.  Additional factors that could affect actual results are described in Item 1.A entitled “ Risk Factors” contained in Part I of the Company’s Form 10-K for its fiscal year ended October 31, 2005, as updated in its Form 10-Q for the fiscal quarter ended January 31, 2006.