EX-99.1 2 a08-15487_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

NEWS RELEASE

 

Date:

 

May 29, 2008

 

 

FOR IMMEDIATE RELEASE

 

 

 

Contact:

 

Dave Mossberg

 

 

Beacon Street Group

 

 

817-310-0051

 

XETA Technologies Reports Second Quarter FY08 Financial Results

 

•                  Q208 Revenue: $20.8 million (increase of 25% year over year)

•                  Q208 EPS: $0.04 vs. Q207 EPS $0.02

 

•                  1H08 Revenue: $38.8 million (increase of 18% year over year)

•                  1H08 EPS: $0.07 vs. 1H07 EPS of $0.04

 

Broken Arrow, OK - XETA Technologies (NASDAQ:XETA) today reported second quarter earnings of $371,000, or $0.04 per diluted share, on revenue of $20.8 million for the second fiscal quarter ended April 30, 2008. This compares to earnings of $208,000, or $0.02 per diluted share, on revenue of $16.7 million for the second fiscal quarter ended April 30, 2007.

 

For the six months ended April 30, 2008, the Company reported earnings of $760,000, or $0.07 per diluted share, on revenue of $38.8 million compared to net income of $378,000 or $0.04 per share diluted on revenue of $32.7 million for the same period ended April 30, 2007.

 

Second quarter 2008 systems sales increased 32 percent to $10.3 million versus $7.8 million recorded in the second quarter of 2007. “Commercial systems sales were strongly aided by increased shipments of orders received from the Miami-Dade County Public Schools Systems (“MDCPS”), which we announced during first quarter,” said Greg Forrest, XETA’s Chief Executive Officer.  This project, the largest in our Company’s history, has gone very well to date and the customer has given us high marks for meeting their aggressive shipment and installation schedule.  Installations of systems at MDCPS are continuing at an aggressive pace early in our third quarter and will then flow with the district’s school calendar until the project is complete in our fourth fiscal quarter.”

 

During the second quarter of 2008, services revenue increased 15 percent to $10.1 million from $8.8 million posted during the second quarter of 2007.  Compared to second quarter of FY07, all three of the Company’s service revenue categories increased: recurring service revenue increased 11 percent to $7.0 million, implementation service revenue increased 32 percent to $2.3 million, and cabling service revenue increased 9 percent to $0.8 million.

 

During the second quarter of 2008, gross margin was 24.9 percent of sales versus 25.2 percent during the second quarter of 2007 as increased equipment revenue margin was offset by decreased margin on services revenue.  Contractually required investments in local presence to support the implementation of the MDCPS purchase orders and customer-driven compaction of the MDCPS installation schedule combined to negatively

 


 

impact service margin during the second quarter.  In addition, service margin was affected by investments made to support continued growth of the wholesale managed services business, the pace of which was slower than anticipated.  The Company also experienced a decrease in time and materials service revenue during the second quarter, which impacted service margin with lower fixed cost absorption.

 

Commenting on the outlook for the remainder of fiscal 2008, Mr. Forrest said, “While our strategies are clearly enabling us to outpace growth in the communications equipment market, we saw evidence during the second quarter that the uncertain economy is affecting our customers’ buying decisions.  In addition to slower than anticipated growth of our services business, equipment order rates, excluding MDCPS, were off plan during the second quarter.  As such, the Company’s existing infrastructure is larger than needed to meet current market demand and we are taking actions to bring our expense structure more in line with current market conditions.”

 

“We remain confident that we have the right strategies in place to grow the top line in excess of 15 percent per year and make incremental improvements to our profitability,” continued Mr. Forrest.  The Company expects fiscal 2008 earnings per diluted share to be in the range of $0.17 to $0.21.  Third quarter earnings per diluted share are expected to be in the range of $0.04 to $0.06.  The Company expects revenue growth in the second half of the year to exceed 15 percent.

 

The Company will host a conference call and webcast to discuss these results at 4:00 p.m. Central Time on Thursday, May 29, 2008.  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 portion 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

 

Six Months Ended

 

 

 

 

 

April 30,

 

April 30,

 

 

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

Services

 

$

10,134

 

$

8,793

 

$

19,860

 

$

17,568

 

 

 

Systems

 

10,272

 

7,762

 

17,986

 

14,789

 

 

 

Other

 

406

 

134

 

916

 

382

 

 

 

Total

 

20,812

 

16,689

 

38,762

 

32,739

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

Services

 

7,600

 

6,116

 

14,731

 

12,465

 

 

 

Systems

 

7,542

 

5,927

 

13,328

 

11,235

 

 

 

Other

 

484

 

447

 

926

 

889

 

 

 

Total

 

15,626

 

12,490

 

28,985

 

24,589

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

5,186

 

4,199

 

9,777

 

8,150

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

 

25

%

25

%

25

%

25

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expense

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

 

 

4,263

 

3,713

 

7,926

 

7,241

 

Amortization

 

 

 

255

 

147

 

457

 

287

 

Total Operating Expenses

 

 

 

4,518

 

3,860

 

8,383

 

7,528

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

 

 

668

 

339

 

1,394

 

622

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

(69

)

—

 

(171

)

(10

)

Interest and Other Income

 

 

 

10

 

9

 

27

 

26

 

Total Interest and Other Expense

 

 

 

(59

)

9

 

(144

)

16

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Provision for Income Taxes

 

 

 

609

 

348

 

1,250

 

638

 

Provision for Income Taxes

 

 

 

238

 

140

 

489

 

260

 

Net Income after Tax

 

 

 

$

371

 

$

208

 

$

761

 

$

378

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

 

 

$

0.04

 

$

0.02

 

$

0.07

 

$

0.04

 

Diluted Earnings Per Share

 

 

 

$

0.04

 

$

0.02

 

$

0.07

 

$

0.04

 

Wt. Avg. Common Shares Outstanding

 

 

 

10,254

 

10,215

 

10,231

 

10,215

 

Wt. Avg. Common Equivalent Shares

 

 

 

10,263

 

10,215

 

10,246

 

10,215

 

 

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

 


 

Consolidated Balance Sheet Highlights

 

 

 

 

 

 

 

April 30, 2008

 

October 31, 2007

 

Assets

 

Current

 

Cash

 

$

125

 

$

403

 

 

 

 

 

Receivables (net)

 

19,258

 

16,236

 

 

 

 

 

Inventories (net)

 

4,872

 

4,297

 

 

 

 

 

Other

 

2,093

 

1,944

 

 

 

 

 

Subtotal

 

26,348

 

22,880

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

PPE (net)

 

10,590

 

10,611

 

 

 

 

 

Goodwill & Intangibles

 

26,580

 

26,469

 

 

 

 

 

Other

 

140

 

136

 

 

 

 

 

Subtotal

 

37,310

 

37,216

 

 

 

Total Assets

 

 

 

$

63,658

 

$

60,096

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

Current

 

Revolving Line of Credit

 

$

4,587

 

$

2,759

 

 

 

 

 

Accounts Payable

 

7,250

 

5,670

 

 

 

 

 

Accrued Liabilities

 

2,441

 

3,565

 

 

 

 

 

Unearned Revenue

 

2,547

 

2,212

 

 

 

 

 

Notes Payable

 

171

 

171

 

 

 

 

 

Subtotal

 

16,996

 

14,377

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

Long Term Debt

 

1,269

 

1,355

 

 

 

 

 

Noncurrent Deferred Tax Liability

 

4,776

 

4,632

 

 

 

 

 

Other

 

207

 

293

 

 

 

 

 

Subtotal

 

6,252

 

6,280

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 

23,248

 

20,657

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

40,410

 

39,439

 

 

(The information is unaudited and is presented in thousands.)

 

 

 

Quarter Ending

 

Six Months Ending

 

 

 

April 30,

 

April 30,

 

Reconciliation of EBITDA to Net Income

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

371

 

$

208

 

$

761

 

$

378

 

Interest

 

69

 

—

 

171

 

10

 

Provision (Benefit) for Income Taxes

 

238

 

140

 

489

 

260

 

Depreciation

 

171

 

130

 

339

 

254

 

Amortization

 

255

 

147

 

457

 

287

 

EBITDA(1)

 

$

1,104

 

$

625

 

$

2,217

 

$

1,189

 

 

(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.

 


 

###

 

About XETA Technologies

 

XETA is a leading provider of communication technologies with a comprehensive array of products and services available from industry leaders. The Company has earned and continues to maintain the industry’s most prestigious certifications as an Avaya Platinum Business Partner, Nortel Elite Advantage Partner, and Mitel premiumPARTNER. Being able to provide solutions and service for these leading vendors is a unique value proposition for Fortune 1000 customers with multiple locations and complex networks. With a 25 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 call 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 (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 systems order rates and sales, profitability, earnings, expectations and managing expense structure. 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 weakening economy and its impact on capital spending trends in the Company’s markets; the Company’s ability to maintain and improve upon current gross profit margins; delays in installation schedule or other adverse events impacting expected revenue and gross profits from the Miami-Dade County Public School system orders; the success of the Mitel product and services offering; the Company’s ability to acquire and retain the technical competencies needed to implement new advanced communications technologies; intense competition and industry consolidation; dependence upon a single customer 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 Item 1.A entitled “Risk Factors” contained in Part I of the Company’s Form 10-K for its fiscal year ended October 31, 2007.