EX-99.1 2 a09-34683_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

NEWS RELEASE

 

Date:

 

December 3, 2009

 

 

FOR IMMEDIATE RELEASE

 

 

 

Contact:

 

Dave Mossberg

 

 

Three Part Advisors, LLC

 

 

817-310-0051

 

 

XETA Technologies, Inc. Reports Fourth Quarter and Fiscal 2009 Financial Results

 

·                  4Q09 Revenue: $18.1 million vs. 4Q08 Revenue: $22.4 million

·                  4Q09 GAAP loss per share: ($0.19) vs. 4Q08 GAAP EPS $0.07

·                  Non-GAAP 4Q09 earnings per share: $0.04, excluding impairment charges

 

·                  FY09 Revenue: $71.6 million vs. FY08 Revenue: $84.3 million

·                  FY09 GAAP loss per share: ($1.01) vs. FY08 GAAP EPS $0.20

·                  Non-GAAP FY09 earnings per share: $0.07, excluding impairment charges

 

XETA Technologies, Inc. (the “Company”) (Nasdaq:XETA) today reported a GAAP loss of ($1.9 million), or ($0.19) per diluted share, on revenue of $18.1 million for the fourth fiscal quarter ended October 31, 2009.  This compares to earnings of $705,000, or $0.07 per diluted share, on revenue of $22.4 million for the fourth fiscal quarter ended October 31, 2008.

 

The Company announced that it has completed its impairment testing for goodwill and other long-lived assets.  An additional non-cash charge of $3.8 million was recorded against goodwill.  The impairment charges do not result in any cash expenditures or affect the Company’s cash position, cash flow from operations, or availability under its credit facility.  Excluding these charges, non-GAAP net income for the fourth fiscal quarter was $407,000, or $0.04 per diluted share.

 

For the fiscal year ended October 31, 2009, the Company reported a GAAP loss of ($10.3 million), or ($1.01) per diluted share, on revenue of $71.6 million compared to net income of $2.1 million, or $0.20 per diluted share on revenue of $84.3 million for the same period ended October 31, 2008.  The year-to-date GAAP loss included non-cash charges of $17.8 million consisting of $14.8 million in impairments to goodwill and $3.0 million in impairments to the Company’s ERP system.  Excluding these and other non-cash charges, non-GAAP net income for the fiscal year ended October 31, 2009 was $721,000, or $0.07 per diluted share.

 

The reported results are un-audited and, although no material changes are expected, are subject to change.  The audit is expected to be complete by the end of December 2009.

 

Total revenue declined 19 percent during the fourth quarter, and 15 percent during fiscal 2009 primarily due to lower systems orders and the corresponding affect on implementation and cabling services.  Commenting on revenue trends, Greg Forrest, CEO and President said, “We faced tough top line comparisons with the prior year and a difficult economic environment during fiscal 2009.  Customers were clearly in cash preservation mode, and made significant cutbacks in technology spending.  However, our fourth quarter results showed the first sequential quarterly revenue growth in five quarters.  Customer activity continued to gain momentum during the fourth quarter, and although our first fiscal quarter is typically our seasonally weakest, we expect sequential growth during the first quarter of fiscal 2010.”

 


 

Line of Businesses

 

Fiscal ‘09
Revenue

 

Fiscal ‘08
Revenue

 

%
Change

 

4Q 09
Revenue

 

4Q 08
Revenue

 

%
Change

 

Maintenance & Repair

 

28,965

 

29,193

 

-1

%

7,581

 

7,755

 

-2

%

Design & Implementation

 

9,409

 

11,047

 

-15

%

2,483

 

2,796

 

-11

%

Cabling

 

2,707

 

3,244

 

-17

%

657

 

1,045

 

-37

%

Total Services

 

41,081

 

43,484

 

-6

%

10,721

 

11,596

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

21,062

 

30,266

 

-30

%

5,453

 

7,095

 

-23

%

Hospitality

 

9,033

 

8,634

 

5

%

1,745

 

3,157

 

-45

%

Total Systems

 

30,095

 

38,900

 

-23

%

7,198

 

10,252

 

-30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

 

396

 

1,937

 

-80

%

134

 

508

 

-74

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

71,572

 

84,321

 

-15

%

18,053

 

22,356

 

-19

%

 

Fourth quarter services revenue was $10.7 million, an 8 percent decline from the same period last year, and a 2 percent sequential increase from the third quarter of 2009.  “Relative to the decline in systems sales, the more modest single digit decline in service revenue is a direct result of our strategic focus on growing this area.  The service business provides more stable recurring revenue, requires less working capital investment, and produces higher margin and returns,” said Mr. Forrest.   “We continue to gain trust and momentum with our direct and wholesale services customers and have recently announced several wins which should provide a foundation for growth in our service business during fiscal year 2010.”

 

Other revenue declined 74 percent during the fourth quarter of 2009, which was consistent with the rate of decline in previous quarters.  These revenues primarily represent commissions earned from Avaya on the sale of their maintenance agreements.  “Our other revenue category was up against difficult comparisons with the prior year, and customers have continued to defer decisions on renewals of existing contracts during the fourth quarter,” said Mr. Forrest. “Due to the high margin nature of this business, the decline in this revenue category had a material affect on our profitability during the year.”

 

Gross Margin Table

 

 

 

4Q09

 

4Q08

 

 

 

Line of Business

 

Gross Margin

 

Gross Margin

 

Change

 

Systems

 

26.5

%

26.4

%

+ 10 basis points

 

Services

 

34.4

%

30.4

%

+ 400 basis points

 

Overall Gross Margin

 

29.5

%

28.1

%

+ 140 basis points

 

 

During the fourth quarter of 2009, gross margin was 29.5 percent of revenue versus 28.1 percent during the fourth quarter of 2008.  The increase in gross margin during the fourth quarter reflects sustainable improvements made in operating efficiencies, as well as cost cutting measures implemented during third quarter of 2009.  Margin improvement also resulted from a mix shift to higher margin services revenue.  “We made significant improvements to our service operations this year.  In addition to greater efficiencies, our implementation business is transitioning to include a greater portion of high-value-added professional services, such as advance design and consulting.  As a result of these factors, fourth quarter’s performance was the highest quarterly gross margin in nine years.  For the year, gross margin from service revenue increased $484,000, despite a $2.4 million decrease in service revenue,” Mr. Forrest commented.  “Gross margin on systems revenue remained above targeted levels, reflecting our discipline to focus on business where we compete based on our differentiated offering, instead of price.”

 


 

Due to cost cutting measures implemented earlier in the year, operating expenses during the fourth quarter of 2009, excluding impairment charges, decreased 8 percent to $4.6 million.  “While we have cut back, operating expenses as a percentage of sales remain above our targeted levels.  Given the growth opportunities that are presenting themselves, increased customer activity, and improvement in some macro economic indicators, we feel confident that now is the right time for continued investment in sales, marketing and operations.  As a result of our investment, we expect to grow faster as the market recovers and reach targeted profitability levels more quickly,” concluded Mr. Forrest.

 

Due to improvements in working capital management, the Company generated over $10.0 million in operating cash flow during fiscal 2009.  “With our strong cash flow generation, we made significant improvements to our balance sheet during the year, paying down our line of credit and building cash balances of $4.7 million.” said Mr. Forrest.

 

The Company will host a conference call and webcast to discuss these results at 4:00 p.m. Central Time on Thursday, December 3, 2009.  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
October 31,

 

Fiscal Year Ended
October 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

 

Sales

Services

$

 10,721

 

$

 11,596

 

$

 41,081

 

$

 43,484

 

 

Systems

7,198

 

10,252

 

30,095

 

38,900

 

 

Other

134

 

508

 

396

 

1,937

 

 

Total

18,053

 

22,356

 

71,572

 

84,321

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

Services

7,033

 

8,074

 

28,291

 

31,178

 

 

Systems

5,288

 

7,545

 

22,080

 

28,720

 

 

Other

412

 

460

 

1,720

 

2,167

 

 

Total

12,733

 

16,079

 

52,091

 

62,065

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

5,320

 

6,277

 

19,481

 

22,256

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

29

%

28

%

27

%

26

%

 

 

 

 

 

 

 

 

 

 

Operating Expense

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

4,445

 

4,751

 

17,371

 

17,547

 

Amortization

 

199

 

296

 

1,201

 

1,018

 

Impairment of Goodwill and Other Assets

 

3,800

 

—

 

17,800

 

—

 

Total Operating Expenses

 

8,444

 

5,047

 

36,372

 

18,565

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

(3,124

)

1,230

 

(16,891

)

3,691

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

(20

)

(66

)

(100

)

(334

)

Interest and Other Income (Expense)

 

13

 

(4

)

28

 

24

 

Total Interest and Other Expense

 

(7

)

(70

)

(72

)

(310

)

 

 

 

 

 

 

 

 

 

 

Income Before Provision for Income Taxes

 

(3,131

)

1,160

 

(16,963

)

3,381

 

Provision for Income Taxes

 

(1,228

)

455

 

(6,646

)

1,324

 

Net Income after Tax

 

$

 (1,903

)

$

 705

 

$

 (10,317

)

$

 2,057

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

 (0.19

)

$

 0.07

 

$

 (1.01

)

$

 0.20

 

Diluted Earnings Per Share

 

$

 (0.19

)

$

 0.07

 

$

 (1.01

)

$

 0.20

 

Wt. Avg. Common Shares Outstanding

 

10,223

 

10,254

 

10,224

 

10,250

 

Wt. Avg. Common Equivalent Shares

 

10,223

 

10,254

 

10,224

 

10,250

 

 

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

 


 

Consolidated Balance Sheet Highlights

 

 

 

(Unaudited)

 

 

 

 

 

October 31, 2009

 

October 31, 2008

 

Assets

Current

Cash

 

$

 4,732

 

$

 64

 

 

 

Receivables (net)

 

13,832

 

19,995

 

 

 

Inventories (net)

 

5,036

 

5,237

 

 

 

Other

 

3,282

 

2,615

 

 

 

Subtotal

 

26,882

 

27,911

 

 

 

 

 

 

 

 

 

 

Non-Current

PPE (net)

 

6,826

 

10,725

 

 

 

Goodwill & Intangibles  (net)

 

12,603

 

27,654

 

 

 

Noncurrent Deferred Tax Asset

 

1,161

 

—

 

 

 

Other

 

336

 

103

 

 

 

Subtotal

 

20,926

 

38,482

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

$

 47,808

 

$

 66,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

Current

Revolving Line of Credit

 

$

 —

 

$

 2,524

 

 

 

Notes Payable

 

1,183

 

1,355

 

 

 

Accounts Payable

 

5,785

 

6,692

 

 

 

Accrued Liabilities

 

3,599

 

4,742

 

 

 

Unearned Revenue

 

5,195

 

3,237

 

 

 

Subtotal

 

15,762

 

18,550

 

 

 

 

 

 

 

 

 

 

Non-Current

Noncurrent Deferred Tax Liability

 

—

 

5,546

 

 

 

Other

 

287

 

460

 

 

 

Subtotal

 

287

 

6,006

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

16,049

 

24,556

 

 

 

 

 

 

 

 

 

Equity

 

 

 

$

 31,759

 

$

 41,837

 

 

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

 

Reconciliation of EBITDA(1) to Net Income

 

Quarter Ending
October 31,

 

Fiscal Year Ending
October 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

 (1,903

)

$

 705

 

$

 (10,317

)

$

 2,057

 

Interest

 

20

 

66

 

100

 

334

 

Provision for Income Taxes

 

(1,228

)

455

 

(6,646

)

1,324

 

Impairment of Goodwill and Other Assets

 

3,800

 

—

 

17,800

 

—

 

Depreciation

 

303

 

215

 

1,026

 

744

 

Amortization

 

199

 

296

 

1,201

 

1,018

 

EBITDA(1)

 

$

 1,191

 

$

 1,737

 

$

 3,164

 

$

 5,477

 

 

(The information is presented in thousands.)

 

(1)The Company uses Adjusted-EBITDA (earnings before net interest, income taxes, depreciation and amortization), which excludes non-cash charges for impairment of goodwill and other assets, 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
October 31,

 

Fiscal Year Ending
October 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net Income as Reported

 

$

 (1,903

)

$

 705

 

$

 (10,317

)

$

 2,057

 

Impairment of Goodwill and Other Assets (Net of Tax)

 

2,310

 

—

 

10,822

 

—

 

Reserve for Bad Debt (Net of Tax)

 

—

 

—

 

216

 

—

 

Non-GAAP net income

 

$

 407

 

$

 705

 

$

 721

 

$

 2,057

 

 

(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
October 31,

 

Fiscal Year Ending
October 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

EPS, Diluted - as Reported

 

$

 (0.19

)

$

 0.07

 

$

 (1.01

)

$

 0.20

 

EPS Impact of Impairment of Goodwill and Other Assets (Net of Tax)

 

0.23

 

0.00

 

1.06

 

0.00

 

EPS Impact of Reserve for Bad Debt, Net of Tax

 

0.00

 

0.00

 

0.02

 

0.00

 

EPS, Diluted - Non-GAAP

 

$

 0.04

 

$

 0.07

 

$

 0.07

 

$

 0.20

 

 

###

 

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 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 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 expected reductions in operating expenses and 2009 financial results. 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; 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.