EX-99.1 2 a10-16421_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

NEWS RELEASE

 

 

 

Date:

 

August 26, 2010

 

 

 

Contact:

 

Dave Mossberg

 

 

Three Part Advisors, LLC

 

 

817-310-0051

 

 

 

 

 

Barrett Waller

 

 

Barrett@wallerpr.com

 

 

918-587-1909

 

XETA Technologies Reports Third Quarter Fiscal 2010 Financial Results

 

·                  3Q10 Revenue $20.9 million (increase 22% year over year)

 

·                  3Q10 GAAP EPS: $0.05 vs. 3Q09 GAAP loss per share ($0.84)

 

·                  First nine months ended July 2010: $61.1 million (increase 14% year over year)

 

·                  First nine months ended July 2010 EPS: $0.13 vs. July 2009 loss per share $0.82

 

·                  Fiscal 2010 earnings expected to be $0.16 to $0.20 per share

 

Broken Arrow, Okla. — XETA Technologies, Inc. (Nasdaq: XETA), a national provider of converged communications solutions for the enterprise marketplace, today reported earnings of $513,000, or $0.05 per diluted share, on revenue of $20.9 million for the third fiscal quarter ended July 31, 2010.  This compares to a loss of $8.6 million, or $0.84 per diluted share, on revenue of $17.2 million for the third fiscal quarter ended July 31, 2009.  Excluding non-cash goodwill and other asset impairment charges recorded during the third quarter of fiscal 2009, non-GAAP net loss during the quarter ended July 31, 2009 was $87,000, or $0.01 per diluted share.

 

For the nine months ended July 31, 2010, the Company reported earnings of $1,358,000, or $0.13 per diluted share, on revenue of $61.1 million compared to a net loss of $8.4 million, or $0.82 per diluted share on revenue of $53.5 million for the same period ended July 31, 2009.

 

Line of Business

 

3Q10

 

3Q09

 

% Change

 

Maintenance & Repair

 

8,253

 

7,358

 

12

%

Design & Integration

 

3,164

 

2,469

 

28

%

Cabling

 

750

 

697

 

8

%

Total Services

 

12,167

 

10,524

 

16

%

Commercial

 

7,297

 

4,032

 

81

%

Hospitality

 

1,240

 

2,491

 

-50

%

Total Systems

 

8,537

 

6,523

 

31

%

Other Revenue

 

188

 

136

 

38

%

Total Revenue

 

20,892

 

17,183

 

22

%

 


 

Total revenue increased 22% during the third fiscal quarter of 2010, as continued growth in service revenue and a significant increase in commercial system sales were partially offset by a decline in hospitality systems revenue.  “Service revenue, which is the most recurring and predicable part of our business, continued to show double-digit growth during the third quarter and has shown 17% growth year to date,” said Greg Forrest, CEO and president.  “We have expanded the size of our addressable market and now offer turnkey design, integration, maintenance and repair service solutions for not just voice equipment, but also video and data equipment and applications.  We had several significant data services and design and consulting service wins this past quarter, which illustrates the success we have had with our efforts and should provide for future service revenue growth.  While customers remained cautious about systems spending, our commercial systems sales improved from second to third quarter and we experienced a nice rebound from last year’s third quarter.”

 

Gross Margin Table

 

 

 

3Q10

 

3Q09

 

 

 

Line of Business

 

Gross Margin

 

Gross Margin

 

Change

 

Services

 

32.4

%

28.7

%

+ 370 basis points

 

Systems

 

29.5

%

28.9

%

+ 60 basis points

 

Overall Gross Margin

 

29.7

%

26.8

%

+ 290 basis points

 

 

During the third quarter of fiscal 2010, overall gross margin was 29.7% of revenue versus 26.8% during the third quarter of fiscal 2009.  “Gross margin continued to benefit from increasing scale and efficiency improvements and was the highest we’ve produced in nearly 10 years,” Forrest commented.

 

Operating expenses during the third fiscal quarter of 2010 were $5.4 million, an increase of 14% from $4.7 million during the third quarter of fiscal 2009, excluding non-cash goodwill and other asset impairment charges from the prior year period.  “While operating expense as a percentage of sales improved 170 basis points year over year, it remained above our targeted levels.”

 

Commenting on the balance of the fiscal year, Forrest said, “Our business expectancies for fiscal 2010 had included a concentration of large systems sales from long-standing government customers, who have recently delayed their purchasing decisions.  Due to the uncertain timing of when these large systems sales will materialize, we have removed this from our fiscal 2010 expectations and have adjusted our earnings guidance accordingly.”  The Company expects earnings per share for fiscal 2010 in the range of $0.16 to $0.20.  “Although macro conditions have improved from last year, some customers remain uncertain about the economy, causing delays in purchasing decisions and elongated sales cycles.  Despite these delays, we continue to expect both our service and commercial systems revenue to show year-over-year growth.”

 

“Looking at next fiscal year, with the continued success in our recurring services business, improvements in operating efficiencies, contribution from our active acquisition program, and pent up demand, we expect to produce revenue in excess of $100 million and earnings per share in the range of $0.30 to $0.40 for Fiscal 2011,” concluded Forrest.

 

The Company will host a conference call and webcast to discuss these results at 4 p.m. CT on Thursday, Aug. 26, 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.  A replay of the webcast will be archived on the Company’s website for 60 days.

 


 

###

 

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/Nortel, Mitel, Hitachi, Samsung, HP, Polycom, Microsoft, Alcatel-Lucent, ShorTel and Juniper. With a 29-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 service revenue growth, earnings expectations, commercial systems revenue growth and revenue run rates for fiscal 2011. 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; the successful integration of recently acquired businesses into that of the Company and realization of anticipated synergies and growth opportunities from these transactions; 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 and the negative impact that may have on the Company’s services gross margins as well as on customer satisfaction;  the Nortel Networks bankruptcy filing including the potential negative impact it may have on the Company’s prepetition accounts receivable claim against Nortel or if Nortel succeeds in bringing a preference claim against the Company; unpredictable quarter to quarter revenues;  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.

 


 

Condensed Consolidated Statements of Income

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

 

July 31,

 

July 31,

 

 

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

Sales

 

Services

 

$

12,167

 

$

10,524

 

$

35,662

 

$

30,359

 

 

 

Systems

 

8,537

 

6,523

 

25,146

 

22,897

 

 

 

Other

 

188

 

136

 

326

 

263

 

 

 

Total

 

20,892

 

17,183

 

61,134

 

53,519

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

Services

 

8,223

 

7,506

 

24,237

 

21,258

 

 

 

Systems

 

6,021

 

4,640

 

18,271

 

16,792

 

 

 

Other

 

435

 

425

 

1,288

 

1,308

 

 

 

Total

 

14,679

 

12,571

 

43,796

 

39,358

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

6,213

 

4,612

 

17,338

 

14,161

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

 

30

%

27

%

28

%

26

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expense

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

 

 

5,179

 

4,388

 

14,566

 

12,926

 

Amortization

 

 

 

206

 

345

 

581

 

1,002

 

Impaiment of Goodwill and Other Assets

 

 

 

—

 

14,000

 

—

 

14,000

 

Total Operating Expenses

 

 

 

5,385

 

18,733

 

15,147

 

27,928

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

 

 

828

 

(14,121

)

2,191

 

(13,767

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

(4

)

(21

)

(15

)

(79

)

Interest and Other Income (Expense)

 

 

 

20

 

(1

)

59

 

14

 

Total Interest and Other Income (Expense)

 

 

 

16

 

(22

)

44

 

(65

)

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Provision for Income Taxes

 

 

 

844

 

(14,143

)

2,235

 

(13,832

)

Provision for Income Taxes

 

 

 

331

 

(5,544

)

877

 

(5,418

)

Net Income after Tax

 

 

 

$

513

 

$

(8,599

)

$

1,358

 

$

(8,414

)

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

 

 

$

0.05

 

$

(0.84

)

$

0.13

 

$

(0.82

)

Diluted Earnings Per Share

 

 

 

$

0.05

 

$

(0.84

)

$

0.13

 

$

(0.82

)

Wt. Avg. Common Shares Outstanding

 

 

 

10,533

 

10,224

 

10,329

 

10,224

 

Wt. Avg. Common Equivalent Shares

 

 

 

10,611

 

10,224

 

10,386

 

10,224

 

 

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

 


 

Consolidated Balance Sheet Highlights

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

July 31, 2010

 

October 31, 2009

 

Assets

 

Current

 

Cash

 

$

3,765

 

$

4,732

 

 

 

 

 

Receivables (net)

 

14,541

 

13,832

 

 

 

 

 

Inventories (net)

 

4,864

 

5,036

 

 

 

 

 

Other

 

4,870

 

3,704

 

 

 

 

 

Subtotal

 

28,040

 

27,304

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

PPE (net)

 

6,655

 

6,826

 

 

 

 

 

Goodwill & Intangibles (net)

 

15,336

 

12,603

 

 

 

 

 

Noncurrent Deferred Tax Asset

 

—

 

739

 

 

 

 

 

Other

 

328

 

336

 

 

 

 

 

Subtotal

 

22,319

 

20,504

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

 

$

50,359

 

$

47,808

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

Current

 

Revolving Line of Credit

 

$

—

 

$

—

 

 

 

 

 

Notes Payable

 

—

 

1,183

 

 

 

 

 

Accounts Payable

 

5,997

 

5,785

 

 

 

 

 

Accrued Liabilities

 

4,096

 

3,599

 

 

 

 

 

Unearned Revenue

 

4,729

 

5,195

 

 

 

 

 

Subtotal

 

14,822

 

15,762

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current

 

Other

 

193

 

287

 

 

 

 

 

Noncurrent Deferred Tax Liability

 

223

 

—

 

 

 

 

 

Subtotal

 

416

 

287

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 

15,238

 

16,049

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

$

35,121

 

$

31,759

 

 

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

 


 

Reconciliation of EBITDA(1) to Net Income

 

 

 

Quarter Ending
July 31,

 

Nine Months Ending
July 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

513

 

$

(8,599

)

$

1,358

 

$

(8,414

)

Interest

 

4

 

21

 

15

 

79

 

Provision for Income Taxes

 

331

 

(5,544

)

877

 

(5,418

)

Impairment of Goodwill and Other Assets

 

—

 

14,000

 

—

 

14,000

 

Depreciation

 

308

 

269

 

906

 

723

 

Amortization

 

206

 

345

 

581

 

1,002

 

EBITDA(1)

 

$

1,362

 

$

492

 

$

3,737

 

$

1,972

 

 

(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
July 31,

 

Nine Months Ending
July 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net Income as Reported

 

$

513

 

$

(8,599

)

$

1,358

 

$

(8,414

)

Impairment of Goodwill and Other Assets (Net of Tax)

 

—

 

8,512

 

—

 

8,512

 

Reserve for Bad Debt (Net of Tax)

 

—

 

—

 

—

 

216

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income

 

$

513

 

$

(87

)

$

1,358

 

$

314

 

 

(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
July 31,

 

Nine Months Ending
July 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

EPS, Diluted - as Reported

 

$

0.05

 

$

(0.84

)

$

0.13

 

$

(0.82

)

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

 

0.00

 

0.83

 

0.00

 

0.83

 

EPS Impact of Reserve for Bad Debt, Net of Tax

 

0.00

 

0.00

 

0.00

 

0.02

 

EPS, Diluted - Non-GAAP

 

$

0.05

 

$

(0.01

)

$

0.13

 

$

0.03