Exhibit 99.1
Integral Systems Announces Financial Results for the Second Quarter of Fiscal Year 2009
Revenue and Gross Margin Remain Strong - Overhead Costs Driven by Infrastructure Investment
LANHAM, Md., May 4 /PRNewswire-FirstCall/ — Integral Systems, Inc. (Nasdaq: ISYS) (“Company”) today reported financial results for the second quarter of fiscal 2009.
Revenue for the quarter was $42.8 million, up 13.4% over 2008. Gross margin for the quarter was 38.2% compared to 28.8% for the same period last year. Second quarter 2009 income from operations was $4.2 million compared to $4.4 million recorded in the second quarter of the last fiscal year. The decline in operating income reflects higher selling, general, and administrative (SG&A) costs. Diluted earnings per share for the second quarter of 2009 was $0.15 compared to $0.16 per share for the second quarter of fiscal 2008.
Year-to-date revenue was $81.2 million, up 13.4% over 2008. Gross margin for the first two quarters of 2009 was 36.6% compared to 32.7% for the same period last year. Year-to-date operating income declined $4.2 million over 2008 due to higher SG&A expenses. Year-to-date 2009 earnings per share was $0.21 compared to $0.43 per share in 2008.
The higher SG&A costs that the Company has experienced this year are the result of conscious efforts to solidify the Company’s infrastructure, build a robust business development function, and ensure compliance in all material respects in the Company’s financial, information systems, security, and quality control operations.
QUARTER HIGHLIGHTS
• | Awarded contract withB-SAT to provide turnkey satellite control system |
• | Awarded contract withMitsubishi Electronic Corporation to provide integrated environment for satellite operations and mission analysis |
• | AwardedNOAA contract modification to complete the modernization of the Polar Acquisition and Control Subsystem (PACS) command, control, and communications ground system |
• | AwardedCCS-C two-year contract extension |
• | AcquiredsatID intellectual property and assets |
• | AchievedCMMI Maturity Level 3 certification for Government Systems Group |
• | Completedcontractor purchasing systems review (CPSR) resulting in approved purchasing system for government contracting |
• | EstablishedIntegral Systems Europe - United Kingdom, bringing earth station and antenna integration capability to the Integral Systems family |
“We are encouraged by our revenue and gross profit growth given the current economic climate,” said John Higginbotham, Chief Executive Officer of Integral Systems. “The increased SG&A costs relate to nearly completed
compliance initiatives and investments made to expand business development activities. We are diligently managing the Company’s cost structure to minimize discretionary expenditures and drive efficiency across the organization.”
Higginbotham concluded, “We continue to see significant new opportunities in our core markets and are making excellent progress in growing them both here and abroad. Looking ahead, the new business opportunity pipeline is robust and lays the foundation for solid bookings for the rest of this fiscal year and into fiscal year 2010.”
Mr. Higginbotham, Chief Executive Officer, and Mr. William Bambarger, the Company’s Chief Financial Officer, will host the Company’s second quarter earnings results conference call today, May 4, 2009, at 11:00 AM EDT. Interested parties are invited to join the call by calling 800-920-9723, ID number 21421850. A replay of the conference call can be heard from 1:00 PM ET Monday, May 4, 2009 through 1:00 PM ET Wednesday, May 6, 2009 by dialing 800-633-8284 or 402-977-9140. Ask for reservation number 21421850.
ABOUT INTEGRAL SYSTEMS
Integral Systems, Inc., applies more than 25 years experience to provide integrated technology solutions for SATCOM-interfaced networks. Customers have relied on the Integral Systems family of companies (Integral Systems Europe, Lumistar, Inc., Newpoint Technologies, Inc., RT Logic, and SAT Corporation) to deliver on time and on budget for more than 250 satellite missions. Our dedication to customer service has solidified long-term relationships with the U.S. Air Force, NASA, NOAA, and nearly every satellite operator in the world. Integral Systems is listed in Forbes’ Top 200 Small Companies in America for 2008. For more information visitwww.integ.com.
Except for statements of historical facts, this news release contains forward-looking statements about the Company, including but not necessarily limited to the Company’s financial projections, all of which are based on the Company’s current expectations. There can be no assurance that the Company’s projections will in fact be achieved and these projections do not reflect any acquisitions or divestitures that may occur in the future. The forward-looking statements contained in this news release are subject to additional risks and uncertainties, including the Company’s reliance on contracts and subcontracts funded by the U.S. government, intense competition in the ground systems industry, the competitive bidding process to which the Company’s government and commercial contracts are subject, the Company’s dependence on the satellite industry for most of its revenues, rapid technological changes in the satellite industry, the Company’s acquisition strategy and those other risks noted in the Company’s SEC filings. The Company assumes no obligation to update or revise any forward-looking statements appearing in this news release.
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 27, 2009 and September 30, 2008
(in thousands of dollars, except share amounts)
March 27, 2009 | September 30, 2008 | |||||
(unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 2,233 | $ | 15,026 | ||
Accounts receivable, net of allowance for doubtful accounts | 13,490 | 16,688 | ||||
Unbilled revenues | 28,046 | 18,656 | ||||
Prepaid expenses and other current assets | 3,314 | 2,542 | ||||
Income tax receivable | 6,369 | 4,782 | ||||
Deferred contract costs | 5,940 | 6,558 | ||||
Inventory | 9,718 | 7,237 | ||||
Total current assets | 69,110 | 71,489 | ||||
Property and equipment, net | 19,816 | 17,634 | ||||
Goodwill | 54,075 | 51,414 | ||||
Intangible assets, net | 7,182 | — | ||||
Other assets | 10,883 | 6,666 | ||||
Total assets | $ | 161,066 | $ | 147,203 | ||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 6,039 | $ | 7,163 | ||
Accrued expenses | 15,342 | 16,650 | ||||
Short term debt | 12,602 | — | ||||
Deferred revenue | 11,075 | 12,403 | ||||
Total current liabilities | 45,058 | 36,216 | ||||
Other non-current liabilities | 402 | 946 | ||||
Total liabilities | 45,460 | 37,162 | ||||
Stockholders’ equity: | ||||||
Common stock, $.01 par value, 80,000,000 shares authorized, and 17,269,109 and 17,246,034 shares issued and outstanding at March 27, 2009 and September 30, 2008, respectively | 173 | 173 | ||||
Additional paid-in capital | 64,512 | 62,608 | ||||
Retained earnings | 50,919 | 47,249 | ||||
Accumulated other comprehensive income | 2 | 11 | ||||
Total stockholders’ equity | 115,606 | 110,041 | ||||
Total liabilities and stockholders’ equity | $ | 161,066 | $ | 147,203 | ||
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||
March 27, | March 31, | March 27, | March 31, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Revenue | $ | 42,768 | $ | 37,704 | $ | 81,238 | $ | 71,664 | ||||||
Cost of revenue | 26,444 | 26,828 | 51,493 | 48,240 | ||||||||||
Gross profit | 16,324 | 10,876 | 29,745 | 23,424 | ||||||||||
Operating expense: | ||||||||||||||
Selling, general & administrative | 11,307 | 5,882 | 22,833 | 12,402 | ||||||||||
Research & development | 773 | 618 | 1,368 | 1,328 | ||||||||||
Total operating expense | 12,080 | 6,500 | 24,201 | 13,730 | ||||||||||
Income from operations | 4,244 | 4,376 | 5,544 | 9,694 | ||||||||||
Other income, net | (72 | ) | 265 | (65 | ) | 200 | ||||||||
Income before income taxes | 4,172 | 4,641 | 5,479 | 9,894 | ||||||||||
Provision for income taxes | 1,527 | 1,601 | 1,809 | 1,802 | ||||||||||
Net income | $ | 2,645 | $ | 3,040 | $ | 3,670 | $ | 8,092 | ||||||
Comprehensive income: | ||||||||||||||
Cumulative currency translation adjustment | (33 | ) | 88 | (9 | ) | 36 | ||||||||
Total comprehensive income | $ | 2,612 | $ | 3,128 | $ | 3,661 | $ | 8,128 | ||||||
Weighted average number of common shares - Basic | 17,298 | 18,334 | 17,289 | 18,548 | ||||||||||
Earnings per share - Basic | $ | 0.15 | $ | 0.17 | $ | 0.21 | $ | 0.44 | ||||||
Weighted average number of common shares - Diluted | 17,333 | 18,496 | 17,394 | 18,680 | ||||||||||
Earnings per share - Diluted | $ | 0.15 | $ | 0.16 | $ | 0.21 | $ | 0.43 | ||||||
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
March 27, 2009 | March 31, 2008 | March 27, 2009 | March 31, 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Revenue: | ||||||||||||||||
Government Systems | $ | 24,039 | $ | 20,108 | $ | 42,061 | $ | 35,550 | ||||||||
Commercial Systems | 5,563 | 4,391 | 11,672 | 9,717 | ||||||||||||
Space Communications Systems | 15,464 | 15,052 | 31,516 | 29,388 | ||||||||||||
Elimination of intersegment sales | (2,298 | ) | (1,847 | ) | (4,011 | ) | (2,991 | ) | ||||||||
Total revenue | 42,768 | 37,704 | 81,238 | 71,664 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Government Systems | 14,975 | 16,236 | 28,725 | 27,655 | ||||||||||||
Commercial Systems | 4,224 | 3,366 | 8,947 | 6,697 | ||||||||||||
Space Communications Systems | 9,543 | 9,073 | 17,832 | 16,879 | ||||||||||||
Elimination of intersegment sales | (2,298 | ) | (1,847 | ) | (4,011 | ) | (2,991 | ) | ||||||||
Total cost of revenue | 26,444 | 26,828 | 51,493 | 48,240 | ||||||||||||
Gross profit: | ||||||||||||||||
Government Systems | 9,064 | 3,872 | 13,336 | 7,895 | ||||||||||||
Gross Margin | 37.7 | % | 19.3 | % | 31.7 | % | 22.2 | % | ||||||||
Commercial Systems | 1,339 | 1,025 | 2,725 | 3,020 | ||||||||||||
Gross Margin | 24.1 | % | 23.3 | % | 23.3 | % | 31.1 | % | ||||||||
Space Communications Systems | 5,921 | 5,979 | 13,684 | 12,509 | ||||||||||||
Gross Margin | 38.3 | % | 39.7 | % | 43.4 | % | 42.6 | % | ||||||||
Total gross profit | 16,324 | 10,876 | 29,745 | 23,424 | ||||||||||||
Gross Margin | 38.2 | % | 28.8 | % | 36.6 | % | 32.7 | % | ||||||||
Operating expense: | ||||||||||||||||
Government Systems | 5,108 | 2,487 | 10,538 | 5,917 | ||||||||||||
Commercial Systems | 1,256 | 1,127 | 2,378 | 2,266 | ||||||||||||
Space Communications Systems | 5,716 | 2,886 | 11,285 | 5,547 | ||||||||||||
Total operating expense | 12,080 | 6,500 | 24,201 | 13,730 | ||||||||||||
Income from operations: | ||||||||||||||||
Government Systems | 3,956 | 1,385 | 2,798 | 1,978 | ||||||||||||
Operating margin | 16.5 | % | 6.9 | % | 6.7 | % | 5.6 | % | ||||||||
Commercial Systems | 83 | (102 | ) | 347 | 754 | |||||||||||
Operating margin | 1.5 | % | -2.3 | % | 3.0 | % | 7.8 | % | ||||||||
Space Communications Systems | 205 | 3,093 | 2,399 | 6,962 | ||||||||||||
Operating margin | 1.3 | % | 20.5 | % | 7.6 | % | 23.7 | % | ||||||||
Total income from operations | $ | 4,244 | $ | 4,376 | $ | 5,544 | $ | 9,694 | ||||||||
Operating margin | 9.9 | % | 11.6 | % | 6.8 | % | 13.5 | % |
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Six Months Ended | ||||||||
March 27, 2009 | March 31, 2008 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 3,670 | $ | 8,092 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 1,637 | 1,042 | ||||||
Bad debt expense | 6 | (150 | ) | |||||
Stock-based compensation | 1,649 | 369 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 3,527 | (4,799 | ) | |||||
Unbilled revenue | (13,612 | ) | 7,133 | |||||
Prepaid expenses and other current assets | (686 | ) | 410 | |||||
Deferred contract costs | 618 | (5,466 | ) | |||||
Inventories | (1,850 | ) | (1,330 | ) | ||||
Income taxes receivable | (2,142 | ) | (2,212 | ) | ||||
Accounts payable | (1,115 | ) | (2,040 | ) | ||||
Accrued expenses | (1,302 | ) | 318 | |||||
Deferred revenue | (1,509 | ) | 6,578 | |||||
Other | 238 | — | ||||||
Net cash (used in) provided by operating activities | (10,871 | ) | 7,945 | |||||
Cash flows from investing activities: | ||||||||
Acquisitions of fixed assets | (1,554 | ) | (2,133 | ) | ||||
Acquisition of satID | (10,941 | ) | — | |||||
Other investing activities | — | 557 | ||||||
Net cash used in investing activities | (12,495 | ) | (1,576 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock | 76 | 2,566 | ||||||
Common stock repurchases | — | (23,501 | ) | |||||
Employee stock purchases | 178 | — | ||||||
Proceeds from line of credit borrowing | 10,311 | — | ||||||
Payments on capital lease obligations | (11 | ) | — | |||||
Net cash provided by (used in) financing activities | 10,554 | (20,935 | ) | |||||
Net decrease in cash and cash equivalents | (12,812 | ) | (14,566 | ) | ||||
Effect of exchange rate changes on cash | 19 | (20 | ) | |||||
Cash and cash equivalents - beginning of period | 15,026 | 23,894 | ||||||
Cash and cash equivalents - end of period | $ | 2,233 | $ | 9,308 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Income taxes paid | $ | 3,290 | $ | 4,012 | ||||
Interest expense paid | $ | 8 | $ | 4 |
CONTACT: Bill Bambarger, Chief Financial Officer, +1-301-731-4233, Ext. 1244; or Media: Kathryn Herr, Vice President, Marketing and Communications, +1-301-731-4233, Ext. 1104, kherr@integ.com, both of Integral Systems, Inc.