Exhibit 99.1
NEWS RELEASE
Date: | August 27, 2008 |
| FOR IMMEDIATE RELEASE |
|
|
Contact: | Dave Mossberg |
| Beacon Street Group |
| 817-310-0051 |
XETA Technologies Reports Third Quarter FY08 Financial Results
· Q308 Revenue: $23.2 million (increase of 27% year over year)
· Q308 EPS: $0.06 vs. Q307 EPS $0.04
· Revenue for nine months: $62.0 million (increase of 21% year over year)
· EPS for nine months: $0.13 vs. EPS for first nine months of 2007 of $0.07
XETA Technologies (NASDAQ:XETA) today reported third quarter earnings of $591,000, or $0.06 per diluted share, on revenue of $23.2 million for the third fiscal quarter ended July 31, 2008. This compares to earnings of $377,000, or $0.04 per diluted share, on revenue of $18.2 million for the third fiscal quarter ended July 31, 2007.
For the nine months ended July 31, 2008, the Company reported earnings of $1,351,000, or $0.13 per diluted share, on revenue of $62.0 million compared to net income of $755,000, or $0.07 per diluted share, on revenue of $51.0 million for the same period ended July 31, 2007.
Revenue Table (in thousands)
|
| 3Q08 |
| 3Q07 |
|
|
| ||
Lines of Business |
| Revenue |
| Revenue |
| % Change |
| ||
|
|
|
|
|
|
|
| ||
Commercial |
| $ | 8,366 |
| $ | 6,522 |
| 28 |
|
Lodging |
| $ | 2,296 |
| $ | 2,135 |
| 8 |
|
Total Equipment |
| $ | 10,662 |
| $ | 8,657 |
| 23 |
|
|
|
|
|
|
|
|
| ||
Recurring (Contract & Time and Materials) |
| $ | 7,202 |
| $ | 6,745 |
| 7 |
|
Implementation |
| $ | 3,864 |
| $ | 2,075 |
| 86 |
|
Cabling |
| $ | 962 |
| $ | 644 |
| 49 |
|
Total Services |
| $ | 12,028 |
| $ | 9,464 |
| 27 |
|
During the third quarter, equipment revenue increased by 23 percent to $10.7 million versus $8.7 million recorded in the third fiscal quarter of 2007. The positive comparison was led by the expected increase in
shipments to Miami-Dade County Public Schools System (“M-DCPS”). “Our team has done an excellent job executing the implementation schedule at Miami-Dade. Earlier this month, we received the district’s 2008 Vendor Appreciation Award for our efforts,” said Greg Forrest, CEO of XETA Technologies. “In addition to our success with Miami-Dade, our equipment revenue benefited from a high single digit increase in sales to lodging customers, which is a rebound from the declines posted in the first half of the year.”
Implementation and cabling service revenue also benefited from the increase in activity from the M-DCPS. Combined with a 7 percent year-over-year growth in recurring services revenue, total services revenue increased 27 percent to $12.0 million versus $9.5 million recorded during the third quarter of 2007. “The pace of growth in our recurring services slowed somewhat during the third quarter due to a decline in time and materials services. However, time and materials revenue improved sequentially from the second quarter and activity picked up during each month of the quarter. Combined with increased activity with some large managed service contracts at the end of the quarter, we expect recurring services to resume double digit growth moving forward,” Forrest commented.
Gross Margin Table
|
| 3Q08 |
| 3Q07 |
|
|
|
Lines of Business |
| Gross Margin |
| Gross Margin |
| Change |
|
Systems |
| 26.4 | % | 22.8 | % | + 360 basis points |
|
Services |
| 30.4 | % | 30.7 | % | – 30 basis points |
|
Total |
| 26.7 | % | 24.8 | % | + 190 basis points |
|
During the third quarter of 2008, gross margin was 26.7 percent of sales versus 24.8 percent during the third quarter of 2007. “Strong implementation activity helped to increase utilization of our services infrastructure and drove service margin above 30% for the third fiscal quarter. This represents a five percentage point swing from the second fiscal quarter and is within the range of our profitability targets. During the quarter, in order to drive greater efficiencies in the services organization, we reorganized our services delivery model and added leadership focus to our services organization. Looking forward, we expect services margin improvements to come from these changes and increased utilization as we continue to on board additional managed services customers,” said Forrest.
“We remain confident that we have the right strategies in place to grow the top line at compounded annual rate of more than 15 percent for the next several years and improve profitability at an even greater rate,” continued Forrest. The Company expects fiscal 2008 earnings per diluted share to be in the range of $0.18 to $0.21.
The Company will host a conference call and webcast to discuss these results at 4:00 p.m. Central Time on Wednesday, August 27, 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 |
| Nine Months Ended |
| ||||||||
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|
|
| July 31, |
| July 31, |
| ||||||||
|
|
|
| 2008 |
| 2007 |
| 2008 |
| 2007 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales |
| Services |
| $ | 12,028 |
| $ | 9,463 |
| $ | 31,888 |
| $ | 27,033 |
|
|
| Systems |
| 10,662 |
| 8,657 |
| 28,648 |
| 23,446 |
| ||||
|
| Other |
| 513 |
| 128 |
| 1,429 |
| 509 |
| ||||
|
| Total |
| 23,203 |
| 18,248 |
| 61,965 |
| 50,988 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of Sales |
| Services |
| 8,373 |
| 6,557 |
| 23,104 |
| 19,022 |
| ||||
|
| Systems |
| 7,846 |
| 6,685 |
| 21,175 |
| 17,919 |
| ||||
|
| Other |
| 782 |
| 477 |
| 1,707 |
| 1,367 |
| ||||
|
| Total |
| 17,001 |
| 13,719 |
| 45,986 |
| 38,308 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross Profit |
|
|
| 6,202 |
| 4,529 |
| 15,979 |
| 12,680 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross Profit Margin |
|
|
| 27 | % | 25 | % | 26 | % | 25 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Expense |
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, General and Administrative |
|
|
| 4,870 |
| 3,705 |
| 12,796 |
| 10,946 |
| ||||
Amortization |
|
|
| 265 |
| 184 |
| 722 |
| 471 |
| ||||
Total Operating Expenses |
|
|
| 5,135 |
| 3,889 |
| 13,518 |
| 11,417 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income from Operations |
|
|
| 1,067 |
| 640 |
| 2,461 |
| 1,263 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest Expense |
|
|
| (96 | ) | (28 | ) | (268 | ) | (39 | ) | ||||
Interest and Other Income |
|
|
| — |
| 9 |
| 27 |
| 35 |
| ||||
Total Interest and Other Expense |
|
|
| (96 | ) | (19 | ) | (241 | ) | (4 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income Before Provision for Income Taxes |
|
|
| 971 |
| 621 |
| 2,220 |
| 1,259 |
| ||||
Provision for Income Taxes |
|
|
| 380 |
| 244 |
| 869 |
| 504 |
| ||||
Net Income after Tax |
|
|
| $ | 591 |
| $ | 377 |
| $ | 1,351 |
| $ | 755 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic Earnings Per Share |
|
|
| $ | 0.06 |
| $ | 0.04 |
| $ | 0.13 |
| $ | 0.07 |
|
Diluted Earnings Per Share |
|
|
| $ | 0.06 |
| $ | 0.04 |
| $ | 0.13 |
| $ | 0.07 |
|
Wt. Avg. Common Shares Outstanding |
|
|
| 10,254 |
| 10,215 |
| 10,242 |
| 10,215 |
| ||||
Wt. Avg. Common Equivalent Shares |
|
|
| 10,254 |
| 10,215 |
| 10,247 |
| 10,215 |
|
(The information is unaudited and is presented in thousands except percentages and per-share data.)
Consolidated Balance Sheet Highlights
|
|
|
|
|
| July 31, 2008 |
| October 31, 2007 |
| ||
Assets |
| Current |
| Cash |
| $ | 74 |
| $ | 403 |
|
|
|
|
| Receivables (net) |
| 23,443 |
| 16,236 |
| ||
|
|
|
| Inventories (net) |
| 5,840 |
| 4,297 |
| ||
|
|
|
| Other |
| 2,772 |
| 1,944 |
| ||
|
|
|
| Subtotal |
| 32,129 |
| 22,880 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Non-Current |
| PPE (net) |
| 10,737 |
| 10,611 |
| ||
|
|
|
| Goodwill & Intangibles |
| 26,543 |
| 26,469 |
| ||
|
|
|
| Other |
| 134 |
| 136 |
| ||
|
|
|
| Subtotal |
| 37,414 |
| 37,216 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Total Assets |
|
|
| $ | 69,543 |
| $ | 60,096 |
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities |
| Current |
| Revolving Line of Credit |
| $ | 6,109 |
| $ | 2,759 |
|
|
|
|
| Accounts Payable |
| 7,653 |
| 5,670 |
| ||
|
|
|
| Accrued Liabilities |
| 4,345 |
| 3,565 |
| ||
|
|
|
| Unearned Revenue |
| 3,451 |
| 2,383 |
| ||
|
|
|
| Subtotal |
| 21,558 |
| 14,377 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Non-Current |
| Long Term Debt |
| 1,226 |
| 1,355 |
| ||
|
|
|
| Noncurrent Deferred Tax Liability |
| 5,187 |
| 4,632 |
| ||
|
|
|
| Other |
| 506 |
| 293 |
| ||
|
|
|
| Subtotal |
| 6,919 |
| 6,280 |
| ||
|
|
|
|
|
|
|
|
|
| ||
|
| Total Liabilities |
|
|
| 28,477 |
| 20,657 |
| ||
|
|
|
|
|
|
|
|
|
| ||
Equity |
|
|
|
|
| 41,066 |
| 39,439 |
|
(The information is unaudited and is presented in thousands.)
|
| Quarter Ending |
| Nine Months Ending |
| ||||||||
Reconciliation of EBITDA to Net Income |
| 2008 |
| 2007 |
| 2008 |
| 2007 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net Income (Loss) |
| $ | 591 |
| $ | 377 |
| $ | 1,351 |
| $ | 755 |
|
Interest |
| 96 |
| 28 |
| 268 |
| 39 |
| ||||
Provision for Income Taxes |
| 380 |
| 244 |
| 869 |
| 504 |
| ||||
Depreciation |
| 190 |
| 140 |
| 529 |
| 393 |
| ||||
Amortization |
| 265 |
| 184 |
| 723 |
| 471 |
| ||||
EBITDA(1) |
| $ | 1,522 |
| $ | 973 |
| $ | 3,740 |
| $ | 2,162 |
|
|
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|
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(The information is presented in thousands.) |
|
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(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 premium PARTNER. 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 revenue growth, service margin improvements and top line growth. 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 uncertainty in the U.S. economy and its impact on capital spending trends in the Company’s markets; dramatic changes by Avaya to its strategies for providing services to its customers, to include service offerings currently provided by us to Avaya’s customers; 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; and dependence upon a single customer for the recent growth in the Company’s Managed Services offering. 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 and in the Company’s quarterly reports filed to date on Form 10-Q for the fiscal year ended October 31, 2008.