Services and consulting revenue increased by 171.5%; Earnings per
share increased by 33.3% MARLTON, N.J., Dec. 3
/PRNewswire-FirstCall/ -- Emtec, Inc. (OCT Bulletin Board: ETEC)
("Emtec" or the "Company") announced today that for the year ended
August 31, 2009, consolidated operating income increased to $4.1
million, compared to $3.3 million in the prior year. Net income
before interest, taxes, depreciation and amortization ("EBITDA")
for the year ended August 31, 2009 increased to $6.4 million from
$4.7 million in the prior year. Adjusted EBITDA, which is defined
by management as net income before interest, taxes, depreciation,
amortization, retention bonuses, non-essential overhead, stock
based compensation, executive recruiting fees, severance, temporary
wage reductions and the recovery of prior year expenses ("Adjusted
EBITDA"), increased to $8.3 million in 2009 from $5.0 million in
2008. Net income for the year ended August 31, 2009 increased to
$1.7 million, as compared to $1.3 million in the prior year.
Earnings per share for the year ended August 31, 2009 increased
$0.03 to $0.12 per share from $0.09 per share in the prior year. A
reconciliation of EBITDA and Adjusted EBITDA to net income (loss)
is attached to this press release. (Logo:
http://www.newscom.com/cgi-bin/prnh/20080414/EMTECLOGO ) EBITDA and
Adjusted EBITDA are key financial metrics used by the Company's
board of directors and management to evaluate and measure the
Company's operating performance on a going forward basis. These
metrics are not in conformity with generally accepted accounting
principles in the United States of America ("GAAP"). Management's
calculation of EBITDA eliminates the effect of charges primarily
associated with financing decisions, tax regulations and capital
investments. Adjusted EBITDA also eliminates certain non-recurring
or unusual costs, reflects certain changes made by management
during the year and makes adjustments which in the opinion of
management are necessary to reflect the underlying ongoing
operations of the business going forward. Net income (loss) is the
most comparable GAAP measure of the Company's operating results
presented in the Company's consolidated financial statements. We
have made a reconciliation of these non-GAAP measures to net income
(loss), the most closely comparable GAAP measure, for the years
ended August 31, 2009 and 2008 and discussed these adjustments
below. EBITDA and Adjusted EBITDA should not be considered as an
alternative to net income (loss) or any other GAAP measure of
performance or liquidity, and may not be comparable to other
similarly titled measures of other companies. Management believes
that the presentation of EBITDA and Adjusted EBITDA is important to
investors because Adjusted EBITDA is used by management to evaluate
financial performance and continuing operations and to determine
resource allocation for each of our business segments. Highlights
for year ended August 31, 2009 -- Services and consulting revenue
increased 171.5% from $20.6 million to $55.8 million -- Services
and consulting revenue increased to 24.9% from 9.7% as a percentage
of total revenue -- Overall gross margin rose to 14.7% from 12.8%
-- Adjusted EBITDA increased to $8.3 million from $5.0 million --
Long term debt, including the current portion of long term debt,
was reduced by $2.4 million The consolidated financial information
for the year ended August 31, 2009 includes the accounts and
transactions of KOAN-IT and EMS as of the respective acquisition
dates of February 12, 2009 and May 12, 2009. The consolidated
financial statement for the years ended August 31, 2009 and 2008
includes the accounts and transactions of Luceo and eBAS/Aveeva as
of the respective acquisition dates of March 20, 2008 and August
13, 2008. Adjusted EBITDA for the Emtec Infrastructure Services
("EIS') division increased $1.6 million to $6.1 million for the
year ended August 31, 2009, compared to $4.5 million for the year
ended August 31, 2008. This increase in Adjusted EBITDA is
primarily attributable to increased gross profit from the growth in
revenues from services and consulting and decreased selling,
general and administrative expenses that resulted from cost-cutting
measures we enacted during 2009. Except for retention bonuses all
adjustments included in the calculation of Adjusted EBITDA set
forth in the reconciliation table below were for this division. In
addition, the EIS division incurred $238,000 in merger and
acquisition expenses versus $296,000 in 2008 which are not included
in the adjustments to EBITDA set forth in the reconciliation that
appears below. Adjusted EBITDA for the Emtec Global Services
("EGS") division increased $1.7 million to $2.2 million for the
year ended August 31, 2009, compared to $502,000 for the year ended
August 31, 2008. This increase in Adjusted EBITDA is primarily
attributable to comparing a full year of operations in fiscal 2009
to a shorter stub period in the year ended August 31, 2008 and a
reduction in selling, general and administrative costs as a
percentage of revenue. The EGS adjustment included in the
calculation of Adjusted EBITDA includes retention bonuses paid
during 2009. Net income on a consolidated basis increased by
$397,000 to $1.7 million for the year ended August 31, 2009,
compared to $1.3 million for the year ended August 31, 2008. "In
light of the continued economic downturn I am delighted to be able
to report this improved annual performance once again," said Dinesh
Desai, Chairman and Chief Executive Officer of Emtec. "Early in the
year we took measures to preserve long term value for the Company
and eliminate certain excess costs. During the second half of the
year we were able to take advantage of our increasingly prominent
position in the market to invest in our people and our clients. Our
execution in our education market was extremely pleasing as we look
to not only improve our stockholder value but to provide technology
needs to improve the critically important education sector." About
Emtec: Emtec, Inc., a Delaware corporation, was formed on January
17, 2001 (the "Company") and is an information technology ("IT")
systems integrator, providing consulting, staffing, application
services and infrastructure solutions to commercial, federal,
education, state and local government clients. The Company's
specific practices include IT consulting, communications, data
management, enterprise computing, managed services, business
service management solutions, training, storage and data center
planning and development and staff augmentation solutions. The
Company's client base is comprised of departments of the United
States and Canada's federal, state and local governments, schools
and commercial businesses throughout the United States and Canada.
Certain statements in this document constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause
the actual results, performance or achievements of the Company or
industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. The Company's future operating results
are dependent upon many factors, including but not limited to the
Company's ability to: (i) obtain sufficient capital or a strategic
business arrangement to fund its plan of operations when needed;
(ii) build the management and human resources and infrastructure
necessary to support the growth of its business; (iii) competitive
factors and developments beyond the Company's control; and (iv)
other risk factors discussed in the Company's periodic filings with
the Securities and Exchange Commission which are available for
review at http://www.sec.gov/ under "Search for Company Filings."
We undertake no obligation to publicly update or revise any
forward-looking statements to reflect changed assumptions, the
occurrence of anticipated or unanticipated events, or changes to
future results over time. Consolidated Financial Statements EMTEC,
INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands) Years Ended
August 31, 2009 2008 Change % ---- ---- ------ --- Revenues
-------- Procurement services $168,020 $190,596 $(22,576) (11.8)%
Service and consulting 55,823 20,560 35,263 171.5% --------
--------- --------- ------ Total Revenues 223,843 211,156 12,687
6.0% -------------- Cost of Sales ------------- Cost of procurement
services 149,631 168,850 (19,219) (11.4)% Service and consulting
41,316 15,370 25,946 168.8% -------- --------- --------- ------
Total Cost of Sales 190,947 184,220 6,727 3.7% -------------------
Gross Profit ------------ Procurement services 18,389 21,746
(3,357) (15.4)% Procurement services % 10.9% 11.4% Service and
consulting 14,507 5,190 9,317 179.5% Service and consulting % 26.0%
25.2% Total Gross Profit 32,896 26,936 5,960 22.1%
------------------ Total Gross Profit % 14.7% 12.8%
-------------------- Operating expenses: Selling, general, and
administrative expenses 25,883 21,892 3,991 18.2% Rent expense -
related party 611 377 234 62.1% Depreciation and amortization 2,320
1,336 984 73.7% -------- --------- --------- ------ Total operating
expenses 28,814 23,605 5,209 22.1% -------- --------- ---------
------ Percent of revenues 12.9% 11.2% Operating income 4,082 3,331
751 22.5% -------- --------- --------- ------ Percent of revenues
1.8% 1.6% Other expense (income): Interest income - other (16) (89)
73 (82.0)% Interest expense 1,117 998 119 11.9% Other 30 1 29 N/A
-------- --------- --------- ------ Income before income taxes
2,951 2,421 530 21.9% Provision for income taxes 1,233 1,100 133
12.1% -------- --------- --------- ------ Net income $1,718 $1,321
$397 30.0% ======== ========= ========= ====== Percent of revenues
0.8% 0.6% Reconciliation of net income to EBITDA and Adjusted
EBITDA EMTEC, INC. RECONCILIATION OF NET INCOME TO EBITDA AND
ADJUSTED EBITDA (In thousands) Years Ended August 31, 2009 2008
Change ------ ------ ------ Net income $1,718 $1,321 $397 Interest
and other expense (income): 1,131 910 221 Income taxes 1,233 1,100
133 Depreciation and amortization 2,320 1,336 984 ------ ------
------ EBITDA 6,402 4,667 1,735 Retention bonuses (1) 932 -
Elimination of non- essential overhead (2) 950 - Stock based
compensation 161 287 Executive recruiting (3) 112 - Severance 249
18 Temporary wage reductions- reinstated (4) (274) - Recovery of
prior year expenses (5) (270) ------ ------ Total Adjustments 1,860
305 ------ ------ ------ Adjusted EBITDA $8,262 $4,972 $3,290
====== ====== ====== 1) Expenses associated with retention bonuses
which were agreed to in connection with the closing of the
Company's acquisitions of EBAS/Aveeva and Luceo. 2) Elimination of
non-essential overhead includes expenses incurred in 2009 which
were eliminated by management during the year and will not recur on
an ongoing basis. These charges included $149,000 paid to the
former owners of Westwood under contracts that were not renewed
(net of ongoing consulting costs paid to an owner), $399,000 paid
to a senior executive under a contract that was not renewed and
paid to other at-will employees whose positions were terminated and
$402,000 in sales compensation changes implemented during the year.
3) Reflects executive recruiting fees incurred in connection with a
management launched search for a senior executive in 2009.
Management made a one-time decision to invest in the business by
hiring new senior executives to grow the business in 2010 and
thereafter. 4) Due to the uncertain economic situation in late
calendar 2008, management reduced wages by $464,000 during the year
and later reinstated full wages at the end of the year, resulting
in a one-time cost savings of $464,000. This amount was netted
against $190,000 in one-time bonuses paid out to employees after
the prior wages we reinstated. 5) Offset from recovered
professional fees which the Company previously recorded as an
expense that were associated with defending the Company's tax
positions during the IRS' 2003 and 2004 tax audit and appeal
process. Contact: John P. Howlett Vice Chairman Emeritus Emtec,
Inc. Telephone 908-338-0043 Email Web site http://www.emtecinc.com/
http://www.newscom.com/cgi-bin/prnh/20080414/EMTECLOGO
http://photoarchive.ap.org/ DATASOURCE: Emtec, Inc. CONTACT: John
P. Howlett, Vice Chairman Emeritus, Emtec, Inc., +1-908-338-0043,
Web Site: http://www.emtecinc.com/
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