Net income increased by 39.9%; Earnings per share increased by
28.6% MARLTON, N.J., Jan. 19 /PRNewswire-FirstCall/ -- Emtec, Inc.
(OTC Bulletin Board: ETEC) ("Emtec" or the "Company") announced
today that for the quarter ended November 30, 2009, consolidated
operating income increased to $2.5 million, compared to $1.9
million in the quarter ended November 30, 2008. Net income before
interest, taxes, depreciation and amortization ("EBITDA") for the
quarter ended November 30, 2009 increased to $3.1 million from $2.5
million in the quarter ended November 30, 2008. 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 and the recovery of prior year expenses ("Adjusted
EBITDA"), increased to $3.4 million in the quarter ended November
30, 2009 from $2.8 million in the quarter ended November 30, 2008.
Net income for the quarter ended November 30, 2009 increased to
$1.4 million, as compared to $1.0 million in the quarter ended
November 30, 2008. Earnings per share for the quarter ended
November 30, 2009 increased $0.02 to $0.09 per share from $0.07 per
share in the quarter ended November 30, 2009. 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 quarter 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 quarters
ended November 30, 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 quarter ended November 30, 2009 include: -- Total gross profit
increased 19.9% from $8.8 million to $10.5 million -- Overall gross
margin rose to 14.3% from 12.6% -- Services and consulting gross
profit increased 53.3% from $2.8 million to $4.3 million --
Services and consulting gross margin rose to 30.5% from 20.7% --
Operating income increased to $2.5 million from $1.9 million,
growth of 30.4% -- Earnings Per Share increased to $0.09 from
$0.07, growth of 28.6% Adjusted EBITDA for the Emtec Infrastructure
Services ("EIS") division increased $1.1 million to $3.0 million
for the quarter ended November 30, 2009, compared to $1.9 million
for the quarter ended November 30, 2008. This increase in Adjusted
EBITDA is primarily attributable to increased gross profit from the
growth in revenues from services and consulting, primarily
attributable to various IT projects for school districts in Florida
and Georgia and various departments of the U.S. government. Except
for retention bonuses all adjustments included in the calculation
of Adjusted EBITDA set forth in the reconciliation table below were
for this division. Adjusted EBITDA for the Emtec Global Services
("EGS") division was $426,000 for the quarter ended November 30,
2009 compared with $939,000 for the quarter ended November 30,
2008. This decline was caused by a 22.1% decrease in hours billed
and a 7.2% decrease in the average hourly billing rate during the
three months ended November 30, 2009 compared with the
corresponding period in 2008. Billable hours decreased by 22.1%,
primarily due to decreases in our Business Analysis and Quality
Assurance practices. Most of the clients EGS serves are commercial
clients and we believe that this decrease in commercial business is
primarily attributed to the current economic downturn. The EGS
adjustment included in the calculation of Adjusted EBITDA includes
retention bonuses paid during the quarter ended November 30, 2009.
Net income on a consolidated basis increased by $401,000 to $1.4
million for the quarter ended November 30, 2009, compared to $1.0
million for the quarter ended November 30, 2008. "We are excited
about the continued operating performance of the business. Our
federal and education businesses continue to perform strongly.
While the declines in our EGS business are concerning, they were
not unexpected given the current economic environment. We continue
to experience challenges in the commercial market place, however,
we believe our industry diversification has softened the blow of
the economic downturn versus our competitors. We continue to focus
on selling our portfolio of services into our client base and feel
this will eventually lead to strong growth in all our businesses,"
said Dinesh Desai, Chairman and Chief Executive Officer of Emtec.
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) Three Months
Ended November 30, 2009 2008 Change % ---- ---- ------ --- Revenues
-------- Procurement services $59,382 $56,359 $3,023 5.4% Service
and consulting 14,195 13,660 535 3.9% ------ ------ --- --- Total
Revenues 73,577 70,019 3,558 5.1% -------------- Cost of Sales
------------- Cost of procurement services 53,173 50,392 2,781 5.5%
Service and consulting 9,860 10,833 (973) (9.0)% ----- ------ ----
----- Total Cost of Sales 63,033 61,225 1,808 3.0%
------------------- Gross Profit ------------ Procurement services
6,209 5,967 242 4.1% Procurement services % 10.5% 10.6% Service and
consulting 4,335 2,827 1,508 53.4% Service and consulting % 30.5%
20.7% Total Gross Profit 10,544 8,794 1,750 19.9%
------------------ Total Gross Profit % 14.3% 12.6%
-------------------- Operating expenses: Selling, general, and
administrative expenses 7,278 6,178 1,100 17.8% Rent expense -
related party 154 152 2 1.0% Depreciation and amortization 596 534
62 11.6% --- --- --- ---- Total operating expenses 8,028 6,864
1,164 17.0% ----- ----- ----- ---- Percent of revenues 10.9% 9.8%
Operating income 2,516 1,930 586 30.4% ----- ----- --- ---- Percent
of revenues 3.4% 2.8% Other expense (income): Interest income -
other (11) (5) (6) 124.4% Interest expense 145 254 (109) (42.9)%
Other (8) 4 (12) (292.1)% --- --- --- ------- Income before income
taxes 2,390 1,676 714 42.6% Provision for income taxes 983 670 313
46.6% --- --- --- ---- Net income $1,407 $1,006 $401 39.9% ======
====== ==== ==== Percent of revenues 1.9% 1.4% Reconciliation of
net income to EBITDA and Adjusted EBITDA EMTEC, INC. RECONCILIATION
OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (In thousands) Three
Months Ended November 30, 2009 2008 Change ---- ---- ------ Net
income $1,407 $1,006 $401 Interest and other expense (income): 126
253 (127) Income taxes 983 670 313 Depreciation and amortization
596 534 62 --- --- --- EBITDA 3,112 2,464 648 Retention bonuses (1)
90 - Elimination of non- essential overhead (2) - 539 Stock based
compensation 86 42 Executive recruiting (3) 99 15 Severance 29 23
Recovery of prior year expenses (4) - (270) --- ---- Total
Adjustments 303 349 --- --- Adjusted EBITDA $3,415 $2,813 $603
====== ====== ==== 1) Expenses associated with retention bonuses
which were agreed to in connection with the closing of the
Company's acquisition of Luceo. 2) Elimination of non-essential
overhead includes expenses incurred, which were eliminated by
management during the three months ended November 30, 2008 and will
not recur on an ongoing basis. These charges included $78,000 paid
to the former owners of Westwood under contracts that were not
renewed (net of ongoing consulting costs paid to an owner),
$361,000 paid to a senior executive under a contract that was not
renewed and paid to other at-will employees whose positions were
terminated and $100,000 in sales compensation changes implemented
during the three months ended November 30, 2008. 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) 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. 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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