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Emtec, Inc. Announces First Quarter 2011 Results

^{Published on 2011-01-18 12:25:21 - Market Wire}
 

SPRINGFIELD, N.J.--([ BUSINESS WIRE ])--Emtec, Inc. (OTCBB: ETEC) (aEmteca or the aCompanya) announced today that for the quarter ended November 30, 2010, revenue increased to $76.9 million for quarter ended November 30, 2010 from $73.6 million in quarter ended November 30, 2009, an increase of $3.3 million. Services and consulting revenue grew by 17.6% from the same period in the prior year, primarily from the addition of revenues generated by the Companya™s recent SDI acquisition. Gross profit showed no material increase from the same period in the prior year. Earnings before interest, taxes, depreciation and amortization expenses (aEBITDAa) were $2.2 million for the quarter ended November 30, 2010, compared with $3.1 million for the quarter ended November 30, 2009. 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, the recovery of prior year expenses and stock warrant expense (aAdjusted EBITDAa), was $2.5 million for the quarter ended November 30, 2010 versus $3.4 million for the quarter ended November 30, 2009. A reconciliation of net income to EBITDA and Adjusted EBITDA is attached to this press release.

"I am pleased to report that the transformation of our business to one based on recurring revenue from services continued to show positive results in the first quarter"

EBITDA and Adjusted EBITDA are key financial metrics used by the Companya™s Board of Directors and management to evaluate and measure the Companya™s operating performance. These metrics are not in conformity with generally accepted accounting principles (aGAAPa) in the United States of America. Managementa™s calculation of EBITDA eliminates the effect of charges primarily associated with financing decisions, tax regulations and capital investments. Adjusted EBITDA also eliminates certain unusual costs and reflects certain changes in the business made by management and includes adjustments which in the opinion of management are necessary to reflect the underlying ongoing operations of the business. Net income (loss) is the most comparable GAAP measure of the Companya™s operating results presented in the Companya™s consolidated financial statements. We have made a reconciliation of net income (loss), which is the most closely comparable GAAP measure to these non-GAAP measures for the quarters ended November 30, 2010 and 2009 and discussed these adjustments in this release. 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.

aI am pleased to report that the transformation of our business to one based on recurring revenue from services continued to show positive results in the first quarter,a said Dinesh Desai, Chairman, CEO, and President of Emtec. aWhile the overall gross profit was flat compared to the same quarter last year, we are excited by the 17.6 percent growth in our services and consulting revenue. The main driver of this revenue growth was our acquisition of SDI along with some other changes we made during the quarter to improve our service offerings. I was disappointed that a few large low margin procurement sales offset the positive margin impact of this services and consulting growth. On the positive side, this clearly shows the long-term benefit of this business transformation we have undertaken. As we continue to make these investments in infrastructure and personnel we may see some short-term negative earnings impacts, but we are implementing cost-control discipline and processes across all our business units that are intended to allow the positive effects to flow to the bottom-line.a

Emtec, Inc.

Emtec, Inc. established in 1964, is a systems integrator providing IT services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implement process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emteca™s market leading value based management methods, coupled with best-in-class IT technology, consulting and development services, allow us to address a wide range of specific client needs, as well as support broader IT transformation initiatives.Emtec's service capabilities span the USA, Canada and countries around the globe. For more information visit: [ www.emtecinc.com ].

Certain statements in this document constitute aforward-looking statementsa 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 Companya™s future operating results are dependent upon many factors, including but not limited to: (i) the Companya™s ability to obtain sufficient capital or a strategic business arrangement to fund its plan of operations when needed; (ii) the Companya™s ability to build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Companya™s control; and (iv) other risk factors discussed in the Companya™s periodic filings with the Securities and Exchange Commission which are available for review at [ www.sec.gov ] under aSearch for Company Filings.aWe 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.

1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company's acquisition of Luceo.

2) Reflects executive recruiting fees incurred in connection with a management launched search for a senior executive. Management made the decision to invest in the business by hiring new senior executives to grow the business in 2010 and thereafter.

3) Stock warrants issued to our majority shareholder during the year ended August 31, 2010. The stock warrants will continue to be amarked-to-marketa each reporting period.

4) In addition to the adjustments described above, the Company has not made an adjustment for merger and acquisition related costs because the Company believes that it may incur similar costs in future periods. Effective September 1, 2009, the Company adopted the new standard for accounting for business combinations in accordance with ASC 805 "Business Combinations."