Click here to close now.

Welcome!

CloudExpo® Blog Authors: Lori MacVittie, Hovhannes Avoyan, Liz McMillan, Ian Goldsmith, Pat Romanski

News Feed Item

Emtec, Inc. Announces First Quarter 2013 Results

Emtec, Inc. (OTCQB: ETEC) (“Emtec” or the “Company”) announced today that for the quarter ended November 30, 2012, its gross profit from Consulting and Outsourcing grew by 6.0% versus the first fiscal quarter of last year to $6.5 million, and total gross margin increased from 16.5% for the quarter ended November 30, 2011 to 18.0% for the quarter ended November 30, 2012. The Company also reported Adjusted EBITDA, which is defined by management as net income (loss) before interest, taxes, depreciation, amortization, retention bonuses, stock-based compensation, severance, earn out liability adjustment, stock warrant expense, restructuring charge, impairment of identifiable intangible assets and impairment of goodwill (“Adjusted EBITDA”) of $2.6 million for the quarter ended November 30, 2012 compared with Adjusted EBITDA of $2.7 million for the quarter ended November 30, 2011. A reconciliation of net income (loss) to Adjusted EBITDA is attached to this press release.

Total revenue for the quarter ended November 30, 2012 decreased by $13.8 million or 19.2% compared to the quarter ended November 30, 2011. Procurement services revenue for the quarter ended November 30, 2012 decreased by $12.8 million while consulting and outsourcing decreased by $1.0 million from the same quarter in the prior year. However, gross profit from consulting and outsourcing increased by $362,000 for the quarter ended November 30, 2012 from the same quarter in the prior year.

“We had a difficult quarter in our federal segment. However, this was not inconsistent with our overall strategy of moving towards higher gross margin recurring business. We were able to generate over $2.6 million in Adjusted EBITDA despite the drop in our Federal business. We are focusing on using our cost savings over the last year to invest in high level sales talent and have had many seasoned sales and delivery experts join us recently from much larger systems integrators. We look forward to increasing our average total contract value as we identify new large outsourcing opportunities,” commented Dinesh Desai, the Company’s Chief Executive Officer.

Greg Chandler, Chief Financial Officer added, “We continue to find ways to make the Company more efficient. We announced the closing of our Springfield facility in November 2012 that will save the Company over $2 million on an annualized basis when we complete the closure. We recorded a restructuring charge in the quarter related to the closure. In addition, we have consolidated a good deal of the back office and reduced the size of our general and administrative expenses. We are now poised for growth as we continue to build more opportunities in our pipeline. However, due to the performance of our Federal business and concerns regarding the fiscal cliff, the first quarter results are disappointing, and we are continuing to examine ways to improve value within the Federal segment.”

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. These metrics are not in conformity with accounting principles generally accepted 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 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 Company’s operating results presented in the Company’s consolidated financial statements. The Company has made a reconciliation of net income (loss), the most closely comparable GAAP measure, to these non-GAAP measures for the quarters ended November 30, 2012 and 2011 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.

About Emtec:

Emtec, established in 1964, provides technology-empowered business solutions for world-class organizations in the enterprise, federal, state and local government, and education markets. With offices in 14 cities in the U.S., Canada and India, Emtec is big enough to address our client needs but small enough to care. Our local offices, highly-skilled associates, and global delivery capabilities ensure the accessibility and scale to align client’s technology solutions with their business needs. Emtec’s singular mission is to create “Clients for Life” - long-term relationships that deliver rapid, meaningful, and lasting business value. Our offerings span the entire IT lifecycle: from Consulting through Packaged, Custom, and Cloud Applications as well as a variety of Infrastructure Services.

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: (i) the Company’s ability to obtain sufficient capital or a strategic business arrangement to fund its plan of operations when needed; (ii) the Company’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 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 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.

                     
 
EMTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands)
For the Three Months Ended November 30,
2012   2011      

$ Change

     

% Change

Revenues

Consulting and outsourcing $ 24,579 $ 25,614 $ (1,035 ) (4.0 )%
Procurement services   33,626       46,416           (12,790 )       (27.6 )%

Total Revenues

58,205 72,030 (13,825 ) (19.2 )%
 

Cost of Revenues

Cost of consulting and outsourcing 18,082 19,479 (1,397 ) (7.2 )%
Cost of procurement services   29,628       40,655           (11,027 )       (27.1 )%

Total Cost of Revenues

47,710 60,134 (12,424 ) (20.7 )%
 

Gross Profit

Consulting and outsourcing 6,497 6,135 362 5.9 %
Consulting and outsourcing % 26.4 % 24.0 %
 
Procurement services 3,998 5,761 (1,763 ) (30.6 )%
Procurement services % 11.9 % 12.4 %
 

Total Gross Profit

10,495 11,896 (1,401 ) (11.8 )%

Total Gross Profit %

18.0 % 16.5 %
 
Operating expenses:
Selling, general, and administrative expenses 7,871 9,259 (1,388 ) (15.0 )%
Retention bonuses to former owners of acquired entities - 146
Restructuring charge 582 - 582 0.0 %
Non-cash operating expenses
Stock-based compensation 95 160 (65 ) (40.6 )%
Warrant liability adjustment 12 (608 ) 620 (102.0 )%
Earnout liability adjustment 902 168 734 436.9 %
Depreciation and amortization   1,027     1,360     (333 )       (24.5 )%
Total operating expenses   10,489     10,485     150         1.4 %
Percent of revenues 18.0 % 14.6 %
 
Operating income   6     1,411     (1,405 )       (99.6 )%
Percent of revenues 0.0 % 2.0 %
 
Other expense (income):
Interest income – other (5 ) (62 ) 57 (91.9 )%
Interest expense 752 835 (83 ) (9.9 )%
Other   11     (2 )   13         (650.0 )%
 
Income (loss) before income tax expense (benefit) (752 ) 640 (1,392 ) (217.5 )%
Income tax expense (benefit)   (6 )   185     (191 )       (103.2 )%
Net income (loss) $ (746 ) $ 455   $ (1,201 )       (264.0 )%
Percent of revenues (1.3 )% 0.6 %
 
 
 
EMTEC, INC.
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
UNAUDITED
(In thousands)
For the Three Months Ended November 30,
2012   2011       Change
Net income (loss) $ (746 ) $ 455 $ (1,201 )
Interest expense 752 835 (83 )
Income tax expense (benefit) (6 ) 185 (191 )
Depreciation and amortization   1,027     1,360     (333 )
EBITDA 1,027 2,835 (1,808 )
 
Retention bonuses (1) - 146
Stock based compensation 95 160
Severance - 11
Earnout liability adjustment (2) 902 168
Warrant expense (3) 12 (608 )
Restructuring charge (4) 582 -
Impairment of identifiable intangible assets - -
Impairment of goodwill   -     -  
Total Adjustments (5)   1,591     (123 )  
Adjusted EBITDA $ 2,618     $ 2,712   $ (94 )
 

1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company’s acquisition of Emerging Solutions (Gnuco).

2) Non Cash adjustment of future contingent earn out liabilities in connection with the acquisitions of SDI, Dinero, Covelix, and Emerging. The earn out liabilities were recorded at fair value based on valuation models which utilize relevant factors such as expected life and estimated probabilities of the acquisitions achieving the performance targets throughout the earn out periods. These earn out liabilities are reassessed each reporting period and can result in recording additional income or expense.

3) Expense or income related to the stock warrants issued to our majority stockholder in August 2010 including legal fees associated with the issuance, as well as the stock warrant issued in connection with the subordinated debt financing in August 2011. These warrants are “marked-to-market” each reporting period, which can result in fluctuations in non-cash income or expense in future periods.

4) Expense related to the Company approved restructuring plan designed to reduce costs and improve efficiencies. Implementation of the Restructuring Plan started in November 2012 and is expected to be completed in the second quarter of fiscal 2013 with certain cash payments expected through the third quarter of fiscal 2014.

5) In addition to the adjustments described above, the Company has not made adjustments for merger and acquisition related costs. The Company may incur similar costs in future periods. The company recorded merger and acquisition related costs of $10,000 and $83,000 for the quarters ended November 30, 2012 and 2011, respectively.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@CloudExpo Stories
T-Mobile has been transforming the wireless industry with its “Uncarrier” initiatives. Today as T-Mobile’s IT organization works to transform itself in a like manner, technical foundations built over the last couple of years are now key to their drive for more Agile delivery practices. In his session at DevOps Summit, Martin Krienke, Sr Development Manager at T-Mobile, will discuss where they started their Continuous Delivery journey, where they are today, and where they are going in an effort ...
The Internet of Things promises to transform businesses (and lives), but navigating the business and technical path to success can be difficult to understand. In his session at @ThingsExpo, Sean Lorenz, Technical Product Manager for Xively at LogMeIn, demonstrated how to approach creating broadly successful connected customer solutions using real world business transformation studies including New England BioLabs and more.
Containers Expo Blog covers the world of containers, as this lightweight alternative to virtual machines enables developers to work with identical dev environments and stacks. Containers Expo Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. Bookmark Containers Expo Blog ▸ Here Follow new article posts on Twitter at @ContainersExpo
There are 182 billion emails sent every day, generating a lot of data about how recipients and ISPs respond. Many marketers take a more-is-better approach to stats, preferring to have the ability to slice and dice their email lists based numerous arbitrary stats. However, fundamentally what really matters is whether or not sending an email to a particular recipient will generate value. Data Scientists can design high-level insights such as engagement prediction models and content clusters that a...
It's time to face reality: "Americans are from Mars, Europeans are from Venus," and in today's increasingly connected world, understanding "inter-planetary" alignments and deviations is mission-critical for cloud. In her session at 15th Cloud Expo, Evelyn de Souza, Data Privacy and Compliance Strategy Leader at Cisco Systems, discussed cultural expectations of privacy based on new research across these elements
In today's application economy, enterprise organizations realize that it's their applications that are the heart and soul of their business. If their application users have a bad experience, their revenue and reputation are at stake. In his session at 15th Cloud Expo, Anand Akela, Senior Director of Product Marketing for Application Performance Management at CA Technologies, discussed how a user-centric Application Performance Management solution can help inspire your users with every applicati...
As enterprises engage with Big Data technologies to develop applications needed to meet operational demands, new computation fabrics are continually being introduced. To leverage these new innovations, organizations are sacrificing market opportunities to gain expertise in learning new systems. In his session at Big Data Expo, Supreet Oberoi, Vice President of Field Engineering at Concurrent, Inc., discussed how to leverage existing infrastructure and investments and future-proof them against e...
The consumption economy is here and so are cloud applications and solutions that offer more than subscription and flat fee models and at the same time are available on a pure consumption model, which not only reduces IT spend but also lowers infrastructure costs, and offers ease of use and availability. In their session at 15th Cloud Expo, Ermanno Bonifazi, CEO & Founder of Solgenia, and Ian Khan, Global Strategic Positioning & Brand Manager at Solgenia, discussed this shifting dynamic with an ...
Due of the rise of Hadoop, many enterprises are now deploying their first small clusters of 10 to 20 servers. At this small scale, the complexity of operating the cluster looks and feels like general data center servers. It is not until the clusters scale, as they inevitably do, when the pain caused by the exponential complexity becomes apparent. We've seen this problem occur time and time again. In his session at Big Data Expo, Greg Bruno, Vice President of Engineering and co-founder of StackI...
Once the decision has been made to move part or all of a workload to the cloud, a methodology for selecting that workload needs to be established. How do you move to the cloud? What does the discovery, assessment and planning look like? What workloads make sense? Which cloud model makes sense for each workload? What are the considerations for how to select the right cloud model? And how does that fit in with the overall IT transformation?
You use an agile process; your goal is to make your organization more agile. But what about your data infrastructure? The truth is, today's databases are anything but agile - they are effectively static repositories that are cumbersome to work with, difficult to change, and cannot keep pace with application demands. Performance suffers as a result, and it takes far longer than it should to deliver new features and capabilities needed to make your organization competitive. As your application an...
17th Cloud Expo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterprises a...
The recent trends like cloud computing, social, mobile and Internet of Things are forcing enterprises to modernize in order to compete in the competitive globalized markets. However, enterprises are approaching newer technologies with a more silo-ed way, gaining only sub optimal benefits. The Modern Enterprise model is presented as a newer way to think of enterprise IT, which takes a more holistic approach to embracing modern technologies.
SYS-CON Events announced today that SUSE, a pioneer in open source software, will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. SUSE provides reliable, interoperable Linux, cloud infrastructure and storage solutions that give enterprises greater control and flexibility. More than 20 years of engineering excellence, exceptional service and an unrivaled partner ecosystem power the products and support that help ...
Move from reactive to proactive cloud management in a heterogeneous cloud infrastructure. In his session at 16th Cloud Expo, Manoj Khabe, Innovative Solution-Focused Transformation Leader at Vicom Computer Services, Inc., will show how to replace a help desk-centric approach with an ITIL-based service model and service-centric CMDB that’s tightly integrated with an event and incident management platform. Learn how to expand the scope of operations management to service management. He will al...
There's no doubt that the Internet of Things is driving the next wave of innovation. Google has spent billions over the past few months vacuuming up companies that specialize in smart appliances and machine learning. Already, Philips light bulbs, Audi automobiles, and Samsung washers and dryers can communicate with and be controlled from mobile devices. To take advantage of the opportunities the Internet of Things brings to your business, you'll want to start preparing now.
In a world of ever-accelerating business cycles and fast-changing client expectations, the cloud increasingly serves as a growth engine and a path to new business models. Dynamic clouds enable businesses to continuously reinvent themselves, adapting their business processes, their service and software delivery and their operations to achieve speed-to-market and quick response to customer feedback. As the cloud evolves, the industry has multiple competing cloud technologies, offering on-premises ...
As the world moves from DevOps to NoOps, application deployment to the cloud ought to become a lot simpler. However, applications have been architected with a much tighter coupling than it needs to be which makes deployment in different environments and migration between them harder. The microservices architecture, which is the basis of many new age distributed systems such as OpenStack, Netflix and so on is at the heart of CloudFoundry – a complete developer-oriented Platform as a Service (PaaS...
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
There is no question that the cloud is where businesses want to host data. Until recently hypervisor virtualization was the most widely used method in cloud computing. Recently virtual containers have been gaining in popularity, and for good reason. In the debate between virtual machines and containers, the latter have been seen as the new kid on the block – and like other emerging technology have had some initial shortcomings. However, the container space has evolved drastically since coming on...