SYS Technologies, Inc. (�SYS�) (AMEX:SYS), a leading provider of
information connectivity solutions that enable situational
awareness and real-time collaboration, today reported results for
the third quarter and nine months ended March 30, 2007. Cliff
Cooke, chief executive officer of SYS, said, �Through complementary
acquisitions, product development and broader distribution
channels, we have driven revenue growth of approximately 40 percent
for the nine months ended March 30, 2007 as compared to last year�s
period. However, as previously noted, this is less than our goal
due to delays in planned purchases from major customers, which
negatively affected our fiscal third quarter results. Although
disappointed in the near-term delay, we do expect a significant
portion of these purchases to occur during our fourth quarter.
Notably, I am encouraged by the consistent improvement in our gross
margins, which have yielded between 22 percent and 23 percent in
each of the past three quarters. This increase over the prior
year�s year-to-date average of 19 percent demonstrates we are
beginning to deliver the intended impact of our targeted revenue
mix between products and services. �Pursuing our growth strategy,
we have devoted sales, marketing, business development, research,
engineering and development resources to our VigilysTM Tactical
Operations System and other product lines, which has increased
expenses compared to last year. While we have achieved some cost
synergies from our acquisitions, we have not yet reached the level
necessary to be profitable. Therefore, with long-term sustainable
profitability in mind, in our second quarter we began implementing
organizational, facility and discretionary spending cuts.
Similarly, we are working to generate more cost efficiencies in our
general and administrative activities. During the fourth quarter,
we will vigorously continue these efforts to position SYS for
profitability at the start of fiscal 2008,� Cooke added. Third
quarter fiscal 2007 revenues were $19.1 million. The $5.7 million
increase from the prior year�s third quarter reflects balanced
revenue contributions from acquisitions, services and products.
Third quarter 2007 generally accepted accounting principles (GAAP)
net loss was $1.1 million, or $0.06 per basic and diluted share.
This compares with a third quarter 2006 GAAP net loss of $1.3
million, or $0.10 per basic and diluted share. For the third
quarter of 2007, the company reported non-GAAP net loss of
approximately $650,000, or $0.04 per basic and diluted share,
compared to non-GAAP net loss of $978,000, or $0.07 per basic and
diluted share, in the prior year�s quarter. Management has included
information about non-GAAP net income (loss) because management
believes it provides a more meaningful measure of
quarter-over-quarter and year-over-year financial performance. A
reconciliation of GAAP results to non-GAAP net income (loss)
results follows in this press release. Non-GAAP net income (loss)
and non-GAAP net income (loss) per share are non-GAAP measures and
exclude amortization of intangibles from acquisitions, non-cash
share-based compensation charges and asset impairment charges, if
any, all net of their related tax effect. For further information,
please refer to the section of the press release titled, �Notice
Regarding Use of Non-GAAP Financial Measures.� Cooke added, �I
remain very encouraged by the progress we are making and the
opportunities that lie ahead. Apart from decreases in certain
software development services, our Defense Solutions Group has
managed quarter-over-quarter non-acquisition based revenue growth
of 15 percent fueled by significant growth in technical program
development and assessment, enterprise architecture and training
programs. We have made significant progress in the further
development of Vigilys and continue to get very enthusiastic
interest throughout the public safety market. During this initial
deployment phase of Vigilys, we have learned a great deal about
customer needs and requirements in the public safety markets, and
we are adapting our sales and marketing strategy accordingly.� For
the nine months ended March 30, 2007, revenues were $54.5 million,
up $15.6 million from the prior year�s nine-month period,
reflecting contributions from acquisitions, services and products.
The nine-month GAAP net loss was $1.5 million, or $0.09 per share,
compared to GAAP net loss of $664,000, or $0.06 per share, in the
prior year�s nine-month period. For the nine-month period ended
March 30, 2007, the company reported non-GAAP net loss of $624,000,
or $0.04 per share, compared to non-GAAP net loss of $47,000, or
$0.00 per diluted share, in the prior year�s nine-month period.
Outlook Cooke concluded, �Our progress on top line revenue growth
has been continuous and is significant. We believe we can achieve
fiscal year 2007 revenue of between $73 million and $75 million. We
also continue to expect we will be breakeven in our fiscal fourth
quarter and are positioning the company to achieve profitability as
we move into fiscal 2008.� Recent Corporate Highlights --� Selected
by Minnesota Army National Guard to deploy NeuralStar(TM) to be its
core network management platform. The cumulative combined value of
Minnesota, Alabama and Mississippi state guard contracts has
reached approximately $500,000. --� Demonstrated critical real-time
Military and Civilian Information Connectivity Solutions in support
of recent Navy Trident Warrior '07 Exercise. --� Awarded three new
contracts totaling $2.5 million with the Department of Defense
consisting of both new and follow-on work. --� For the nine months
ended March 30, 2007 as compared to March 31, 2006: --� Delivered
products-based revenues of $4.1 million, or eight percent of total
revenue, more than doubling the $1.9 million, or five percent of
total revenue. --� Increased Public Safety, Security and Industrial
Systems Group revenue to $17.5 million, or 32 percent of total
revenue, more than doubling the $7.3 million, or 19 percent of
total revenue. Conference Call SYS management will host a
conference call today at 11:00 am EDT (8:00 am PDT) to discuss its
financial results for the recent quarter and to answer questions.
Participating in the call will be Cliff Cooke, Chief Executive
Officer, and Ed Lake, Chief Financial Officer. To participate in
the live call, please dial (866) 277-1184 from the US, or for
international callers, please dial (617) 597-5360 passcode
#39733726, approximately 15 minutes before the start time. A
telephone replay will be available for two weeks by dialing (888)
286-8010 from the US, or (617) 801-6888 for international callers,
and entering passcode #37418923. To listen to the conference call
live via the Internet, visit SYS� web site at
www.systechnologies.com. Please go to the web site 15 minutes prior
to its start to register, download, and install the necessary audio
software. A replay will be available on SYS� web site for two
weeks. About SYS Technologies SYS (AMEX:SYS) is a leading provider
of information connectivity solutions that capture, analyze and
present real-time information to our customers in the Department of
Defense, Department of Homeland Security, other government agencies
and to commercial companies. Using interoperable communications
software, sensors, digital video broadcast and surveillance
technologies, wireless networks, network management,
decision-support tools and Net-centric technologies, our technical
experts enhance complex decision-making. We also provide solution
lifecycle support with program, financial, test and logistical
services and training. Founded in 1966, SYS is headquartered in San
Diego and has principal offices in California and Virginia. For
additional information, visit www.systechnologies.com. Notice
Regarding Use of Non-GAAP Financial Measures Certain of the
information set forth herein, including non-GAAP net income (loss)
and non-GAAP net income (loss) per share, are non-GAAP financial
measures. SYS believes this information is useful to investors
because it provides a basis for measuring SYS� available capital
resources, the operating performance of SYS� business and SYS� cash
flow, excluding the effects of non-cash charges for amortization of
intangibles from acquisitions, non-cash share-based compensation
charges and asset impairment charges, if any, all net of their
related tax effects, that would normally be included in the most
directly comparable measures calculated and presented in accordance
with GAAP. SYS� management uses these non-GAAP financial measures
along with the most directly comparable GAAP financial measures in
evaluating SYS� operating performance, capital resources and cash
flow. Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
presented in accordance with GAAP. Non-financial measures as
reported by SYS may not be comparable to similarly titled amounts
reported by other companies. A reconciliation of GAAP results to
non-GAAP results has been provided in the financial statement
tables that accompany this press release. Notice Regarding
Forward-Looking Statements This press release includes
�forward-looking statements� within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact included in this press release
regarding the Company�s strategies, plans, objectives,
expectations, and future operating results are forward-looking
statements. Although SYS believes that the expectations reflected
in such forward-looking statements are reasonable at this time, it
can give no assurance that such expectations will prove to have
been correct. Actual results could differ materially based upon a
number of factors including, but not limited to, the state of
economy, competition, unanticipated business opportunities,
availability of financing, market acceptance, government
regulation, dependence on key personnel, limited public markets and
liquidity, shares eligible for future sale, continuation and
renewal of contracts and other risks that may apply to the Company,
including risks that are disclosed in the Company�s Securities and
Exchange Commission filing. SYS AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (amounts in
thousands, except per share data) � � Three Months Ended Nine
Months Ended March 30, March 31, March 30, March 31, 2007� 2006�
2007� 2006� � Revenues $ 19,069� $ 13,388� $ 54,528� $ 38,930� � �
Operating costs and expenses: Costs of revenue 14,811� 11,392�
42,138� 31,526� Selling, general and administrative 4,299� 2,901�
10,877� 5,942� Research, engineering and development 1,059� 926�
3,050� 1,987� Total operating costs and expenses 20,169� 15,219�
56,065� 39,455� � Loss from operations (1,100) (1,831) (1,537)
(525) � Other (income) expense: Other income (29) (35) (90) (93)
Interest expense 147� 123� 529� 313� Total other expense 118� 88�
439� 220� � � Loss before income taxes (1,218) (1,919) (1,976)
(745) � Income tax benefit (162) (586) (464) (81) � � � � Net loss
$ (1,056) $ (1,333) $ (1,512) $ (664) � � � Net loss per share:
Basic $ (0.06) $ (0.10) $ (0.09) $ (0.06) Diluted $ (0.06) $ (0.10)
$ (0.09) $ (0.06) � Weighted average shares: Basic 18,666� 13,133�
17,196� 11,958� Diluted 18,666� 13,133� 17,196� 11,958� SYS
TECHNOLOGIES RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
(in thousands except per share data) � Three Months Ended Nine
Months Ended March 30, March 31, March 30, March 31, 2007� 2006�
2007� 2006� � GAAP net loss $ (1,056) $ (1,333) $ (1,512) $ (664) �
Amortization of intangibles 257� 90� 830� 284� Share-based
compensation expense 104� 143� 331� 409� Tax effect 45� 122� (273)
(76) Non-GAAP net loss $ (650) $ (978) $ (624) $ (47) � � Basic
Non-GAAP loss per share $ (0.04) $ (0.07) $ (0.04) $ 0.00� Diluted
Non-GAAP loss per share $ (0.04) $ (0.07) $ (0.04) $ 0.00� � Shares
used in the calculation of basic Non-GAAP EPS 18,666� 13,133�
17,196� 11,958� Shares used in the calculation of diluted Non-GAAP
EPS 18,666� 13,133� 17,196� 11,958� SYS TECHNOLOGIES SELECTED
CONSOLIDATED BALANCE SHEET DATA (in thousands) � March 30, 2007
June 30, 2006 � Cash $ 1,665� $ 2,106� � Accounts receivable, net $
16,249� $ 13,966� � Convertible notes payable $ 3,321� $ 5,197� �
Stockholders� equity $ 34,545� $ 27,507�
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