|
NEWS
ANNOUNCEMENT
SYS
Contact:
Edward M. Lake
Chief
Financial Officer
858-715-5500
Email:
elake@systechnologies.com
|
Investor
Contact:
Christiane
Pelz
Lippert/Heilshorn
& Associates
415-433-3777
Email:
cpelz@lhai.com
|
SYS
TECHNOLOGIES REPORTS FISCAL 2008 FIRST QUARTER RESULTS
--Quarterly
Revenues Increase 26% Compared to Fiscal 2007 First Quarter
--
--
Return to Profitability Reporting Net Income of $0.03 per Diluted
Share--
SAN
DIEGO, CA – November 12, 2007
– SYS Technologies, Inc. (“SYS”) (AMEX:
SYS), a leading provider of information connectivity solutions that enable
real-time, complex decision-making, today reported results for the first
quarter
ended September 28, 2007.
Cliff
Cooke, chief executive officer of SYS, said, “The groundwork we laid over the
past several months delivered results. First quarter revenues grew 26 percent
as
compared to last year, and a higher mix of product sales fueled continued
gross
margin increases. Additionally, significant operating cost reductions
made during this time enabled us to achieve our stated goal of returning
to
profitability in fiscal 2008.”
First
quarter 2008 revenues were $20.5 million, up $4.3 million from the prior
year
first quarter. The increase included approximately $2.5 million from an
acquisition and $1.8 million from net increases in other core contract services
and products. Gross margin was 27.4 percent in the quarter as compared to
22.8
percent in the prior year, reflecting a higher products-based revenue
contribution. Operating expenses were $4.5 million, or 21.8 percent
of revenues, in the current year quarter, as compared to $3.9 million, or
24.2
percent of revenues, in the prior year. Importantly, on a sequential quarter
basis, operating expenses have been reduced by $1.1 million or 19.4 percent
from
the fourth quarter of 2007.
“First
quarter revenues exceeded our guidance of $17.0 million to $19.0 million,
and
products-based revenue grew to 12.1 percent of revenue, up from 7.3 percent
of
revenue in first quarter fiscal 2007. The favorable product mix,
including higher than expected contributions from software license revenues,
drove higher gross margins and positively impacted profitability. We
anticipate that in the near-term the combined software license and product
revenue contribution will be less than this quarter; nevertheless, we do
expect
to maintain profitability. We have implemented sustainable overall
cost reductions. In addition, we continue to work on optimizing our
core contract services business as well as our enterprise video, network
management and Vigilys businesses,” added Cooke.
Management
has included information about non-GAAP net income because management believes
it provides a more meaningful measure of quarter-over-quarter and year-over-year
financial performance. A reconciliation of generally accepted
accounting principles (GAAP) results to non-GAAP net income results follows
in
this press release. Non-GAAP net income and non-GAAP net income 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, “Note Regarding Use of Non-GAAP
Financial Measures.”
First
quarter 2008 net income was $526,000, or $0.03 per diluted share, compared
to a
net loss of $115,000, or $0.01per share, in the prior year’s first
quarter. For the first quarter of 2008, the company reported non-GAAP
net income of $712,000 or $0.04 per diluted share, compared to a slight loss
of
$5,000, or $0.00 per share in the prior year quarter.
At
September 28, 2007, the company had a cash balance of $2.4 million, working
capital of $9.4 million and an available credit facility balance of $2.9
million.
First
Quarter Corporate Highlights
|
·
|
Awarded
$37.6 million in new and follow-on contract
tasking.
|
|
·
|
Won
two key contract awards in network security management business
including
a $1.6 million contract to supply secure network management solutions
for
a government agency and a contract for BNSF Railway
Company.
|
|
·
|
Delivered
Vigilys to a customer in Delaware County, PA. where it is currently
operational.
|
|
·
|
Ranked
number 23 in Deloitte's Technology Fast 50 Program for San
Diego.
|
|
·
|
Vigilys
nominated for 2007 Annual AeA High Tech
Award.
|
Outlook
for Fiscal Year 2008
The
business continues to be dependent upon awards from large government agencies
and corporations, and as such, the revenue stream may be unpredictable. For
the
fiscal 2008 second quarter, management expects revenue to be in the range
of
$17.0 million to $19.0 million and the company to be profitable. For
fiscal year 2008, management expects revenue to be in the range of $78.0
million
to $80.0 million. The company expects to be profitable throughout the year;
however, management anticipates the level of profitability will fluctuate
based
on the timing and composition of revenues.
Fiscal
2008 First Quarter Conference Call
SYS
management will host a conference call today, Monday, November 12, 2007 at
11:00
a.m. ET (8:00 a.m. PT), which will be simultaneously broadcast over the
Internet. 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) 203-3206 from the US or, for international callers, please
dial (617) 213-8848 passcode #93113009 approximately 15 minutes before the
start
time. To listen to the conference call live via the Internet, visit the 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
telephone replay will be available for one week by dialing (888) 286-8010
from
the US, or (617) 801-6888 for international callers, and entering passcode
#80817630.
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’s 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 filings.
|
SYS
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE
MONTHS ENDED SEPTEMBER 28, 2007 AND SEPTEMBER 29,
2006
(UNAUDITED)
(amounts
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
20,510
|
|
|
$
|
16,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
14,900
|
|
|
|
12,530
|
|
|
Selling,
general and administrative expenses
|
|
|
3,377
|
|
|
|
3,054
|
|
|
Research,
engineering and development expenses
|
|
|
1,089
|
|
|
|
881
|
|
|
Total
operating costs and expenses
|
|
|
19,366
|
|
|
|
16,465
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
1,144
|
|
|
|
(222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income) expense:
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
(39
|
)
|
|
|
(37
|
)
|
|
Interest
expense
|
|
|
128
|
|
|
|
197
|
|
|
Total
other (income) expense
|
|
|
89
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
1,055
|
|
|
|
(382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision (benefit)
|
|
|
529
|
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
526
|
|
|
$
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
(0.01
|
)
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,317
|
|
|
|
15,405
|
|
|
Diluted
|
|
|
19,396
|
|
|
|
15,405
|
|
|
|
|
|
|
|
|
|
|
|
SYS
AND SUBSIDIARIES
RECONCILIATION
OF GAAP NET INCOME (LOSS) TO
NON-GAAP
NET INCOME (LOSS)
(Amounts
in thousands except per share data)
|
|
|
Three
months ended
|
|
|
|
|
September
28,
2007
|
|
|
September
29,
2006
|
|
|
|
|
|
|
|
|
|
|
GAAP
net income (loss)
|
|
$
|
526
|
|
|
$
|
(115
|
)
|
|
Amortization
of intangibles
|
|
|
256
|
|
|
|
253
|
|
|
Share-based
compensation expense
|
|
|
117
|
|
|
|
114
|
|
|
Tax
effect
|
|
|
(187
|
)
|
|
|
(257
|
)
|
|
Non-GAAP
net income (loss)
|
|
$
|
712
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Non-GAAP income (loss) per share
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
|
Diluted
Non-GAAP income (loss) per share
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in the calculation of basic Non-GAAP EPS
|
|
|
19,317
|
|
|
|
15,405
|
|
|
Shares
used in the calculation of diluted Non-GAAP EPS
|
|
|
19,396
|
|
|
|
15,405
|
|
|
|
|
|
|
|
|
|
|
|
|
SYS
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts
in thousands, except par value amounts)
|
|
|
|
|
September
28, 2007
|
|
|
June
30,
2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,399
|
|
|
$
|
2,770
|
|
|
Accounts
receivable, net
|
|
|
17,518
|
|
|
|
16,321
|
|
|
Inventories,
net
|
|
|
562
|
|
|
|
599
|
|
|
Prepaid
expenses
|
|
|
475
|
|
|
|
603
|
|
|
Deferred
taxes
|
|
|
761
|
|
|
|
275
|
|
|
Total
current assets
|
|
|
21,715
|
|
|
|
20,568
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture,
equipment and leasehold improvements, net
|
|
|
2,068
|
|
|
|
1,951
|
|
|
Intangible
assets, net
|
|
|
5,855
|
|
|
|
6,111
|
|
|
Goodwill
|
|
|
23,107
|
|
|
|
23,477
|
|
|
Other
assets
|
|
|
250
|
|
|
|
276
|
|
|
Total
assets
|
|
$
|
52,995
|
|
|
$
|
52,383
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Line
of credit
|
|
$
|
604
|
|
|
$
|
--
|
|
|
Accounts
payable
|
|
|
4,806
|
|
|
|
5,270
|
|
|
Accrued
payroll and related expenses
|
|
|
2,656
|
|
|
|
3,887
|
|
|
Income
taxes payable
|
|
|
1,192
|
|
|
|
194
|
|
|
Other
accrued liabilities
|
|
|
1,257
|
|
|
|
1,474
|
|
|
Current
portion of note payable
|
|
|
63
|
|
|
|
--
|
|
|
Deferred
revenue
|
|
|
1,692
|
|
|
|
1,552
|
|
|
Total
current liabilities
|
|
|
12,270
|
|
|
|
12,377
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable, related party
|
|
|
975
|
|
|
|
975
|
|
|
Convertible
notes payable
|
|
|
2,150
|
|
|
|
2,150
|
|
|
Note
payable, net of current portion
|
|
|
437
|
|
|
|
500
|
|
|
Other
long-term liabilities
|
|
|
64
|
|
|
|
69
|
|
|
Deferred
revenue, net of current portion
|
|
|
37
|
|
|
|
210
|
|
|
Deferred
taxes
|
|
|
1,023
|
|
|
|
1,023
|
|
|
Total
liabilities
|
|
|
16,956
|
|
|
|
17,304
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
|
4%
convertible preferred stock, $.50 par value; 250 shares
|
|
|
|
|
|
|
|
|
|
authorized;
none issued or outstanding
|
|
|
--
|
|
|
|
--
|
|
|
9%
preference stock, $1.00 par value; 2,000 shares
|
|
|
|
|
|
|
|
|
|
authorized;
none issued or outstanding
|
|
|
--
|
|
|
|
--
|
|
|
Common
stock, no par value; 48,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
and
19,425 and 19,232 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
as
of September 28, 2007 and June 30, 2007, respectively
|
|
|
36,356
|
|
|
|
35,903
|
|
|
Accumulated
deficit
|
|
|
(317
|
)
|
|
|
(824
|
)
|
|
Total
stockholders’ equity
|
|
|
36,039
|
|
|
|
35,079
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
52,995
|
|
|
$
|
52,383
|
|