Emtec, Inc. Announces Second Quarter 2012 Results

Springfield, NJ. – Emtec, Inc. (OTCQB: ETEC) (“Emtec” or the “Company”) announced today that, for the quarter ended February 29, 2012, consulting and outsourcing revenue increased to $25.2 from $17.6 million in quarter ended February 28, 2011, an increase of $7.6 million or 43.2%. Overall revenue increased from $46.1 million for the three months ended February 28, 2011 to $47.7 million for the three months ended February 29, 2012. Procurement services revenues declined by $6.0 million from $28.6 million for the three months ended February 28, 2011 to $22.6 million for the three months ended February 29, 2012. The decline in procurement services revenue was due to purchasing decision delays by education clients. Gross profit increased by approximately $731,000 to $8.5 million for the quarter ended February 29, 2012 from $7.8 million for the quarter ended February 28, 2011. Adjusted EBITDA, which is defined by management as net income before interest, taxes, depreciation, amortization, retention bonuses, stock-based compensation, executive recruiting fees, severance, earnout liability adjustments and stock warrant expense (“Adjusted EBITDA”), was a loss of approximately $10,000 for the quarter ended February 29, 2012 versus a loss of approximately $150,000 for the quarter ended February 28, 2011. A reconciliation of net income to EBITDA and Adjusted EBITDA is attached to this press release.

For the six months ended February 29, 2012, consulting and outsourcing revenue increased to $50.8 million from $34.3 million in six months ended February 28, 2011, an increase of $16.5 million or 48.2%. Overall revenue decreased from $123.0 million for the six months ended February 28, 2011 to $119.8 million for the six months ended February 29, 2012. Procurement services revenues declined by $19.7 million from $88.7 million for the six months ended February 28, 2011 to $69.0 million for the six months ended February 29, 2012. The decline in procurement revenue was due to purchasing decision delays by education clients as discussed above. Gross profit increased by approximately $2.1 million to $20.4 million for the six months ended February 29, 2012 from $18.3 million for the six months ended February 28, 2011. Adjusted EBITDA increased by approximately $326,000 or 14% to $2.6 million for the six months ended February 29, 2012 versus $2.3 million the six months ended February 28, 2011.

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 generally accepted accounting principles (“GAAP”) in the United States of America. 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. 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 February 29, 2012 and February 28, 2011 and the six month periods ended February 29, 2012 and February 28, 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.

Dinesh Desai, Chairman and CEO of Emtec commented, “Our consulting and outsourcing revenue for the quarter continues to show growth versus 2011. In what is usually our slowest quarter of our fiscal year, our consulting and outsourcing revenue has held above the $100 million annual run rate we discussed last quarter. In spite of the delays in our Education revenue in the quarter we have improved our profitability at the Adjusted EBITDA line, which is the key profitability measure we focus on as a management team. The Education projects have commenced and we now expect to show improved profitability in our third quarter. We also continue to see improvements in our commercial sector.”

Gregory Chandler, Chief Financial Officer of Emtec added, “We started to see the revenue from the Education sector increase in March. We are excited to be working with the school districts on these projects which will improve technology for their students, teachers, administrators and parents. We have the privilege of serving some of the most progressive school districts in the country. While a negative Adjusted EBITDA is not what we wanted to show during this quarter, the recurring services we added in 2011 and our continued focus on moving the procurement gross margin higher yielded a continued improvement in our overall gross margin. We improved gross margin on a quarter over quarter basis by another 1.0%. Our SG&A line increased by approximately $2 million over 2011 during the quarter. Of this increase, approximately $2.5 million was due to the SG&A expenses of our acquired companies. Gross profits from acquired companies for the quarter ended February 29, 2012 was approximately $3.3 million. With our Education group rebounding in the third quarter we expect to see profits return. Year to date capital expenditures continue to be tracking at lower levels then in the prior year, with the Company only spending about $500,000 over the first six months of fiscal 2012 versus approximately $700,000 in 2011. We also improved our DSO this quarter as we received payments from Federal agencies. In general we are finding feedback from the marketplace that Federal Agencies are still paying their vendors slowly. We continue to focus on ways to work with these agencies to bring our DSO down to more reasonable levels.”

MEDIA CONTACT

Deanna Evers
Phone : 973.232.7897
Email : Deanna.Evers@emtecinc.com

ABOUT EMTEC

Emtec is an IT consultancy dedicated to helping world class organizations in the enterprise, education, and government markets drive transformation and growth by employing the latest enterprise technologies and innovative business processes. We empower our clients to accelerate innovation and deliver amazing client experiences to better compete and ultimately lead in their industry. Our “Client for Life” approach is built upon over 20 years of delivering rapid, meaningful and lasting business value. Our offerings span the IT spectrum from Advisory, Applications (Enterprise, Custom, Mobile and Cloud) as well as a suite of Analytic and Infrastructure Services. www.emtecinc.com