MTI Technology Corporation (Nasdaq: MTIC), a multi-national provider of consulting services and comprehensive information infrastructure solutions, today reported financial results for its fiscal 2007 third quarter ended December 30, 2006.
Total revenue for the quarter grew 12% to $45.2 million compared to $40.2 million in the prior year period. Growth from the prior year is primarily attributable to a 50% rise in service revenues to $14.3 million, reflecting the changing nature of the Company following the acquisition of Collective Technologies. Product revenue of $30.9 million was up slightly from a year ago but was up 22% compared to the prior quarter.
The Company reported a net loss of $1.5 million or $0.04 per share in the third quarter of fiscal 2007 compared to $1.8 million or $0.05 per share in the prior year period, on a generally accepted accounting principles (GAAP) basis. Included in fiscal 2007 third quarter net loss are charges for stock option and restricted stock expense, amortization of intangible assets and restructuring totaling $1.0 million. Excluding these items, non-GAAP net loss improved by 71% year-over-year to $0.5 million or $0.01 per share from a net loss of $1.7 million or $0.05 per share in the prior year period.
Total gross margin for the third quarter of fiscal 2007 was 20.5% compared to 19.6% in the prior year period. Product gross margin for the third quarter improved to 19.6% from 18.1% in the prior year period and 18.3% in the prior quarter primarily due to higher manufacturer rebates and strong performance in Europe. Service gross margins for the third quarter were 22.3% compared to 24.7% in the prior year period and 26.0% in the prior quarter. Service gross margins were lower as the Company transitions to more direct engagements. Also, the prior quarter benefited from significant, higher margin billings within its Data Center Practice.
Third quarter fiscal 2007 selling, general and administrative (SG&A) expense was $10.4 million. Excluding equity compensation expense of $0.7 million, non-GAAP SG&A expense was $9.7 million compared to $9.4 million in the prior year period. Additional SG&A expenses attributable to the acquisition of Collective Technologies were partially offset by continuing cost reduction activities throughout the Company. The Company is focused on realizing the remaining cost synergies available by integrating Collective Technologies.
For the nine months ended December 30, 2006, MTI reported total revenue of $128.2 million compared to $111.1 million in the prior year period. Product revenue for the first nine months of fiscal 2007 increased to $89.5 million from $81.8 million in the prior year, while service revenues increased to $38.7 million from $29.3 million. The Company reported a net loss for the first nine months of fiscal 2007 of $5.7 million or $0.15 per share compared to $8.3 million or $0.23 per share in the prior year period, on a GAAP basis. Included in the first nine months of fiscal 2007 net loss are charges for equity compensation expense, amortization of intangible assets and restructuring charges totaling $3.3 million. Excluding these items, on a non-GAAP basis net loss improved by 67% to $2.4 million or $0.06 per share from a net loss of $7.1 million or $0.20 per share in the prior year period.
As of December 30, 2006, the Company had $7.7 million in cash and cash equivalents, compared to $10.3 million at the end of the prior quarter. Third quarter cash use was driven by accounts receivables associated with higher revenues. The Company has extended its line of credit with Comerica through May 31, 2007 and entered into a receivables factoring arrangement with Wells Fargo Business Credit to support growth of the business.
"Our sales teams worldwide delivered outstanding order performance. In addition to solid product revenues, we ended the quarter with $8.4 million in product backlog, the highest in several years," said Tom Raimondi, chairman, CEO and president of MTI. "We are especially pleased with our European operations, which posted their fifth consecutive quarter of profitably."
Non-GAAP Measures
MTI provides non-GAAP measures as a supplement to financial results based on GAAP. A detailed reconciliation of the non-GAAP results to the most directly comparable GAAP measures is included in the accompanying financial data. Investors are encouraged to review this reconciliation. The Company believes the presentation of non-GAAP measures provides investors with additional insight into underlying operating results and prospects for the future by excluding stock-based compensation and other non-cash items associated with business acquisitions and our convertible preferred stock. The Company uses non-GAAP measures internally to evaluate operating performance and for internal budgets and forecasts. The Company believes these non-GAAP measures can be useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. The Company began recording equity compensation expense in accordance with Financial Accounting Standards Board (FASB) Statement No. 123(R) in the first quarter of fiscal 2007. The Company believes that excluding equity compensation expense in non-GAAP measures facilitates a comparison of results with prior periods and can enhance the understanding of performance.
Investor Conference Call
Management will discuss results followed by a question and answer session today, February 13, 2007 at 9:00 a.m. Eastern Time (6:00 a.m. Pacific Time). The call-in number is 800-561-2601, pass code 23026384; international callers should dial 617-614-3518, pass code 23026384. If you are unable to participate, a replay will be available for 48 hours, beginning at 11:00 a.m. Eastern Time (8:00 am Pacific Time) today, February 13, 2007. The replay call-in number is 888-286-8010, pass code 60892787. The replay for international callers is 617-801-6888, pass code 60892787. A live and archived webcast of the conference call will be available on the MTI website at http://www.mti.com.
About MTI Technology
MTI is a multi-national provider of enterprise-class IT infrastructure solutions for mid-to large-size organizations. Throughout our 20+ years as technology innovators, we have tested and refined our methodologies through more than 5 million hours of professional, consultative service delivery to some of the largest, most complex and mission critical environments in the world. In addition to the work we perform for our 3,500 direct customers, EMC, Microsoft, Symantec, Cisco and others rely on MTI to deliver complex services to their clients.
MTI is a registered trademark of MTI Technology Corporation. All other company, brand or product names are registered trademarks or trademarks of their respective holders.
Safe Harbor Statement
This press release contains 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. Such statements include information regarding our expectations, goals or intentions regarding the future, including but not limited to statements regarding our focus on realizing remaining cost synergies available by integrating Collective Technologies, our backlog and our disclosure of non-GAAP financial measures. The actual results may differ materially from those described in any forward- looking statement. Important factors that may cause actual results to differ include competition, timing of customer orders, unanticipated expenses, achievement of volume-based rebates, currency movements, evolving technology, and the economy and other world events. Other important factors are set forth in our periodic filings with the U.S. Securities and Exchange Commission, including our Form 10-K, as amended, for the year ended April 1, 2006. All forward-looking statements speak as of the date made and we undertake no obligation to update any such statements.
Contact:
Joyce Shinn
MTI Technology Corporation
949-885-7337
jshinn@mti.com
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MTI TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
December 30, December 31, December 30, December 31,
2006 2005 2006 2005
Net product
revenue $30,897 $30,583 $89,476 $81,843
Service revenue 14,324 9,579 38,728 29,285
Total revenue 45,221 40,162 128,204 111,128
Product cost of
revenue 24,826 25,058 72,633 66,179
Service cost of
revenue 11,125 7,217 29,841 22,583
Total cost
of revenue 35,951 32,275 102,474 88,762
Gross profit 9,270 7,887 25,730 22,366
Operating expenses:
Selling, general
and
administrative 10,402 9,414 30,175 28,420
Amortization of
intangible assets 147 -- 595 --
Restructuring
charges 117 30 672 1,056
Total operating
expenses 10,666 9,444 31,442 29,476
Operating loss (1,396) (1,557) (5,712) (7,110)
Interest and
other expense, net (182) (6) (282) (151)
Gain (loss) on
foreign currency
transactions 85 (207) 391 (1,015)
Loss before income
tax expense (1,493) (1,770) (5,603) (8,276)
Income tax expense 19 17 68 27
Net loss (1,512) (1,787) (5,671) (8,303)
Amortization of
preferred stock
discount (823) (586) (2,375) (1,241)
Dividend on
preferred stock (772) (615) (2,247) (1,215)
Net loss
applicable to
common
shareholders: $(3,107) $(2,988) $(10,293) $(10,759)
Net loss per
share applicable
to common
shareholders:
Basic and
diluted $(0.08) $(0.08) $(0.27) $(0.31)
Weighted average
shares used in
per share
computations:
Basic and
diluted 38,485 35,598 37,656 35,045
MTI TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
December 30, April 1,
2006 2006
ASSETS
Current assets:
Cash and cash equivalents $7,666 $21,660
Accounts receivable, less allowance for
doubtful accounts and sales returns of
$348 and $514 at December 30, 2006
and April 1, 2006, respectively 41,256 37,803
Inventories, net 4,208 10,466
Prepaid expenses and other receivables 7,894 8,712
Total current assets 61,024 78,641
Property, plant and equipment, net 785 555
Intangible assets, net 2,905 --
Goodwill 13,365 5,184
Other assets 55 242
Total assets $78,134 $84,622
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Line of credit $5,167 $5,167
Current portion of notes payable 808 --
Accounts payable 28,104 36,952
Accrued liabilities 9,243 7,423
Accrued restructuring charges 697 847
Deferred revenue, current 10,724 11,820
Total current liabilities 54,743 62,209
Note payable 1,037 --
Accrued preferred stock dividends 5,139 2,892
Deferred revenue, noncurrent 3,419 4,305
Total liabilities 64,338 69,406
Series A redeemable convertible preferred
stock, 567 shares issued and outstanding
at December 30, 2006 and April 1, 2006
net of discount of $5,383 and $6,584 at
December 30, 2006 and April 1, 2006,
respectively 9,617 8,416
Series B redeemable convertible preferred
stock, 1,582 shares issued and outstanding
December 30, 2006 and April 1, 2006, net
of discount of $8,396 and $9,570 at
December 30, 2006 and April 1, 2006,
respectively 11,604 10,430
Stockholders' deficit:
Preferred stock, $.001 par value;
5,000 shares authorized; 2,149 shares
issued and outstanding at December 30, 2006
and April 1, 2006, included in redeemable
convertible preferred stock -- --
Common stock, $.001 par value; 80,000 shares
authorized; 38,514 and 36,024 shares issued
and outstanding at December 30, 2006
and April 1, 2006, respectively 38 36
Additional paid-in capital 161,406 155,039
Accumulated deficit (166,072) (155,779)
Accumulated other comprehensive loss (2,797) (2,926)
Total stockholders' deficit (7,425) (3,630)
$78,134 $84,622
MTI TECHNOLOGY CORPORATION
SELECTED NON-GAAP DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended December 30, 2006
Service Selling Loss per
Cost General and Share,
of Adminis- Operating Net Basic and
Revenue trative Loss Loss Diluted
GAAP $11,125 $10,402 $(1,396) $(1,512) $(0.08)
Adjustments to
reconcile to
Non-GAAP:
Stock Option
Expense (1) (55) (353) 408 408 0.01
Restricted Stock
Expense (1) (35) (310) 345 345 0.01
Amortization of
Intangible
Assets (2) -- -- 147 147 0.00
Restructuring
Charges -- -- 117 117 0.00
Amortization of
Preferred Stock
Discount (3) -- -- -- -- 0.02
Dividend on
Preferred
Stock (3) -- -- -- -- 0.02
Non-GAAP $11,035 $9,739 $(379) $(495) $(0.01) #
Three Months Ended December 31, 2005
Service Selling Loss per
Cost General and Share,
of Adminis- Operating Net Basic and
Revenue trative Loss Loss Diluted
GAAP $7,217 $9,414 $(1,557) $(1,787) $(0.08)
Adjustments to
reconcile to
Non-GAAP:
Stock Option
Expense (1) -- -- -- -- --
Restricted Stock
Expense (1) -- (61) 61 61 0.00
Restructuring
Charges -- -- 30 30 0.00
Amortization of
Preferred Stock
Discount (3) -- -- -- -- 0.02
Dividend on
Preferred
Stock (3) -- -- -- -- 0.02
Non-GAAP $7,217 $9,353 $(1,466) $(1,696) $(0.05) #
(1) Represents equity compensation recognized pursuant to Financial
Accounting Board Standard No. 123R, "Share-Based Payment."
(2) Represents amortization associated with intangible assets acquired in
connection with business combinations.
(3) Represents a non-cash charge to equity associated with the Series A
and Series B Convertible Preferred Stock.
# Amount may not add due to rounding.
MTI TECHNOLOGY CORPORATION
SELECTED NON-GAAP DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Nine Months Ended December 30, 2006
Service Selling Loss per
Cost General and Share,
of Adminis- Operating Net Basic and
Revenue trative Loss Loss Diluted
GAAP $29,841 $30,175 $(5,712) $(5,671) $(0.27)
Adjustments to
reconcile to
Non-GAAP:
Stock Option
Expense (1) (144) (1,350) 1,494 1,494 0.04
Restricted Stock
Expense (1) (39) (521) 560 560 0.01
Amortization of
Intangible
Assets (2) -- -- 595 595 0.02
Restructuring
Charges -- -- 672 672 0.02
Amortization of
Preferred Stock
Discount (3) -- -- -- -- 0.06
Dividend on
Preferred
Stock (3) -- -- -- -- 0.06
Non-GAAP $29,658 $28,304 $(2,391) $(2,350) $(0.06) #
Nine Months Ended December 31, 2005
Service Selling Loss per
Cost General and Share,
of Adminis- Operating Net Basic and
Revenue trative Loss Loss Diluted
GAAP $22,583 $28,420 $(7,110) $(8,303) $(0.31)
Adjustments to
reconcile to
Non-GAAP:
Stock Option
Expense (1) -- -- -- -- --
Restricted Stock
Expense (1) -- (192) 192 192 0.01
Restructuring
Charges -- -- 1,056 1,056 0.03
Amortization of
Preferred Stock
Discount (3) -- -- -- -- 0.04
Dividend on
Preferred
Stock (3) -- -- -- -- 0.03
Non-GAAP $22,583 $28,228 $(5,862) $(7,055) $(0.20) #
(1) Represents equity compensation recognized pursuant to Financial
Accounting Board Standard No. 123R, "Share-Based Payment."
(2) Represents amortization associated with intangible assets acquired in
connection with business combinations.
(3) Represents a non-cash charge to equity associated with the Series A
and Series B Convertible Preferred Stock.
# Amount may not add due to rounding.