ENHT.ob (.08) enherent Corp. Reports 2007 Fourth Quarter and Year End Results - $710,000 Improvement in Net Income from Prior Year and $1,655,000 in 2007 Adjusted EBITDA
Friday, March 28 2008 - 8:00
ENHT $0.08 $0.003 (%3.90)
ROSELAND, N.J.--(BUSINESS WIRE)--
enherent Corp. (OTC BB: ENHT, www.enherentcorp.com), an information technology services company, today announced its results for the fourth quarter of 2007 and the year ended December 31, 2007.
Fourth Quarter 2007 Financial Results
Revenues for the fourth quarter ended December 31, 2007 were $7.5 million, compared to revenues of $8.1 million in the quarter ended December 31, 2006. The decrease was attributable primarily to a decrease in the number of software and equipment sales and a reduction in billable consultants at certain customer accounts. Net income decreased by approximately $23,000 to $118,000, or $0.00 per diluted share, for the fourth quarter of 2007 as compared to net income of approximately $141,000, or $0.00 per diluted share, for the comparable quarter of 2006. The decrease in net income resulted primarily from increased operating costs as a result of a severance expense charge of $116,000 during the quarter. Earning before interest, taxes, depreciation and amortization, or EBITDA, totaled $351,000 for the fourth quarter of 2007 as compared to $402,000 for the comparable quarter of 2006. EBITDA, adjusted to add back stock-based compensation, deferred compensation and severance charges, or Adjusted EBITDA, totaled $494,000 for the fourth quarter of 2007 as compared to $426,000 for the comparable quarter of 2006.
Full Year 2007 Financial Results
Revenues for the year ended December 31, 2007 were $30.7 million compared to $30.1 million in the year ended December 31, 2006. The increase was attributable primarily to higher bill rates and an increase in the number of billable consultants deployed at certain key clients, partially offset by a decrease in the number of billable consultants deployed at certain other key clients. The Company reported a net income of approximately $412,000, or $0.01 per diluted share, for the year ended December 31, 2007 compared with a net loss of approximately $298,000, or $(0.01) per diluted share, for the year ended December 31, 2006, The increase of $710,000 was due primarily to cost reductions made by the Company that resulted in a relative decrease in selling and recruiting payroll costs, general and administrative payroll costs and other operating expenses during the year ended December 31, 2007. Earning before interest, taxes, depreciation and amortization, or EBITDA, totaled $1.4 million for the year ended December 31, 2007 as compared to $766,000 for the year ended December 31, 2006. EBITDA, adjusted to add back stock-based compensation, deferred compensation and severance charges, or Adjusted EBITDA, totaled $1,655,000 for the year ended December 31, 2007 as compared to $955,000 for the year ended December 31, 2006.
Pamela Fredette, Chairman, CEO and President, commenting on the financial results for 2007, said "We are proud of what we accomplished this year and are pleased with our full year financial operating results. Notably, as a result of the initiatives we have taken to improve our cost structure over the past few years, we have significantly improved our profitability and are better positioned to react to changes in market conditions. We look forward to building on this momentum with a strategy focused on organic and acquired growth and improved profitability. We continue to review acquisition candidates and pursue alliances with organizations that may create new service possibilities and growth opportunities."
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on certain assumptions and analyses made by the Company derived from its experience and perceptions. Actual results and developments may vary materially from those described because they are subject to a number of known and unknown risks and uncertainties. Such risks and uncertainties include, but are not limited to, future demand for the Company's services; general economic, market and business conditions; the Company's ability to increase the amount of services rendered to existing clients and develop new clients and reduce costs of providing services; the Company's ability to recruit and retain IT professionals; and various other factors discussed in the Company's filings with the Securities and Exchange Commission including those set forth under Item 1A of the Company's recent Form 10-K. The Company disclaims any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise.
NON-GAAP Financial Measures:
enherent Corp. utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall business performance, for making operating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial measures helpful in assessing its current financial performance and prospects for the future. While the Company uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, the Company does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the Company believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. In assessing the overall health of its business during the fourth quarter and the fiscal years 2007 and 2006, The Company excluded items in the following general categories, each of which are described below:
Stock-based Compensation and Deferred Compensation. The Company believes that because of the variety of equity awards used by companies, varying methodologies for determining stock-based compensation and the assumptions and estimates involved in those determinations, the exclusion of non-cash stock-based compensation enhances the ability of management and investors to understand the impact of non-cash stock-based compensation on our operating results. Further, the Company believes that excluding stock-based compensation expense allows for a more transparent comparison of its financial results to previous periods. In addition, the Company prepares and maintains its budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measure.
Earnings Before Interest, Taxes, Depreciation and Amortization. The press release contains references to EBITDA and Adjusted EBITDA and provides reconciliations of EBITDA and Adjusted EBITDA to Net income (loss) on the face of the attached statements of operations. The Company's management believes that EBITDA is used by investors and analysts as an alternative to GAAP measures when evaluating the Company's performance in comparison to other companies. In order to fully assess the Company's financial operating results, management believes that EBITDA is an appropriate measure of evaluating the Company's operating performance, because it eliminates the effects of financing and accounting decisions. This measure is also significant to institutional lenders, and is considered an important internal benchmark of performance by the Company. The Company's management uses EBITDA to measure the Company's performance against internal performance targets, which are based on EBITDA. In addition, the Company further excludes stock-based compensation, deferred compensation and severance charges in calculating Adjusted EBITDA. The Company believes excluding severance and deferred compensation charges, as well as the non-cash charges for stock-based compensation, allows for a better assessment of its normalized internal operations and comparisons to industry performance.
Each of the non-GAAP financial measures described above, and used in this press release, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measure reflect the exclusion of items that are recurring and will be reflected in the Company's financial results for the foreseeable future. The Company compensates for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, the Company evaluates the non-GAAP financial measures together with the most directly comparable GAAP financial information
(1) GAAP stands for Generally Accepted Accounting Principles
ENHERENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2006
December 31, December 31,
2007 2006
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ASSETS
Current assets:
Cash and cash equivalents $ 1,121,694 $ 631,656
Accounts receivable, net of allowance for
doubtful accounts of $55,492 and
$50,492 at December 31, 2007 and 2006 3,844,726 4,320,334
Prepaid expenses and other current assets 143,981 134,854
------------ ------------
Total current assets 5,110,401 5,086,844
Furniture, equipment and improvements, net 179,794 174,506
Goodwill 4,334,278 4,334,278
Other intangible assets, net 225,000 325,000
Deferred financing costs, net 280,986 85,812
Other assets 41,833 31,376
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TOTAL $ 10,172,292 $ 10,037,816
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LIABILITIES
Current liabilities:
Revolving credit facility $ 2,824,691 $ 2,852,628
Current portion of long-term debt 577,311 758,335
Accounts payable and accrued expenses 2,884,320 3,186,815
Deferred revenue 169,647 171,275
Accrued compensation and benefits 1,005,359 853,979
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Total current liabilities 7,461,328 7,823,032
Long-term liabilities:
Long-term debt, net of current portion
above 2,956,189 3,234,184
------------ ------------
------------ ------------
Total liabilities 10,417,517 11,057,216
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Commitments and contingencies
CAPITIAL DEFICIENCY
Preferred stock, $.001 par value;
authorized--10,000,000 shares, issued-
none -- --
Common stock,$.001 par value, authorized--
101,000,000 shares, issued and
outstanding--52,375,653,shares in 2007
and 50,361,451 shares in 2006 52,376 50,361
Additional paid-in capital 27,616,974 27,256,889
Accumulated deficit (27,914,575) (28,326,650)
------------ ------------
Total capital deficiency (245,225) (1,019,400)
------------ ------------
TOTAL $ 10,172,292 $ 10,037,816
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ENHERENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
------------ ------------
Revenues:
Service revenue $27,911,795 $27,486,679
Equipment and software revenue 2,774,503 2,633,509
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Total revenues 30,686,298 30,120,188
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Cost of revenues:
Cost of services 21,311,281 21,084,983
Cost of equipment and software 2,345,443 2,026,493
----------- -----------
Cost of revenues 23,656,724 23,111,476
----------- -----------
Gross profit 7,029,574 7,008,712
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Operating expenses:
Selling, general and administrative 5,649,088 6,242,670
Depreciation and amortization expense 307,664 296,955
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Total operating expenses 5,956,752 6,539,625
----------- -----------
Operating income 1,072,822 469,087
Interest expense (647,037) (738,596)
----------- -----------
Income (loss) before income taxes 425,785 (269,509)
Provision for income taxes (13,710) (28,000)
----------- -----------
NET INCOME (LOSS) $ 412,075 $ (297,509)
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Basic net income (loss) per share $ 0.01 $ (0.01)
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Diluted net income (loss) per share $ 0.01 $ (0.01
----------- -----------
Number of shares used in computing basic
net income (loss) per share 51,345,255 50,361,173
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Number of shares used in computing diluted
net income (loss) per share 52,061,649 50,361,173
== =========== ===========
ENHERENT CORP. AND SUBSIDIARIES
RECOCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2007 AND 2006
(Unaudited)
Three Months
Ended Years Ended
December December
31, 31, December December
2007 2006 31, 2007 31, 2006
-------- -------- ---------- ----------
Net income (loss), as reported $117,887 $140,529 $ 412,075 $(297,509)
Interest (income) expense, net 141,580 179,413 647,037 738,596
Taxes 3,475 17,000 13,710 28,000
Depreciation and amortization 88,205 65,448 307,664 296,955
----------------- ---------- ----------
EBITDA 351,147 402,390 1,380,486 766,042
Adjustments:
Stock based compensation 26,500 24,000 157,500 165,000
Severance expense 116,523 - 116,523 -
Deferred compensation - - - 24,295
----------------- ---------- ----------
Adjusted EBITDA $494,170 $426,390 $1,654,509 $ 955,337
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Source: enherent Corp.
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