INX Announces Second Quarter 2006 Results.HOUSTON Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; -- INX INX Information Exchange INX Increment Index Register INX Ion Exchange INX Internet Exchange INX Increment Register Pair Inc. (Nasdaq:INXI) today announced financial results for its second quarter ended June June: see month. 30, 2006. In summary, for the quarter ended June 30, 2006 compared to the same period in the prior year: --Total revenue increased 36% to $38.7 million. --Gross margin on total revenue increased to 19.7% from 15.7%. --Product revenue increased 31% to $33.3 million and gross margin on product sales increased to 19.1% from 13.6%. --Service revenue increased 90% to $5.4 million and gross margin on services Margin on Services, also referred to as "MoS", is the financial reporting method developed by the Australian Accounting Standards Board which relates to life insurance companies in Australia. revenue decreased to 23.7% from 34.6%. --Operating income increased 53% to $631,000 from $412,000. --Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the increased 48% to $613,000 from $413,000. --Net income was $756,000 compared to a loss of $418,000. Total net income results include net income of $143,000 from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , which included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. gain of $469,000, which compared to a net loss of $831,000 from discontinued operations for the prior period. --Diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. from continuing operations was $0.08 compared to $0.07. --Diluted EPS was income of $0.10 compared to a loss of $0.08. For the six months ended June 30, 2006 compared to the same period in the prior year: --Total revenue increased 30% to $65.0 million. --Gross margin on total revenue increased to 20.1% compared to 16.3%. --Product revenue increased 23% to $55.6 million and gross margin on product sales increased to 19.4% compared to 15.0%. --Service revenue increased 115% to $9.3 million and gross margin on services revenue decreased to 24.3% compared to 30.0%. --Operating income was a profit of $193,000 compared to a loss of $4.9 million. The prior year period contained a one-time, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $5.7 million. --Income from continuing operations was $89,000 compared to a loss of $5.0 million. --Net income was $228,000 compared to a loss of $6.9 million. The current period results include net income of $139,000 from discontinued operations, which included a one-time gain of $469,000, and the prior period results included a net loss from discontinued operations, net of income taxes, of $1.9 million. --Diluted EPS from continuing operations was income of $0.01 compared to a loss of $0.92. --Diluted EPS was income of $0.03 compared to a loss of $1.27. Commenting on the second quarter results, James Long James Long may refer to:
Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Fontana Fontana, city (1990 pop. 87,535), San Bernardino co., S Calif., at the foot of the San Bernardino Mts.; inc. 1952. Fabricated metal products, construction materials, and transportation equipment are manufactured, and there is a small steel mill. , INX's Chief Financial Officer, commenting on the highlights of the Company's second quarter results, stated, "Revenue from continuing operations from both products and services increased to record levels, with product sales increasing 31% and services revenue increasing almost 90% on a year-over-year basis, reflecting the continuing trend of service revenue making up an increasing portion of our total revenue. We continue to be particularly pleased with the performance of our services business, and in particular our NetSurant managed support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services offering, which saw its revenue increase by 145% over the prior year period. The increasing mix of service revenue contributed to an increase in our overall gross margin to 19.7% in the second quarter compared to 15.7% for the prior year quarter. Our product gross margin increased substantially to 19.1% compared to 13.6% in the prior year quarter. The prior year period contained several larger, lower margin education account transactions that made gross margin lower than our target range, and the current quarter contained no unusually large transactions and much less education account business, which resulted in the substantial improvement in product sales gross margin. Our gross margin percentage on total revenue improved because of increased gross margin on product sales and the improving mix of service revenue, even though gross margin percentage on service revenue is still below our target range because of investments we have been making in the business in terms of increased engineering staff. The strength in revenue and improving gross margin percentage resulted in a substantial improvement in operating results for the second quarter, both compared to the first quarter and the prior year second quarter." Commenting on the Company's accomplishments during the quarter, Mark Hilz, INX's President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , commented, "We believe the strength of our second quarter results and business momentum is evidence that the investments we have been making in the business are beginning to pay off. During the second quarter, we established a presence on the east coast, staffing up new green-field start-up Start-up The earliest stage of a new business venture. operations in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , while also increasing sales and engineering headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. in other markets. We also received the largest NetSurant support contract in INX's history, a contract that substantially increased our backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. services revenues. In the second quarter the industry continued to show signs of moving into what we have referred to as the period of "mass adoption" of VoIP technology in the enterprise space, and we are looking ahead at the next major wave of industry change, which we believe will create substantial opportunities for INX. The IP network truly is becoming the primary platform for information technology and communications, and we believe enterprise organizations will be spending an increasing portion of their technology budget on IP communications A general term for networks that use the IP protocol for voice (VoIP) and video traffic. See IP telephony. . Because of the changes we expect in the industry we have been in the process of introducing new practice areas that we believe will allow us to provide our customers with more comprehensive IP Communications solutions, and which will add new sources of revenue. During the second quarter we invested in building the foundation of two new practices, a Network Storage practice and an IP Communications Collaboration Working together on a project. See collaborative software. practice, which we expect to announce as new company-wide offerings in the near future. We continue to believe that demand for IP communications solutions in the enterprise space is increasing and that our recent and continuing expansion efforts will continue to have a positive impact on our ability to take advantage of what we believe is a large and attractive long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. opportunity." OUTLOOK: The following statements made by the Company are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " and are subject to the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement set forth below. We believe our efforts towards creating a national presence, along with the increasing complexity and increasing use of enterprise-class IP communications systems will result in continued growth opportunities for INX over the next several years. One of our long-term goals Long-term goals Financial goals expected to be accomplished in five years or longer. continues to be improving profitability at a faster rate than the growth of revenue. As we described in the announcement of our first quarter results, in early 2006 we decided to make strategic investments that increased operating costs operating costs npl → gastos mpl operacionales in the short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. in order to better position INX to take advantage of the long-term market opportunity we believe exists. While we are beginning to realize a return on these investments, we believe the full benefit will not be realized for six to nine months. For our current third quarter ending September September: see month. 30, 2006, we currently expect total revenue in the range of $39 million to $41 million, which represents year-over-year growth of 18% to 24% compared to restated revenue of $33.2 million for the prior year period. We expect to be profitable for our third quarter. However, because we have been and are continuing to invest in the future of our business, we expect that net operating margin Net operating margin The ratio of net operating income to net sales. percentage for our third quarter will be below the levels that we believe are ultimately achievable for our business model, as was the case for our second quarter. On a longer-term basis, one of our primary financial goals is to improve our operating profit margin Operating profit margin The ratio of operating profit to net sales. percentage. We believe improvement will be driven by an increasing mix of service revenue, improved gross margin on service revenue and improving financial performance of our recently opened offices as those new markets mature. We believe we can increase gross margin on our total service revenue through improved utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of recently added technical resources that perform our implementation services and because we believe our NetSurant support services profitability will improve as our NetSurant revenue continues to grow. CONFERENCE CALL: An investor conference call will be held by the Company today, August 21, 2006, starting at 10:30 a.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time to discuss the results and the Company's outlook for the future, as well as provide an opportunity to answer investors' questions in a public format. The call is expected to last approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 60 minutes. James Long, Chairman and Chief Executive Officer; Mark Hilz, President and Chief Operating Officer; and Brian Fontana, Chief Financial Officer, will be on the call to discuss the quarter's results and answer investors' questions. To access the conference call within the U.S., dial 800-862-9098. For international/toll access, dial 785-424-1051. The conference call will begin promptly at the scheduled time In rallying, the Scheduled Time of any crew is the time, calculated at the beginning of the event, that they should arrive at any given control. It is different from Due Time in that Due Time is dynamic, ie it can change throughout the event as competitors drop time; whereas . Investors wishing to participate should call the telephone number at least five minutes prior to that time. Beginning approximately one hour after the end of the conference call and ending on September 21, 2006, a replay of the conference call will be accessible by calling either 888-753-5212 from within the U.S., or 402-220-2673 for international/toll access. The replay of the conference call will also be available by the following morning, and until September Until September is a 1984 romantic drama set in France. It stars Karen Allen as an American tourist in Paris who falls in love with a married Frenchman (Thierry Lhermitte). External links 21, 2006, for listening via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the from the Company's web site at www.inxi.com/webcasts/Q206.call. Additional investor information can be accessed on the INX Web site at www.inxi.com or is available by calling 713-795-2525. SAFE HARBOR STATEMENT: The statements contained in this document and during the related conference call that are not statements of historical fact including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties. We do not have contracts in hand that will generate the revenue that we expect for the current and future quarters for which we attempt to predict future events in the Outlook section of this press release above. The actual results of the future events described in the forward-looking statements in this press release and related conference call could differ materially from those stated in the forward-looking statements due to numerous factors, including: --Whether the Company obtains anticipated contracts and other business, the timing of obtaining same, and the size and profitability of such contracts and business. --Market and economic conditions, including capital expenditures by enterprises for communications products and services. --The Company's ability to attract and retain key management, sales and technical staff, and to successfully manage its technical employee resources, which is key to maintaining gross margin on services revenue. --Risks associated with the Company's entry into new markets and the ability of the Company to increase revenues and gain market share in recently opened new markets. --The Company's ability to obtain sufficient volumes of products for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. and maintain its relationship with its key supplier, Cisco Systems “Cisco” redirects here. For other uses, see Cisco (disambiguation). Cisco System,Inc. (NASDAQ: CSCO, HKSE: 4333 ) is an American multinational corporation with 54,000 employees and annual revenue of US $28.48 billion as of 2006. , Inc. --The continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. of, and the Company's ability to qualify for, sales incentive Noun 1. sales incentive - remuneration offered to a salesperson for exceeding some predetermined sales goal bonus, incentive - an additional payment (or other remuneration) to employees as a means of increasing output programs from its key supplier. --The Company's ability to finance its business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . --The Company's ability to identify suitable acquisition candidates and successfully integrate acquired companies, and the risk of unexpected liabilities or loss of customers and other unforeseeable Un`fore`see´a`ble a. 1. Incapable of being foreseen. Adj. 1. unforeseeable - incapable of being anticipated; "unforeseeable consequences" unpredictable - not capable of being foretold risks associated with making acquisitions. --The Company's ability to grow its revenues in newly opened offices in new markets. --The Company's ability to manage its business in a manner that results in increased revenues without a proportional proportional values expressed as a proportion of the total number of values in a series. proportional dwarf the patient is a miniature without disproportionate reductions or enlargements of body parts. increase in costs of operating its business. --Unexpected losses related to customer credit risk. --Uncertainties related to rapid changes in the information and communications technology Noun 1. communications technology - the activity of designing and constructing and maintaining communication systems engineering, technology - the practical application of science to commerce or industry industries. --The Company's ability to sell its Valerent business unit as it expects. --Catastrophic events. --Other risks and uncertainties set forth from time to time in the Company's public statements and its most recent Annual Report filed with the SEC on Form 10-K/A for 2005, which the Company makes available on its web site in PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. format at www.inxi.com/Information/sec.asp. Recipients of this document are cautioned to consider these risks and uncertainties and to not place undue reliance on these forward-looking statements. The financial information contained in this release should be read in conjunction with the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. included in the Company's most recent reports on Form 10-K/A and Form 10-Q Form 10-Q See 10-Q. , each as it may be amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. from time to time. The Company's past results of operations are not necessarily indicative of its operating results for any future periods. All information in this press release is as of August 21, 2006, and the Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto, or any change in events, conditions or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or upon which any statement is based. ABOUT INX INC.: INX Inc. (Nasdaq:INXI) is a network infrastructure professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. firm delivering best-of-class A product considered to be superior within a certain category of hardware or software. It does not mean absolute best overall; for example, the best-of-class in a low-priced category may be seriously inferior to the best product on the market, which could sell for ten times as much. "Business Ready Networks" to enterprise organizations. INX offers a full suite of Advanced Technology solutions that support the entire life-cycle life-cycle - software life-cycle of IP Communications systems. Services include design, implementation and support of IP network infrastructure for enterprise organizations including routing and switching, IP Telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. , messaging, wireless, network storage and security. Operating in a highly focused manner provides a level of expertise that enables us to better compete in the markets we serve. Our customers for enterprise-level Cisco-centric advanced technology solutions include large enterprises organizations such as corporations, public schools as well as federal, state and local governmental agencies. Because we have significant experience implementing and supporting the critical technology building blocks of IP Telephony systems and other IP Communications advanced technology solutions for enterprises, we believe we are well positioned to deliver superior solutions and services to our customers. Additional information about INX can be found on the Web at www.inxi.com.
INX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three months ended
June 30,
-----------------------
2006 2005
---------- ----------
(as restated)
Revenue:
Products $ 33,322 $ 25,543
Services 5,356 2,822
---------- ----------
Total revenue 38,678 28,365
---------- ----------
Cost of products and services:
Products 26,962 22,063
Services 4,084 1,846
---------- ----------
Total cost of products and services 31,046 23,909
---------- ----------
Gross profit 7,632 4,456
Selling, general and administrative expenses 7,001 4,044
---------- ----------
Operating income 631 412
Interest and other income (expense), net (18) (26)
---------- ----------
Income from continuing operations before
income taxes 613 386
Income tax expense (benefit) -- (27)
---------- ----------
Net income from continuing operations 613 413
Income (loss) from discontinued operations,
net of income taxes 143 (831)
---------- ----------
Net income (loss) $ 756 $ (418)
========== ==========
Net income per share:
Basic:
Income from continuing operations $ 0.10 $ 0.07
Income (loss) from discontinued operations,
net of income taxes 0.02 (0.15)
---------- ----------
Net income (loss) per share $ 0.12 $ (0.08)
========== ==========
Diluted:
Income from continuing operations $ 0.08 $ 0.07
Income (loss) from discontinued operations,
net of income taxes 0.02 (0.15)
---------- ----------
Net income (loss) per share $ 0.10 $ (0.08)
========== ==========
Shares used in computing net income per
share:
Basic 6,223,118 5,621,589
========== ==========
Diluted 7,324,469 5,621,589
========== ==========
INX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Six months ended
June 30,
-----------------------
2006 2005
---------- ----------
(as restated)
Revenue:
Products $ 55,633 $ 45,317
Services 9,321 4,330
---------- ----------
Total revenue 64,954 49,647
---------- ----------
Cost of products and services:
Products 44,855 38,500
Services 7,060 3,030
---------- ----------
Total cost of products and services 51,915 41,530
---------- ----------
Gross profit 13,039 8,117
Selling, general and administrative expenses 12,846 13,054
---------- ----------
Operating income (loss) 193 (4,937)
Interest and other income (expense), net (103) (94)
---------- ----------
Income (loss) from continuing operations
before income taxes 90 (5,031)
Income tax expense (benefit) 1 (50)
---------- ----------
Net income (loss) from continuing operations 89 (4,981)
Income (loss) from discontinued operations,
net of income taxes 139 (1,945)
---------- ----------
Net income (loss) $ 228 $ (6,926)
========== ==========
Net income per share:
Basic:
Income (loss) from continuing operations $ 0.01 $ (0.92)
Income (loss) from discontinued operations,
net of income taxes 0.03 (0.35)
---------- ----------
Net income (loss) per share $ 0.04 $ (1.27)
========== ==========
Diluted:
Income (loss) from continuing operations $ 0.01 $ (0.92)
Income (loss) from discontinued operations,
net of income taxes 0.02 (0.35)
---------- ----------
Net income (loss) per share $ 0.03 $ (1.27)
========== ==========
Shares used in computing net income per
share:
Basic 6,135,350 5,433,778
========== ==========
Diluted 7,202,067 5,433,778
========== ==========
INX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
June 30, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,290 $ 2,597
Accounts receivable, net of allowance of
$222 and $161 35,339 24,903
Inventory 690 79
Other current assets 858 881
Current assets of discontinued operations 733 2,564
------------ ------------
Total current assets 41,910 31,024
Property and equipment, net of accumulated
depreciation of $2,730 and $2,344 2,818 2,050
Goodwill 10,905 7,121
Intangible and other assets, net of
accumulated amortization of $1,166 and
$1,007 409 393
Noncurrent assets of discontinued operations 106 1,057
------------ ------------
Total assets $ 56,148 $ 41,645
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-
term debt $ 4,646 $ 2,707
Accounts payable 24,411 13,825
Accrued expenses 4,532 3,696
Other current liabilities 1,005 468
Current liabilities of discontinued
operations 573 2,936
------------ ------------
Total current liabilities 35,167 23,632
------------ ------------
Long-term liabilities of discontinued
operations -- 7
Other long-term liabilities 142 --
Commitments and contingencies -- --
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized, 6,347,098 and
5,975,626 shares issued 64 60
Additional paid-in capital 29,395 27,546
Common stock issuable 752 --
Retained deficit (9,372) (9,600)
------------ ------------
Total stockholders' equity 20,839 18,006
------------ ------------
Total liabilities and stockholders'
equity $ 56,148 $ 41,645
============ ============
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