Sento Reports Results for First Quarter of Fiscal 2007.SALT LAKE CITY -- Sento Corporation (Nasdaq: SNTO): --Revenues Increase 71% to $14.9 Million; the Net Loss is $1.6 Million or $0.41 per Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Share, including Tax Benefit Reserve Equivalent to $0.04 --Cost Reduction Program and Selective Price Increases Implemented to Quicken A popular financial management program for PCs and Macs from Intuit, Inc., Mountain View, CA (www.intuit.com). It is used to write checks, organize investments and produce a variety of reports for personal finance and small business. Return to Profitability Sento Corporation (Nasdaq: SNTO), a right-channeling solutions leader, today reported financial results for the first quarter of fiscal 2007 ended June June: see month. 30, 2006. Consolidated revenues for the first quarter of fiscal 2007 were $14.9 million, a 71% increase from the $8.7 million reported in the first quarter of fiscal 2006. In its revised forecast for the first quarter of fiscal 2007 announced July July: see month. 12, the Company had estimated that revenues for the quarter would range from $14.4 to $14.6 million. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the first quarter of fiscal 2007 was $1.6 million, approximately the same level as the operating loss incurred in the fiscal 2006 first quarter and in line with the Company's revised forecast. As previously reported, the most recent quarter included a bad debt reserve with a final total of $466,689 for an account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. due from U.S. Digital Television for services rendered by Sento from approximately March 15 to June 30, 2006. Sento also did not receive timely payment of a $400,000 note due June 30 from USDTV USDTV US Digital Television, Inc. , which was fully reserved. USDTV filed for Chapter 7 bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection on July 6, 2006 after failing to raise an expected new round of financing. The fiscal 2007 first quarter operating results also include a benefit from grant monies the Company was awarded by the state of New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). for partial reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of job training costs incurred in its customer care center in Albuquerque Albuquerque (ăl`bəkûr'kē), city (1990 pop. 384,736), seat of Bernalillo co., W central N.Mex., on the upper Rio Grande; inc. 1890. . That resulted in an $826,405 reduction in cost of sales in the fiscal 2007 first quarter due to an accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. for future reimbursement from the New Mexico Jobs Training Incentive Program (JTIP JTIP Joint Technology Insertion Program ). The Company expects to recognize approximately $300,000 in cost reduction due to JTIP grant monies in the second quarter of fiscal 2007 and up to $500,000 over the next three quarters based on actual training hours completed and its forecast of future hours that will qualify for reimbursement. The operating loss for the first quarter of fiscal 2006 included a $477,575 restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. related to facilities consolidation. The net loss for the first quarter of fiscal 2007 was $1.6 million or $0.41 per diluted share compared with a net loss of $1.7 million or $0.44 per diluted share in the first quarter of fiscal 2006. The fiscal 2007 first quarter net loss included a reserve for a tax benefit equivalent to $0.04 per diluted share related to its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. In its revised forecast, the Company had estimated that the net loss for the fiscal 2007 first quarter would range from $1.4 to $1.5 million or $0.36 to $0.38 per diluted share. The decision on the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. reserve was made subsequently during the Company's normal quarter-end review, after consultation with its tax adviser and its independent auditor Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. . Sento Corporation ended fiscal 2006 with working capital of $2.1 million and cash and cash equivalents of $1.8 million, equivalent to $0.45 per diluted share. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. to equity was 44.8%, including accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. contingent consideration from business acquisition, net of current portion, versus 35.0% at the end of fiscal 2006 calculated on the same basis. Patrick F. O'Neal, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Sento, stated: "Despite achieving 71% revenue growth in the first quarter of fiscal 2007, we were not able to sustain the profitability turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. we worked steadfastly to attain in the prior three quarters. We simply could not overcome a rapid series of challenges that unexpectedly arose in the last two months of the quarter, culminating with the bankruptcy filing of one of our clients on July 6. While no single one of these operating challenges would have resulted in a loss for the quarter, taken together they presented a substantial hurdle HURDLE, Eng. law. A species of sledge, used to draw traitors to execution. to us. On balance, though, it was the loss of the client due to their bankruptcy that was the most damaging to our profitability. "To recap re·cap 1 tr.v. re·capped, re·cap·ping, re·caps 1. To replace a cap or caplike covering on: recapped the bottle. 2. our report of July 12, the operating challenges we faced in the fiscal 2007 first quarter included the following: (1) despite the substantial growth of our revenues, they were lower than expected because certain clients missed their own forecasts for projected call volume and other interactions; (2) we kept higher than normal staffing in the U.S. to maintain service levels for two clients experiencing erratic er·rat·ic adj. 1. Having no fixed or regular course; wandering. 2. Lacking consistency, regularity, or uniformity: an erratic heartbeat. 3. call patterns and in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). because of restrictive
labor laws labor law, legislation dealing with human beings in their capacity as workers or wage earners. The Industrial Revolution, by introducing the machine and factory production, greatly expanded the class of workers dependent on wages as their source of income. and the imminent start-up Start-upThe earliest stage of a new business venture. of a new client project; (3) it became necessary to raise the wages of certain agents with the entry of a competitive contact center in Albuquerque and because of growing wage pressures in other cities where we operate. "Another factor that reduced our first quarter profitability was high non-reimbursable training costs. These resulted mainly from greater than normal attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: among trainees in a single client program because of restrictions imposed by that client. As we reported last quarter, we have been winding down the program, and it will end completely by September September: see month. 30. While this action will ultimately improve our profitability, it also will decrease our revenues by approximately $1.4 million in the second quarter. The loss of USDTV to bankruptcy and the decision by another client to take their program in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. will reduce our projected second quarter revenues by approximately $735,000, although this will be offset to some extent by the new project for McAfee (McAfee, Inc., Santa Clara, CA, www.mcafee.com) A leading provider of intrusion prevention software. In 1997, McAfee Associates and Network General merged to become Network Associates. in Europe and the increased pricing we have won thus far to offset wage increases. In addition, we also have expanded our business with Philips (company) Philips - A Dutch multinational electronics company. It produces washing machines, consumer electronics, integrated circuits and light bulbs. Together with Sony they set the Compact Disc standard, especially Green Book CD-ROM. in Europe and added a U.S. program for an existing client in Europe which will further benefit the second quarter. Accordingly, we expect revenues for the second quarter of fiscal 2007 to be in the range of $12 to $12.5 million compared with $9.9 million in the second quarter last year. "Despite continuing challenges, we are determined to get back on track with our profitability turnaround as quickly as possible and have begun implementing an aggressive program to do so. Our action plan entails achieving approximately $375,000 in margin improvement monthly, primarily through non-agent staff reductions but also through other expense savings and the renegotiation of customer contract pricing, with the full benefit of those actions to begin in September. "Because of the success of CXP CXP Common IFF Digital Transponder Program (US Navy shipboard and aircraft Identification Friend or Foe Transponder) to date and its potential to add another revenue stream and open up additional markets to us, we are continuing its development. CXP or the Customer Experience Platform is the next generation of our proprietary Right Channeling technology, for which we have patents pending, as we reported last quarter. All costs associated with it have been capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. because it has reached technical feasibility, a major milestone. "We also are continuing to explore financing options with our main focus now on maintaining a flexible capital base." Mr. O'Neal concluded: "The difficult first quarter has temporarily delayed our growth plan. There is no more important priority for our company right now than returning to profitability. We are making every effort to do so by the second half of this fiscal year." CONFERENCE CALL Sento senior management will host a conference call, today, July 24th at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss the fiscal 2007 first quarter results and the future outlook. To access the call, dial 617-597-5342 in or outside the US, five minutes before start time. The participant passcode is 38250120. The webcast is also being distributed over CCBN's Investor Distribution Network. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com). The webcast of this call will be archived for two months at these CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network Web sites. SENTO PROFILE Sento Corporation (www.sento.com) specializes in Right Channeling(SM), a proven methodology designed to optimize optimize - optimisation customer contact solutions and ensure that companies make informed choices for multi-channel See multichannel. communication that support their business goals and customer expectations. We offer outsourced customer contact services designed to optimize the way companies interact with their customers to enhance brand loyalty, improve customer satisfaction, drive business initiatives and reduce service costs. Through our proprietary Customer Choice Platform(SM), we offer comprehensive professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. and customer interaction tools for customer acquisition, customer service and technical support. Companies can select communication channels from a range of integrated live support and web-enabled self-help Redressing or preventing wrongs by one's own action Without Recourse to legal proceedings. Self-help is a term in the law that describes corrective or preventive measures taken by a private citizen. applications that combine voice, chat, email and web forums. With operations in the U.S., The Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , and France, plus partnerships in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. and other low-cost regions, Sento provides customer contact solutions in 19 languages to industry-leading clients worldwide including McAfee, LensCrafters, Philips, Thomson, AON Warranty Group, and Overstock.com. 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. Statements in this press release, which are not purely historical, 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 statements encompass Sento's beliefs, expectations, goals, hopes or intentions regarding future events. Words such as "expects," "intends," "estimates," "believes," "anticipates," "should" and "likely" also identify forward-looking statements. All forward-looking statements included in this release are made as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" and are based on information available to Sento as of such date. Sento assumes no obligation, and specifically disclaims any obligation, to update any forward-looking statement. Actual results could differ materially from those anticipated for a number of reasons, including, among others: the Company's stock price has historically been volatile; variations in market and economic conditions; the Company's dependence on its limited number of key clients; failure to renew existing client contracts for continuation of services; reduction in services requested by the Company's clients resulting in lower revenues for the Company; the Company's ability to complete negotiations and execute client agreements; risk of equipment failure and/or emergency interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. of the Customer Contact Solutions operations; and other unanticipated factors. Risk factors, cautionary statements and other conditions, which could cause actual results to differ from the Company's current expectations, are contained in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-KSB.
Sento Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
-------------------------
June 30, June 30,
2006 2005
------------ ------------
Revenue, net $14,852,103 $8,684,787 (1)
Cost of sales 13,191,397 7,501,834 (1)
Less: training reimbursements (826,405) -
------------ ------------
Net cost of sales 12,364,992 7,501,834
------------ ------------
Gross profit 2,487,111 1,182,953
Selling, general, and administrative
expenses 2,887,606 1,864,114 (1)
Specific reserve for doubtful account 466,689 -
Amortization of intangible assets 136,000 68,312
Restructuring charge - 477,575
Depreciation expense 550,956 441,813 (1)
Stock based benefit - (54,572)
------------ ------------
Loss from operations (1,554,140) (1,614,289)
Interest income 9,780 -
Interest expense (89,551) (39,546)
Other income, net 7,172 -
------------ ------------
Net loss before income tax benefit
(expense) (1,626,739) (1,653,835)
Income tax benefit (expense) 17,838 (11,230)
------------ ------------
Net loss attributable to common
stockholders $(1,608,901) $(1,665,065)
============ ============
Net loss per share - basic and diluted $(0.41) $(0.44)
============ ============
Weighted average shares outstanding 3,941,350 3,785,264
============ ============
Notes to Consolidated Financial Statements:
Note 1: Reclassifications - Certain prior year amounts have been
reclassified to conform to the current year's presentation. The
reclassifications had no effect on net income or total assets.
Sento Corporation and Subsidiaries
Consolidated Balance Sheets
June 30, March 31,
2006 2006
------------ ------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $1,790,375 $4,498,707
Accounts receivable, less allowance for
doubtful accounts of $559,000 and
$120,000 at June 30, 2006 and March 31,
2006, respectively 6,514,770 7,688,374
Training reimbursement receivable 896,283 736,000
Prepaid and other current assets 1,260,500 1,068,987
------------ ------------
Total current assets 10,461,928 13,992,068
Property and equipment, net 7,597,476 7,068,197
Intangible assets, net 1,768,274 1,904,274
Other assets 453,751 350,375
------------ ------------
Total assets $20,281,429 $23,314,914
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,084,919 $3,686,890
Accrued salaries and payroll taxes 2,743,507 3,559,149
Current portion of accrued
restructuring expense 86,832 86,832
Current portion of long-term debt and
capital leases 2,645,524 2,155,339
Current portion of accrued contingent
consideration from business acquisition 129,416 470,528
Current portion of deferred lease
incentive 62,834 62,834
Current portion of deferred tax liability 82,572 82,572
Other current liabilities 495,032 349,447
------------ ------------
Total current liabilities 8,330,636 10,453,591
Long-term debt and capital leases, net of
current portion 1,929,548 1,924,902
Accrued contingent consideration from
business acquisition, net of current portion 1,585,387 1,244,275
Accrued restructuring expense, net of
current portion 94,064 115,771
Deferred lease incentive, net of current
portion 310,323 323,013
Deferred tax liability, net of current
portion 185,789 206,432
------------ ------------
Total liabilities 12,435,747 14,267,984
Commitments and contingencies
Stockholders' equity:
Common stock, $.25 par value, 50,000,000
shares authorized; 3,993,994 and 3,868,207
shares issued and outstanding at June 30,
2006 and March 31, 2006, respectively 998,498 967,052
Additional paid-in capital 20,916,318 20,583,158
Accumulated deficit (14,041,154) (12,432,253)
Accumulated other comprehensive income:
Cumulative foreign currency
translation adjustment (27,980) (71,027)
------------ ------------
Total stockholders' equity 7,845,682 9,046,930
------------ ------------
Total liabilities and stockholders' equity $20,281,429 $23,314,914
============ ============
Sento Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
-------------------------
June 30, June 30,
2006 2005
------------ ------------
Cash flows from operating activities:
Net loss $(1,608,901) $(1,665,065)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 550,956 68,312
Amortization of intangible assets 136,000 441,813
Amortization of deferred lease
incentives (12,690) -
Non-cash interest expense related to
warrants issued with convertible
debentures - 3,174
Stock-based 123R expense 20,556 -
Share-based benefit - (54,572)
Provisions for losses on accounts
receivable 498,050 -
Restructuring charge - 477,575
Provision for deferred taxes (20,643) -
Changes in operating assets and
liabilities:
Accounts receivable 675,554 856,529
Other assets (445,172) (104,965)
Accounts payable (1,601,971) (151,193)
Accrued liabilities and other (691,764) (351,225)
------------ ------------
Net cash used in operating
activities (2,500,025) (479,617)
------------ ------------
Cash flows from investing activities:
Purchase of capital assets (1,090,235) (766,973)
------------ ------------
Net cash used in investing
activities (1,090,235) (766,973)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt
and line of credit 1,833,167 987,267
Principal payments on long-term debt,
capital leases, and line of credit (1,338,336) (224,849)
Proceeds from exercise of stock options,
warrants and employee stock purchases 344,050 30,496
Purchase of treasury stock - (55,939)
------------ ------------
Net cash provided by financing
activities 838,881 736,975
------------ ------------
Effect of foreign currency translation 43,047 (76,131)
------------ ------------
Net decrease in cash and cash equivalents (2,708,332) (585,746)
Cash and cash equivalents at beginning of
period 4,498,707 5,698,195
------------ ------------
Cash and cash equivalents at end of period $1,790,375 $5,112,449
------------ ------------
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