MTM Technologies Announces Financial Results for Second Fiscal Quarter of 2009 for the Period Ended September 30, 2008

STAMFORD, Conn.--(BUSINESS WIRE)--MTM Technologies, Inc. (NASDAQ: MTMC), a leading national provider of innovative IT solutions and services to Global 2000 and mid-size companies, today announced financial results for its second fiscal quarter ended September 30, 2008.

“Our second quarter results are a reflection of the recent dramatic changes to the U.S. economy. While we are pleased to return to EBITDA profitability, our goal was to produce a greater EBITDA improvement, and consequently, we will continue to reduce our expense structure.”

Key Highlights for Second Quarter of Fiscal Year 2009

• Return to positive EBITDA;
• Net revenue increased 4.2% over the prior quarter;
• Selling, General & Administrative expenses, net of depreciation, amortization and stock-based compensation costs, decreased $648,000 over the prior quarter.

Second Quarter Fiscal Year 2009 Results

Net revenue was $50.1 million for the quarter ended September 30, 2008, representing an increase of 4.2% over the prior quarter and a decline of 19.6% over the comparable prior year period. Within total revenue, product revenue was $35.9 million or 72% of total revenue. Product revenue was up 5.9% as compared to the previous quarter and down 19.1% over the comparable prior year period. For the quarter, services revenue was $14.1 million, representing 28% of total revenue. Services revenue was essentially flat as compared to the previous quarter and down 21% on a year-over-year basis.

Gross profit was $11.2 million for the second quarter of fiscal 2009, resulting in an overall gross margin of 22.4%. Gross margins decreased 1.6% from the previous quarter and essentially flat as compared to the comparable prior year period. Product gross margin for the second quarter of fiscal 2009 was 16.4%, relatively flat as compared to the previous quarter and an increase from 15.3% in the prior year’s quarter. Services gross margin was 37.5% in the second quarter of fiscal 2009, which was down from 42.1% in the previous quarter and down from 40.6% as compared to the prior year’s quarter.

Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation costs, were $11.1 million a decrease of approximately $648,000 over the prior quarter and a decrease of $1.8 million as compared to the same quarter in the prior year.

EBITDA for the second fiscal quarter ended September 30, 2008 was $52,000 as compared to a negative $248,000 in the previous quarter and $1,107,000 in the second quarter of fiscal 2008.

Net loss available to common shareholders was $5.7 million, which includes $5.2 million of non-cash items related to depreciation, amortization, stock-based compensation, taxes, interest and preferred stock dividends, or $6.33 loss per share on a split adjusted basis, for the quarter ended September 30, 2008, compared to a loss of $4.7 million, or $5.37 loss per share on a split adjusted basis, in the same quarter a year ago. Earnings per share take into account the one for fifteen reverse stock split that was completed on June 25, 2008.

Lenders

MTM also announced that Columbia Partners LLC, MTM’s existing secured debt facility lender, and GE CDF, MTM’s credit facility lender, modified their agreements to ease certain financial covenants.

Financial Outlook

Given the uncertainties in the overall economy, MTM is withdrawing any previous financial guidance and is suspending future guidance.

Steve Stringer, President and Chief Executive Officer, said “Our second quarter results are a reflection of the recent dramatic changes to the U.S. economy. While we are pleased to return to EBITDA profitability, our goal was to produce a greater EBITDA improvement, and consequently, we will continue to reduce our expense structure.”

Inquiries concerning this earnings press release and subsequent financial information can be made by contacting MTM at investorrelations@mtm.com.

MTM and MTM Technologies are trademarks of MTM Technologies, Inc. All other company and trademark names are the property of their respective owners.

Non-GAAP Financial Measures

MTM Technologies believes that EBITDA, which is not a recognized measure for financial presentation under United States generally accepted accounting principles (“GAAP”), provides investors and management with a useful supplemental measure of its operating performance because it more closely approximates the cash generating ability of the Company as compared to operating income (loss). EBITDA excludes the impact of interest, taxes, depreciation, amortization, stock based compensation and other expense. A table reconciling net loss calculated in accordance with GAAP to EBITDA is included in the financial statements in this release. EBITDA does not have any standardized definition and is therefore unlikely to be comparable to similar measures presented by other reporting companies.

About MTM Technologies, Inc.

MTM Technologies, Inc. is a leading national provider of innovative IT solutions and services to Global 2000 and mid-size companies. Partnered nationally with industry-leading technology providers such as Cisco Systems, Citrix, EMC, HP, and Microsoft, MTM Technologies offers comprehensive solutions in the areas of secure access, unified communications, consolidation, and virtualization. In addition, MTM Technologies provides a broad range of complementary managed service offerings, including system monitoring and management, security management, IP telephony management, and IT helpdesk support. The lifecycle approach also includes IT architecture consulting, IT staff augmentation and training services. For more information, visit www.mtm.com.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995

Except for the historical information herein, the matters discussed in this release include forward-looking statements. In particular, the forward-looking statements contained in this release include statements about future financial and operating results. When used in this press release, the words: believes, intends, plans, anticipates, expects, estimates, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause actual results to differ materially which include, but are not limited to, the following: a significant portion of the company’s quarterly sales are concluded in the last month of the fiscal quarter; the Company’s key strategic relationships; the length of sales and delivery cycles; the risk of obtaining financing and complying with our lenders’ financial covenants; the timing, cost and success or failure of current and new product and service introductions; and other risks affecting MTM’s businesses generally and as set forth in MTM’s most recent filings with the Securities and Exchange Commission. All forward-looking statements in this release are qualified by these cautionary statements and are made only as of the date of this release. MTM is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
		Three Months Ended								Six Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net revenues:
Products		$	35,932			$	44,405			$	69,869			$	93,639
Services			14,136				17,902				28,247				35,680
Total net revenues			50,068				62,307				98,116				129,319
Costs and expenses:
Cost of products sold			30,039				37,602				58,378				79,534
Cost of services provided			8,838				10,631				17,008				21,179
Selling, general and administrative expenses			13,395				15,740				27,446				32,684
Total costs and expenses			52,272				63,973				102,832				133,397
Operating loss			(2,204	)			(1,666	)			(4,716	)			(4,078	)
Interest expense, net & other income			(2,030	)			(1,844	)			(5,874	)			(2,964	)
Loss before income tax provision			(4,234	)			(3,510	)			(10,590	)			(7,042	)
Provision for income taxes			234				3				461				199
Net loss		$	(4,468	)		$	(3,513	)		$	(11,051	)		$	(7,241	)
Preferred stock dividend			1,223				1,232				2,413				2,164
Net loss available to common shareholders		$	(5,691	)		$	(4,745	)		$	(13,464	)		$	(9,405	)
Net loss per common share:
Basic and Diluted		$	(6.33	)		$	(5.37	)		$	(15.00	)		$	(11.08	)
Weighted average number of common shares outstanding:
Basic and Diluted			899				884				897				849

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
		September 30,				March 31,
		2008				2008
ASSETS		(Unaudited)
Current assets:
Cash		$	2,361			$	3,210
Accounts receivable - trade, net of allowance of $856 and $974, respectively			38,873				42,207
Inventories			1,097				576
Prepaid expenses and other current assets			5,953				5,958
Total current assets			48,284				51,951
Property and equipment, net			8,533				10,813
Goodwill			69,960				69,960
Intangible assets, net			1,269				1,783
Other assets			820				968
TOTAL ASSETS		$	128,866			$	135,475
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Secured revolving credit facilities		$	10,756			$	8,100
Inventory financing agreements			11,176				15,801
Related party note payable			-				2,431
Accounts payable			13,247				18,603
Accrued expenses			4,002				4,225
Deferred revenue			5,571				5,734
Current portion of capital lease obligations			176				383
Total current liabilities			44,928				55,277
Secured promissory note			26,847				23,578
Long-term accrued interest on secured promissory note			10,977				6,538
Related party notes payable			5,770				-
Other long-term liabilities			3,689				3,135
Total liabilities			92,211				88,528
Shareholders' equity:
Series A preferred stock, $.001 par value; 40,280,000 and 39,300,000 shares authorized; issued and outstanding 30,451,469 and 29,569,259 shares at September 30, 2008 and March 31, 2008, respectively			68,864				66,515
Common stock, $.001 par value; 150,000,000 shares authorized; issued and outstanding 900,739 and 890,228 shares, respectively			1				1
Additional paid-in capital			52,561				54,151
Accumulated deficit			(84,771	)			(73,720	)
Total shareholders' equity			36,655				46,947
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	128,866			$	135,475

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES
EBITDA Reconciliation
		Three Months Ended								Six Months Ended
		September 30								September 30
(in thousands)		2008				2007				2008				2007
EBITDA		$	52			$	1,107			$	(196	)		$	1,710
Depreciation and amortization			1,957				2,609				3,940				5,168
Interest expense			2,030				1,844				5,874				2,964
Stock based compensation			299				164				580				620
Income taxes			234				3				461				199
Net loss		$	(4,468	)		$	(3,513	)		$	(11,051	)		$	(7,241	)