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·

Total revenue increased 12.3% to $63.6 million from $56.6 million.

·

Product revenue increased 6.2% to $51.6 million from $48.6 million, with gross profit on product revenue increasing 1.0% to $8.8 million on slightly lower margins of 17.1% of product revenue, compared to $8.8 million, or 18.0% of product revenue.

·

Service revenue increased 49.8% to $12.0 million from $8.0 million, with gross profit on service revenue increasing 10.8% to $3.1 million on lower margin of 25.9% of service revenue, compared to $2.8 million, or 35.0% of service revenue.

·

Gross profit on total revenue increased 3.4% to $11.9 million on reduced gross margin of 18.8% of total revenue, compared to $11.5 million, or 20.4% of total revenue.

·

Operating loss was $15.1 million compared to operating income of $1.1 million after the combined effect of certain unusually large expenses in the 2008 quarter:

o

$13.1 million non-cash charge related to the impairment of goodwill, intangible assets and property and equipment representing the difference between the fair value of various reporting units and the carrying values of these units

o

$466,000 related to bad debt expense

o

$311,000 in severance expense related to a cost reduction program

o

$140,000 related to litigation settlement

·

Net loss was $15.2 million compared to net income of $1.3 million.

·

Diluted loss per share was $1.75 compared to diluted income per share of $0.16.

·

Non-GAAP (see attached schedule which reconciles to GAAP earnings per share) net loss was $1.5 million compared to non-GAAP net income of $1.1 million; and non-GAAP diluted loss per share was a loss of $0.17 compared to non-GAAP diluted income per share of $0.14.

 

·

Total revenue increased 24.6% to $259.2 million from $208.0 million.

·

Product revenue increased 18.2% to $213.1 million from $180.3 million, with gross profit on product revenue increasing 19.3% to $37.9 million, or 17.8% of product revenue, compared to $31.7 million, or 17.6% of product revenue.

·

Service revenue increased 66.4% to $46.0 million from $27.7 million, with gross profit on service revenue increasing 68.0% to $13.3 million, or 28.8% of service revenue, compared to $7.9 million, or 28.6% of service revenue.

·

Gross profit on total revenue increased 29.0% to $51.2 million, or 19.7% of total revenue, compared to $39.7 million, or 19.1% of total revenue.

·

Operating loss, including the impact of the above-referenced unusually large expense items, was $10.7 million compared to operating income of $3.5 million

·

Net loss was $12.6 million compared to net income of $3.7 million.

·

Diluted loss per share was $1.55 compared to diluted income per share of $0.47.

·

Non-GAAP net income was $3.8 million compared to $4.0 million; non-GAAP diluted income per share was $0.47 compared to $0.50.

 

 

·	Market and economic conditions, including capital expenditures by enterprises for network, telephone communications and data center systems, products and services.

·	Credit and financial market conditions.

·	Whether the Company obtains anticipated contracts and other business, the timing of obtaining same, and the size and profitability of such contracts and business.

·	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.

·	The Company's ability to finance its business operations.

·	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.

·	Risks associated with the Company’s introduction of offerings of additional areas of technology.

·	The Company's ability to obtain sufficient volumes of products for resale and maintain its relationship with its key supplier, Cisco Systems, Inc.

·	The continuance of, and the Company’s ability to qualify for, sales incentive programs from its key supplier.

·	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 risks associated with making acquisitions.

·	The Company’s ability to grow its revenues in newly opened and/or acquired offices in new markets.

·	The Company’s ability to manage its business in a manner that results in increased revenues without a proportional increase in costs of operating its business.

·	Unexpected customer contract cancellations.

·	Unexpected losses related to customer credit risk.

·	Uncertainties related to rapid changes in the information and communications technology industries.

·	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, as such may be amended from time to time, which the Company makes available on its web site in PDF format at www.inxi.com/Information/sec.asp.

 

 

		Three Months Ended December 31,								Year Ended December 31,
		2008				2007				2008				2007
GAAP net (loss) income		$	(15,188	)		$	1,311			$	(12,638	)		$	3,735
Equity-based compensation expense from continuing operations			500				223				1,655				743
Non-cash income tax expense (benefit) from continuing operations			173				(402	)			1,763				(402	)
Impairment charge			13,071				—				13,071				—
Discontinued operations			(14	)			14				(37	)			(83	)
Non-GAAP net (loss) income		$	(1,458	)		$	1,146			$	3,814			$	3,993
Non-GAAP net (loss) income per diluted share		$	(0.17	)		$	0.14			$	0.47			$	0.50
Shares used in computing non-GAAP net (loss) income per diluted share			8,655,761				8,408,437				8,133,165				8,027,286

 

 

 

		Three Months Ended December 31,
		2008				2007
Revenue:
Products		$	51,628			$	48,621
Services			11,953				7,978
Total revenue			63,581				56,599
Cost of goods and services:
Products			42,787				39,868
Services			8,862				5,189
Total cost of goods and services			51,649				45,057
Gross profit			11,932				11,542
Selling, general and administrative expenses			13,934				10,395
Impairment charge			13,071				—
Operating (loss) income			(15,073	)			1,147
Interest and other income (expense), net			49				(79	)
(Loss) income from continuing operations before income taxes			(15,024	)			1,068
Income tax expense (benefit)			178				(257	)
Net (loss) income from continuing operations			(15,202	)			1,325
Income (loss) from discontinued operations, net of taxes			14				(14	)
Net (loss) income		$	(15,188	)		$	1,311
Net (loss) income per share:
Basic:
Net (loss) income from continuing operations		$	(1.75	)		$	0.18
Loss from discontinued operations, net of taxes			—				(0.01	)
Net (loss) income per share		$	(1.75	)		$	0.17
Diluted:
Net (loss) income from continuing operations		$	(1.75	)		$	0.16
Loss from discontinued operations, net of taxes			—				—
Net (loss) income per share		$	(1.75	)		$	0.16
Shares used in computing net (loss) income per share:
Basic			8,655,761				7,499,620
Diluted			8,655,761				8,408,437

		Year Ended December 31,
		2008				2007
		(Unaudited)
Revenue:
Products		$	213,125			$	180,311
Services			46,032				27,656
Total revenue			259,157				207,967
Cost of goods and services:
Products			175,244				148,564
Services			32,756				19,756
Total cost of goods and services			208,000				168,320
Gross profit			51,157				39,647
Selling, general and administrative expenses			48,734				36,152
Impairment charge			13,071				—
Operating (loss) income			(10,648	)			3,495
Interest and other income (expense), net			(16	)			(79	)
(Loss) income from continuing operations before income taxes			(10,664	)			3,416
Income tax expense (benefit)			2,011				(236	)
Net (loss) income from continuing operations			(12,675	)			3,652
Income from discontinued operations, net of taxes			37				83
Net (loss) income		$	(12,638	)		$	3,735
Net (loss) income per share:
Basic:
Net (loss) income from continuing operations		$	(1.55	)		$	0.52
Income from discontinued operations, net of taxes			—				0.01
Net (loss) income per share		$	(1.55	)		$	0.53
Diluted:
Net (loss) income from continuing operations		$	(1.55	)		$	0.45
Income from discontinued operations, net of taxes			—				0.02
Net (loss) income per share		$	(1.55	)		$	0.47
Shares used in computing net (loss) income per share:
Basic			8,133,165				7,026,623
Diluted			8,133,165				8,027,286

 

		December 31,
		2008				2007
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	10,937			$	9,340
Accounts receivable — trade, net of allowance of $735 and $470			52,866				45,128
Inventory, net			2,406				1,439
Deferred income taxes			—				2,100
Other current assets			1,275				2,062
Total current assets			67,484				60,069
Property and equipment, net of accumulated depreciation of $5,429 and $3,728			5,207				4,421
Goodwill			12,238				16,603
Intangible assets, net of accumulated amortization of $2,346 and $1,592			2,365				3,148
Total assets		$	87,294			$	84,241
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable		$	91			$	6,200
Current portion of capital lease obligations			77				—
Accounts payable			45,172				37,233
Accrued payroll and related costs			4,258				3,788
Accrued expenses			2,615				1,575
Other current liabilities			1,072				1,440
Total current liabilities			53,285				50,236
Long-term liabilities:
Long-term portion of capital lease obligations			163				—
Deferred income taxes			—				1,565
Other long-term liabilities			250				413
Total long-term liabilities			413				1,978
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, 8,709,304 and 7,548,892 issued			87				75
Additional paid-in capital			50,692				36,497
Accumulated deficit			(17,183	)			(4,545	)
Total stockholders’ equity			33,596				32,027
Total liabilities and stockholders’ equity		$	87,294			$	84,241

 

 

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