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

Business Wire, August 12, 2008

* EBITDA loss of $248 thousand for first quarter of fiscal year 2009 for the period ended June 30, 2008, including approximately $500 thousand of one-time severance related costs from the May headcount reduction

* Overall gross margin improvement of 2.3 percentage points over the first quarter of fiscal year 2008, with services gross margin improvement of 1.4 percentage points over the first quarter of fiscal year 2008

* Company expects to return to positive EBITDA in the second quarter and is experiencing increased demand for its offerings

STAMFORD, Conn. -- 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 first fiscal quarter ended June 30, 2008.

Key Highlights for First Quarter of Fiscal Year 2009

* EBITDA loss of $248 thousand, including approximately $500 thousand of one-time severance related expense from the Company's May headcount reduction;

* Net revenue declined 11.3% over the prior quarter to $48 million;

* Overall gross margin improvement of 2.3 percentage points over the first quarter of fiscal year 2008; and service margins improved by 2.5 percentage points sequentially and by 1.4 percentage points year over year;

* Selling, General & Administrative expenses, net of depreciation, amortization and stock-based compensation costs, decreased $2.1 million or 15% over the first quarter of the prior fiscal year;

* Completed the one for fifteen reverse stock split on June 25th, enabling MTM Technologies to regain compliance with NASDAQ listing requirements;

* Double digit year-over-year virtualization revenue growth driven by recent focus and investment around key market leading partner's technologies; and

* Now monitoring approximately 12,000 devices within our Aware 360/NOC monitoring and Managed Services platform.

First Quarter Fiscal Year 2009 Results

Net revenue was $48.0 million for the quarter ended June 30, 2008, representing a decline of 11.3% over the prior quarter and a decline of 28.3% over the comparable prior year period. Within total revenue, product revenue was $33.9 million or 71% of total revenue. Product revenue was down 9.3% as compared to the previous quarter and down 31.1% over the comparable prior year period. For the quarter, services revenue was $14.1 million, representing 29% of total revenue. Services revenue was down 15.6% as compared to the previous quarter and down 20.6% on a year-over-year basis.

Gross profit was $11.5 million for the first quarter of fiscal 2009, resulting in an overall gross margin of 24.0%. Gross margins improved from the 23.4% recorded in the previous quarter and from the 21.7% recorded in the comparable prior year period. Product gross margin for the first quarter of fiscal 2009 was 16.5%, a slight increase from 16.2% in the previous quarter and an increase from 14.8% in the prior year's quarter. Services gross margin was 42.1% in the first quarter of fiscal 2009, which was up from 39.6% in the previous quarter and up from 40.7% as compared to the prior year's quarter.

Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation costs, were $11.8 million a decrease of approximately $635,000 over the prior quarter and a decrease of $2.1 million as compared to the same quarter in the prior year. This is primarily due to our cost reduction initiatives.

EBITDA for the first fiscal quarter ended June 30, 2008 was a negative $248,000 as compared to a positive $253,000 in the previous quarter and a positive $603,000 in the first quarter of fiscal 2008. EBITDA in the quarter was negatively impacted by approximately $500,000 of one-time severance related costs.

Net loss available to common shareholders was $7.8 million, which includes $7.2 million of non-cash items related to depreciation, amortization, stock-based compensation, taxes, interest and preferred stock dividends, or $8.66 loss per share on a split adjusted basis, for the quarter ended June 30, 2008, compared to a loss of $4.7 million, or $5.73 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.

Steve Stringer, President and Chief Operating Officer, said, "We believe we have aligned our expense structure to allow us to run an EBITDA positive business. While we are disappointed with revenue results in the June quarter, we have experienced an increase in demand for our offerings to date in the second quarter." Mr. Stringer continued, "We continue to believe that there is significant opportunity for our Access, Unified Communications and Managed Services solutions and are investing in our direct sales and sales operations in order to increase our pipelines, improve the productivity of our sales professionals and streamline processes to make it easier for our sales organization to target and close new business."