Paradigm Holdings Provides Business Update and Reports Financial Results for the Third Quarter of 2009
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ROCKVILLE, Md.--(BUSINESS WIRE)-- Paradigm Holdings, Inc. (OTCBB: PDHO) ("Paradigm" or the "Company"), a provider of comprehensive information technology and cyber security solutions for federal government enterprises, today provided an update for the third quarter ended September 30, 2009.
Third Quarter 2009 Highlights:
-- Revenues of $8.0 million
-- Gross profit of $1.9 million, with gross margin expansion of 228 basis
points to 23.4%
-- EBITDA of $0.4 million
-- Net income of $0.02 per basic share, resulting from the non-cash change
in the fair value of put warrants; net loss of $0.01 per diluted share
without non-cash change in fair value of put warrants
Peter B. LaMontagne, Paradigm President and CEO, stated, "We believe that our strategy of focusing on higher-margin national and homeland security contracts is enabling us to make additional positive progress toward becoming a leading provider of specialized cyber security services. The transition away from our Small Business Program status has been a long process, but we believe we have begun to stabilize: revenues have been in the $8 million per quarter range for three quarters; our book-to-bill ratio for the quarter increased to 3.4x; and our total backlog grew to approximately $92 million. In addition, approximately 18% of our total revenues for 2009 are directly focused on cyber security and nearly 40% are derived from national and homeland security agencies. As we look toward 2010, we will focus sharply on cyber security and related programs."
Richard Sawchak, Chief Financial Officer, stated, "We are pleased that our disciplined cash management enabled us to once again generate positive operating cash flow during the quarter and reduce our debt balance to $3.1 million. As we continue to focus on operating profitability and positive cash flow during the remainder of 2009 and beyond, we intend to continue to take the necessary steps to expand gross margins, reduce expenses and manage our working capital position."
The Company's EBITDA was $0.4 million during the quarter ended September 30, 2009, as compared to approximately $0.3 million for the same period of 2008. The Company defines EBITDA as earnings before interest, taxes, changes in the fair value of put warrants, depreciation and amortization, stock compensation and restructuring expenses which include the basket allowed under our senior credit facility and other actual restructuring costs. EBITDA is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), and should not be considered in isolation of, or as a substitute for, earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. The Company believes the presentation of EBITDA is relevant and useful by enhancing the readers' ability to understand the Company's operating performance. The Company's management utilizes EBITDA as a means to measure performance. The Company's measurements of EBITDA may not be comparable to similar titled measures reported by other companies. The table below reconciles EBITDA, a non-GAAP measure, to net income (loss) for the three and nine months ended September 30, 2009 and 2008.
Quarter Ended September 30 Nine Months
Ended September 30
2009 2008 2009 2008
Net Income (Loss) $ 957,679 $ (224,147 ) $ (1,140,669 ) $ (627,313 )
Adjustments:
Interest Expense, 536,943 230,593 1,385,690 733,877
net
Income Tax Provision 135,069 (105,263 ) (88,624 ) (255,505 )
(Benefit)
Change in FV of Put (1,463,910 ) -- (463,085 ) --
Warrants
Depreciation & 109,720 142,844 351,923 468,824
Amortization
Stock Compensation 91,570 140,032 487,175 420,095
Restructuring -- 67,390 325,000 431,978
Expense
EBITDA $ 367,071 $ 251,449 $ 857,410 $ 1,171,956
Revenue for the third quarter of 2009 was $8.0 million, compared to $9.6 million for the third quarter of 2008. The decline in revenue for the three months is attributable to a decrease in federal repair and maintenance services and the completion of certain small business set-aside programs during 2008. Net income for the third quarter of 2009 was $957,679 or $0.02 per basic share and ($0.01) per diluted share, versus a net loss of $269,147 or ($0.01) per basic and diluted share in the third quarter of 2008. The increase in net income for the three months is attributable to the gain from the changes in the fair value of put warrants and the lower SG&A expenses which is partially offset by the decrease in revenue and an increase in interest expense.
The Company had a $0.8 million working capital deficit and approximately $3.1 million outstanding on its line of credit with Silicon Valley Bank as of September 30, 2009.
For additional details, please refer to the Company's quarterly report on Form 10-Q as filed with the SEC.
About Paradigm Holdings, Inc.
Paradigm Holdings, Inc., (www.paradigmsolutions.com) is a provider of information technology (IT) and cyber security solutions for U.S. Federal Government enterprises. Paradigm specializes in comprehensive information assurance solutions involving cyber security and digital forensics as well as continuity of operations and disaster recovery planning. The Company also provides systems engineering and IT infrastructure support solutions. Headquartered in Rockville, Maryland, the Company currently employs approximately 200 people.
Safe Harbor Statement
This press release may contain forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. Paradigm assumes no obligation to update the information contained in this press release. Future results for Paradigm may be affected by its ability to continue to implement its government technology solutions, its dependence on the federal government and state and local governments and other federal government contractors as its major customers, timely passage of components of the federal budget, timely obligations of funding by the federal and state governments, its dependence on procuring, pricing and performing short-term government contracts, its dependence on hiring and retaining qualified professionals, potential fluctuations in its quarterly operating results, including seasonal impacts, its dependence on certain key employees and its ability to timely and effectively integrate the businesses it may acquire. For further information about forward-looking statements and other Paradigm specific risks and uncertainties please refer to recent SEC filings for Paradigm, which are available at www.sec.gov.
PARADIGM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2009 December 31, 2008
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 134,719 $ 52,257
Accounts receivable -- contracts, net 5,212,932 6,920,768
Prepaid expenses 745,685 1,033,837
Prepaid corporate income taxes -- 47,092
Deferred income tax assets 34,473 60,269
Other current assets 432,869 554,610
Total current assets 6,560,678 8,668,833
Property and equipment, net 132,825 183,612
Goodwill 3,991,605 3,991,605
Intangible assets, net 984,136 1,244,591
Deferred financing costs, net 948,418 --
Deferred income tax assets, net of 443,646 211,326
current portion
Other non-current assets 681,914 172,029
Total Assets $ 13,743,222 $ 14,471,996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable -- line of credit $ 3,096,851 $ 5,949,983
Note payable -- promissory note -- 2,000,000
Capital leases payable, current portion -- 1,578
Accounts payable and accrued expenses 2,155,191 3,498,690
Accrued salaries and related liabilities 1,578,908 1,474,133
Corporate income tax payable 52,827 --
Mandatorily redeemable preferred stock, 350,000 --
current portion
Other current liabilities 86,831 227,200
Total current liabilities 7,320,608 13,151,584
Long-term liabilities
Other non-current liabilities 127,559 183,870
Mandatorily redeemable preferred stock -
$.01 par value, 10,000,000 shares 4,483,923 --
authorized, 6,206 shares issued and
outstanding as of September 30, 2009
Put warrants 1,465,082 --
Total liabilities 13,397,172 13,335,454
Commitments and contingencies
Convertible preferred stock - $.01 par
value, 10,000,000 shares authorized, 0
and 1,800 shares issued and outstanding
as of September 30, 2009 and December 31, -- 18
2008, respectively. Each share of
convertible preferred stock has a
liquidation preference of $0.01 per share
plus all accrued but unpaid dividends
Common stock - $.01 par value, 50,000,000
shares authorized, 41,243,027 shares and
19,148,153 shares issued and outstanding 412,431 191,482
as of September 30, 2009 and December 31,
2008, respectively
Additional paid-in capital 3,344,646 3,215,400
Accumulated deficit (3,411,027 ) (2,270,358 )
Total stockholders' equity 346,050 1,136,542
Total liabilities and stockholders' $ 13,743,222 $ 14,471,996
equity
PARADIGM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2008
2009 2008 2009
Contract
Revenue
Service $ 5,713,956 $ 7,079,396 $ 17,180,060 $ 21,388,614
contracts
Repair and
maintenance 2,322,972 2,485,063 7,235,964 9,593,523
contracts
Total contract 8,036,928 9,564,459 24,416,024 30,982,137
revenue
Cost of
revenue
Service 4,353,955 5,324,087 13,244,991 16,394,569
contracts
Repair and
maintenance 1,805,342 2,223,919 5,911,417 8,417,479
contracts
Total cost of 6,159,297 7,548,006 19,156,408 24,812,048
revenue
Gross margin 1,877,631 2,016,453 5,259,616 6,170,089
Selling,
general and 1,711,850 2,115,270 5,566,304 6,319,257
administrative
Income (loss)
from 165,781 (98,817 ) (306,688 ) (149,168 )
operations
Other income
(expense)
Interest 2 65 8 2,772
income
Change in fair
value of put 1,463,910 -- 463,085 --
warrants
Interest
expense -
mandatorily (418,248 ) -- (950,223 ) --
redeemable
preferred
stock
Interest (118,697 ) (230,658 ) (435,475 ) (736,649 )
expense
Other income -- -- -- 227
Total other
income 926,967 (230,593 ) (922,605 ) (733,650 )
(expense)
Income (loss)
from
operations 1,092,748 (329,410 ) (1,229,293 ) (882,818 )
before income
taxes
Provision
(benefit) for 135,069 (105,263 ) (88,624 ) (255,505 )
income taxes
Net income 957,679 (224,147 ) (1,140,669 ) (627,313 )
(loss)
Dividends on
preferred -- 45,000 78,870 135,000
stock
Net income
(loss)
attributable $ 957,679 $ (269,147 ) $ (1,219,539 ) $ (762,313 )
to common
shareholders
Weighted
average number
of common
shares:
Basic 41,243,027 19,148,153 36,299,722 19,148,153
Diluted 79,262,830 19,148,153 36,299,722 19,148,153
Basic net
income (loss) $ 0.02 $ (0.01 ) $ (0.03 ) $ (0.04 )
per common
share
Diluted net
loss per $ (0.01 ) $ (0.01 ) $ (0.03 ) $ (0.04 )
common share
Source: Paradigm Holdings, Inc.
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