Gross profit in the fourth quarter of fiscal 2005 was 8.4 million, or 10 percent of net revenues,
compared to 8.2 million, or nine percent of net revenues, in the same period last year. Gross
profit for our service fee business was 3.8 million, or 24 percent of service fee revenues,
compared to 3.9 million, or 31 percent of service fee revenues, in the fourth quarter of 2004. Our
service fee business gross margin results for the fiscal 2005 fourth quarter were positively
impacted by the transition of new business agreements to a steady level of — or steady-state level
of performance which was offset by the impact of reduced project activity which generally operates
at higher margins.
During the December quarter, SG&A totaled 7.2 million, an increase from 6.6 million in last year’s
December quarter. The increase was primarily attributable to incremental expenses related to
increased professional fees and certain personnel-related costs. EBITDA, which will remain a key
metric in evaluating our operational performance and potential following our merger with eCOST, was
2.73 million for the 2005 December quarter versus 2.76 million in the year-earlier period. EBITDA
in the fourth quarter marked the 13th consecutive quarter of positive or virtually
break-even EBITDA performance by the entity. Our net income for the fourth quarter ended December
31, 2005, was 466,000, or two cents per basic and diluted share, compared to net income of 1.1
million, or five cents per basic and diluted share, in the fourth quarter of 2004. For the 12
months ended December 31, 2005, net revenues totaled 331.7 million compared to 321.7 million last
year. Service fees revenues, as Mark indicated earlier, increased this year 44 percent to 60.8
million compared to 42.1 million last year. During 2005 we invoiced virtually all of the estimated
annual revenue run rate of the new service fee contracts signed in 2004. Although service fee
revenues in 2005 were impacted by reduced project activity, our 44-percent growth in revenue
exceeded our projected increase that we spoke of earlier of 30 to 40 percent.
Product revenue for 2005 declined by approximately five percent to 252.9 million from 267.5 million
in 2004 primarily due to reduced volumes. This decrease was in line with our expectations, but we
continue to believe that our product revenue model as the opportunity to provide strong recurring
revenue streams through solid client relationships and it operates with financing agreements with
limited exposure.
Gross profit in 2005 was 32.5 million, or 10 percent of net revenues, compared to 29.5 million, or
nine percent of net revenues, last year. Gross profit for our service fee business was 15.2
million, or 25 percent of service revenues, compared to 14 million, or 33 percent of service
revenues, last year. Our gross margin results for 2005 were negatively impacted by rollout costs
for new business signed in 2004, lower run rate gross margins on these new contracts as well as the
reduction in higher margin project activity.
SG&A totaled 30.5 million in 2005 compared to 27.1 million last year. The increase was primarily
attributable to relocation-related expenses, increased sales and marketing expenses, increased
legal fees related to the Daisy Tech (ph) lawsuit filed in May 2005, and certain personnel-related
costs. During the second and third quarters of fiscal 2005 we incurred incremental cost totaling
1.4 million related to the relocation of two of our distribution facilities from Memphis to the new
airways distribution center (ph) in South Haven, Mississippi, to better
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