XRS Corporation Reports Fiscal 2014 First Quarter Results

Mobile software revenue grew 14 percent in first quarter 2014.

First quarter net income drove free cash flow of $0.6 million.

Non-GAAP earnings of $1.9 million, or $0.07 per diluted share in first quarter 2014.

Feb 06, 2014, 09:00 ET from XRS Corporation

MINNEAPOLIS, Feb. 6, 2014 /PRNewswire/ -- XRS Corporation (NASDAQ: XRSC) reported results for its fiscal 2014 first quarter ended December 31, 2013.

"The first quarter of fiscal 2014 was our fifth consecutive quarter of profitability, with mobile growth of 14 percent," said Jay Coughlan, chairman and chief executive officer of XRS Corporation. "We are committed to the ongoing success in transitioning to our no upfront hardware cost XRS mobile solution. We continue to enhance functionality of our XRS solution, including aligning with strategic third-party providers to meet the integration requirements of larger, more complex fleets. During this time of continued investment in our XRS mobile solution we are closely controlling costs, which resulted in decreased costs of $0.7 million year-over-year. This positions us well to support the long-term growth of the Company."

First Quarter Results For the three months ended December 31, 2013, mobile software revenue increased 14 percent, while total software revenue decreased $0.9 million with the comparable fiscal period in 2013. Total revenue was $13.3 million for the three months ended December 31, 2013, compared to $14.2 million for the comparable period in fiscal 2013 as a result of new customers selecting the Company's mobile solutions, as well as by attrition in the legacy subscription base.

Gross margin percentage decreased 4 percentage points to 59 percent for the three months ended December 31, 2013. Software gross margins drove the decline in total gross margin percent. Software gross margins declined 4 percentage points to 70 percent for the three months ended December 31, 2013. The decline is reflective of the Company's commitment to continue to support its legacy solutions while it transitions customers to its mobile solutions.

Selling, general and administrative expenses decreased to $4.9 million, compared to $5.5 million for the comparable period in fiscal 2013. Overall selling, general and administrative expenses decreased as a percentage of revenue for the first quarter of fiscal 2014 and 2013 at 37 percent and 39 percent, respectively. The decrease in selling, general and administrative expenses reflects the Company's commitment to increased operational efficiencies. In addition, the current period reflects reduced legal expenses as the Company was involved in defending a patent litigation suit in the first quarter of fiscal 2013.

Research and development expenses were $2.9 million and $3.1 million for the first quarter of fiscal 2014 and 2013, respectively. Research and development expense remained relatively consistent as the Company continued to focus on enhancements to its XRS solution to meet the operational needs of larger, more complex fleets.

First quarter of fiscal 2014 net income was $0.1 million, a decrease of $0.2 million compared to a net income of $0.3 million for the same period in fiscal 2013. The Company reported non-GAAP earnings of $1.9 million, or $0.07 per diluted share for the first quarter of fiscal 2014, compared to a non-GAAP earnings of $2.2 million, or $0.08 per diluted share for the same period in fiscal 2013.

As of December 31, 2013, the Company maintained a debt-free balance sheet with $11.2 million in cash. Free cash flow was $0.6 million for the three months ended December 31, 2013, compared to a $1.6 million for the comparable period in fiscal 2013. Working capital increased $1.4 million to $14.4 million as of December 31, 2013, compared to $13.0 million in working capital as of September 30, 2013.

Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data):

For the Three Months Ended

December 31,

2013

2012

Revenue:

   Software

$

10,908

$

11,769

   Hardware systems

2,131

2,191

   Services

258

235

   Total revenue

$

13,297

$

14,195

Gross margins (deficits):

   Software

70%

74%

   Hardware systems

25%

21%

   Services

(112%)

(122%)

   Total gross margin

59%

63%

Non-GAAP vs. GAAP Financial Measures To assist investors in understanding the Company's financial performance, the Company supplements the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures, including non-GAAP earnings, non-GAAP earnings per diluted share, working capital and free cash flow. These non-GAAP financial measures are useful to investors for evaluating the Company's historical and prospective financial performance, as well as our performance relative to competitors. Management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its ongoing business operations and to make operating decisions. These non-GAAP financial measures are among the primary factors management uses in planning for and forecasting future period performance. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of the Company's ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business.

The end of this release contains a description of the non-GAAP financial measures and/or a reconciliation of the specific non-GAAP financial measures to the nearest comparable GAAP measures.

About XRS Corporation XRS Corporation delivers fleet management and compliance software solutions to the trucking industry to help maintain regulatory compliance and reduce operating costs. XRS Corporation is leading the trucking industry's migration to mobile devices for collecting and analyzing compliance and management data. Its mobile solutions have no upfront hardware costs and run on smartphones, tablets and rugged handhelds. XRS Corporation has sales and distribution partnerships with the major wireless carriers supporting the U.S. and Canadian trucking industries.

Through XRS Corporation's solutions: XRS, Turnpike, XataNet and MobileMax, we serve 109,000 subscriptions through 1,300 customers. Our various solutions help fleet managers, dispatchers and drivers collect, sort, view and analyze data to help reduce costs, increase safety, attain compliance with governmental regulations and improve customer satisfaction.

For more information, visit www.xrscorp.com or call 1-800-745-9282.

Cautionary note regarding forward-looking statements This announcement includes forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Such statements are based on current expectations, and actual results may differ materially. The forward-looking statements in this announcement are subject to a number of risks and uncertainties including, but not limited to, the possibility of operating losses, the ability to adapt to rapid technological change, the ability of our solutions to be compliant with future regulations, dependence on propriety technology and communication networks owned and controlled by others, the failure to renew contracts or failure to sell additional solutions or services to existing customers, the timely introduction and market acceptance of new products, the ability to fund future research and development activities, the ability to establish and maintain strategic partner relationships and the other factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 (as updated in our subsequent reports filed with the SEC). These reports are available under the "Investors" section of our website at www.xrscorp.com and through the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

 

XRS Corporation

Consolidated Statements of Operations

(Unaudited)

For the Three Months Ended December 31,

(In thousands, except per share data)

2013

2012

Revenue

   Software

$

10,908

$

11,769

   Hardware systems

2,131

2,191

   Services

258

235

   Total revenue

13,297

14,195

Cost of goods sold

5,419

5,306

Selling, general and administrative

4,859

5,497

Research and development

2,894

3,050

Total costs and expenses

13,172

13,853

Operating income

125

342

Net interest and other expense

(15)

(18)

Income before income taxes

110

324

Income tax expense

19

5

Net income

91

319

Preferred stock dividends and deemed

       dividends

(60)

(58)

Net income to common shareholders

$

31

$

261

Net income per common share:

   Basic

$

$

0.02

   Diluted

$

$

0.01

Weighted average common and common share equivalents:

   Basic

10,930

10,809

   Diluted

12,063

27,357

 

 

XRS Corporation

Consolidated Balance Sheets

December 31,

September 30,

(In thousands)

2013

2013

(Unaudited)

Current assets

   Cash and cash equivalents

$

11,155

$

10,445

   Accounts receivable, net

6,739

6,864

   Inventories

1,665

1,710

   Deferred product costs

549

625

   Prepaid expenses and other current assets

1,172

1,417

   Total current assets

21,280

21,061

Equipment and leasehold improvements, net

5,320

5,980

Intangible assets, net

4,065

4,578

Goodwill

16,241

16,640

Deferred product costs, net of current portion

158

213

Other assets

451

667

   Total assets

$

47,515

$

49,139

Current liabilities

   Accounts payable

$

3,205

$

2,885

   Accrued expenses

3,133

4,560

   Deferred revenue

1,759

1,886

   Total current liabilities

8,097

9,331

Deferred revenue, net of current portion

360

496

Other long-term liabilities

12

62

   Total liabilities

8,469

9,889

Shareholders' equity

   Preferred stock

44,643

44,524

   Common stock

110

109

   Additional paid-in capital

50,806

50,674

   Accumulated deficit

(56,657)

(56,688)

   Accumulated other comprehensive income

144

631

   Total shareholders' equity

39,046

39,250

   Total liabilities and shareholders' equity

$

47,515

$

49,139

 

 

XRS Corporation

Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months Ended

December 31,

(In thousands)

2013

2012

Operating activities

Net income

$

91

$

319

Adjustments to reconcile net income to net cash provided by operating activities:

   Depreciation and amortization

1,714

1,690

   Amortization of deferred financing costs

25

12

   Deferred income taxes

(9)

   Loss on sale or disposal of equipment and leased equipment

10

5

   Stock-based compensation

58

160

   Changes in assets and liabilities:

   Accounts receivable, net

321

287

   Inventories, net

45

117

   Deferred product costs

131

42

   Prepaid expenses and other assets

171

57

   Accounts payable

468

230

   Accrued expenses and other liabilities

(1,412)

(204)

   Deferred revenue

(258)

(524)

   Net cash provided by operating activities

1,364

2,182

Investing activities

   Purchase of equipment and leasehold improvements

(734)

(613)

   Proceeds from the sale of equipment

7

   Net cash used in investing activities

(734)

(606)

Financing activities

   Revolving line of credit

(2,300)

   Proceeds from exercise of options

75

   Net cash provided by (used in) financing activities

75

(2,300)

   Effects of exchange rate on cash

5

2

   Increase (decrease) in cash and cash equivalents

710

(722)

Cash and cash equivalents

   Beginning

10,445

7,120

   Ending

$

11,155

$

6,398

 

 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

Non-GAAP Earnings and Non-GAAP Earnings Per Diluted Share

For the Three Months Ended December 31,

(In thousands, except per share data)

2013

2012

Net income to common shareholders

$

31

$

261

Adjustments:

   Depreciation & amortization expense

1,714

1,690

   Stock-based compensation

58

160

   Net interest expense

6

16

   Preferred stock dividends and deemed dividends

60

58

   Income taxes

19

5

Total adjustments

1,857

1,929

Non-GAAP earnings

$

1,888

$

2,190

Non-GAAP earnings per diluted share

$

0.07

$

0.08

Shares used in calculating non-GAAP earnings

     per diluted share

28,669

27,357

Working Capital

December 31,

September 30,

(In thousands)

2013

2013

Current assets

$

21,280

$

21,061

Current liabilities

(8,097)

(9,331)

   Net current assets

13,183

11,730

Current portion of deferred revenue net deferred costs

1,210

1,261

Working capital

$

14,393

$

12,991

 

 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

Free Cash Flow

For the Three Months Ended December 31,

2013

2012

Net cash provided by operating activities

$

1,364

$

2,182

Net cash used in investing activities:

   Purchase of equipment and leasehold improvements

(183)

(114)

   Purchase of Relay assets

(551)

(499)

   Proceeds from the sale of equipment

7

Net cash used in investing activities

(734)

(606)

Free cash flow

$

630

$

1,576

 

SOURCE XRS Corporation



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