XRS Reports Fiscal 2013 Second Quarter Results

Net income of $0.2 million drives free cash flow of $1.2 million for the second quarter of fiscal 2013

09 May, 2013, 07:30 ET from XRS Corporation

MINNEAPOLIS, May 9, 2013 /PRNewswire/ -- XRS Corporation (formerly Xata Corporation, NASDAQ: XRSC) reported its results for its fiscal 2013 second quarter ended March 31, 2013.

The Company reported net income to common shareholders for the second quarter of fiscal 2013 of $0.1 million, or $0.01 per diluted share, compared to net loss to common shareholders of $2.1 million, or $0.20 per diluted share for the comparable period in fiscal 2012. Total revenue was $14.5 million for the quarter ended March 31, 2013, compared to $15.9 million for the comparable period in fiscal 2012. Further highlights for the quarter include:

  • Mobile software revenue growth of 27 percent drove total software revenue to $11.6 million for the second quarter of fiscal 2013.
  • Fiscal 2013 second quarter software revenue accounted for approximately 80 percent of total revenue, compared to 74 percent for the same period of fiscal 2012, contributing to a 7 percentage point improvement in overall gross margins.
  • The Company signed 98 new customers in the second quarter of fiscal 2013, all of whom selected the Turnpike mobile solution.
  • Net income of $0.2 million contributed to free cash flow of $1.2 million for the second quarter of fiscal 2013, compared to negative free cash flow of $2.2 million for the same period in fiscal 2012.

"We are encouraged by our second consecutive quarter of net income," said Jay Coughlan, chairman and chief executive officer of XRS Corporation. "This performance is consistent with our strategy of shifting our business to a mobile solution. We are continuing to invest in the XRS mobile solution and the growth opportunities in that market, while at the same time maintaining our commitment to provide support to our existing customers."

For the second quarter of fiscal 2013, selling, general and administrative expenses decreased to $5.3 million, compared to $6.6 million for the comparable period in fiscal 2012. Reductions in the Company's amortization and personnel expenses resulting from the fiscal 2012 third quarter intangible asset impairment and business realignment events, respectively, drove the favorability realized in the second quarter of fiscal 2013.

Research and development expenses were $2.8 million and $3.5 million for the second quarter of fiscal 2013 and 2012, respectively, or 19 percent and 22 percent of revenue, respectively. During the second quarter of fiscal 2013, the Company continued to invest in the development of the XRS mobile solution. The Company capitalized $0.3 million in software development costs associated with the XRS mobile solution in the second quarter of fiscal 2013, representing approximately 9 percent of total research and development costs.

The Company reported non-GAAP earnings of $2.2 million, or $0.08 per diluted share for the second quarter of fiscal 2013, compared to non-GAAP earnings of $0.2 million, or $0.01 per diluted share for the same period in fiscal 2012, an increase of $2.0 million. The increase in non-GAAP earnings is a reflection of improved overall gross margins and a reduced cost structure.

"We had an enthusiastic response to our announcement in March that the new XRS mobile solution for compliance and fleet optimization is available for sale," said Coughlan. "With the commencement of shipment of XRS mobile subscriptions in April, new and existing customers will be able to experience the benefits of the leading fleet management platforms in a single mobile package."

For the six months ended March 31, 2013, mobile software revenue increased 23 percent, while total software revenue remained relatively consistent with the comparable period in fiscal 2012. Total revenue was $28.7 million for the six months ended March 31, 2013, compared to $32.5 million for the comparable period in fiscal 2012 as a result of decreased hardware revenue as adoption of the the Turnpike no upfront hardware cost solution continues to increase.

For the six months ended March 31, 2013, the Company reported non-GAAP earnings of $4.4 million, or $0.16 per diluted share, compared to $0.7 million, or $0.03 per diluted share, for the comparable period in fiscal 2012. The increase in non-GAAP earnings is a reflection of mobile revenue growth, improved overall gross margins and a reduced cost structure.

As of March 31, 2013, the Company maintained a debt-free balance sheet and reported an increase of $1.5 million in working capital to $11.2 million, compared to debt of $2.3 million and working capital of $9.6 million as of September 30, 2012. Free cash flow was $2.8 million for the six months ended March 31, 2013, compared to negative $2.9 million for the comparable period in fiscal 2012.

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

For the Three Months Ended

For the Six Months Ended

March 31,

March 31,

2013

2012

2013

2012

Revenue:

     Software

$

11,578

$

11,703

$

23,347

$

23,389

     Hardware systems

2,580

3,624

4,771

8,088

     Services

338

532

573

983

     Total revenue

$

14,496

$

15,859

$

28,691

$

32,460

Gross margins (deficits):

     Software

73

%

71

%

74

%

72

%

     Hardware systems

6

%

(4%)

13

%

(6%)

     Services

(59%)

(24%)

(85%)

(35%)

     Total gross margin

58

%

51

%

60

%

49

%

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 reconciliation of the specific non-GAAP financial measures to the nearest comparable GAAP measures.

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

Through XRS' solutions: XataNet, Turnpike, MobileMax and XRS, we are currently serving 114,000 subscriptions through 1,400 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 forwardlooking statements in this announcement are subject to a number of risks and uncertainties including, but not limited to, the possibility of continuing 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, 2012 (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 March 31,

For the Six Months

 Ended March 31,

(In thousands, except per share data)

2013

2012

2013

2012

Revenue

Software

$

11,578

$

11,703

$

23,347

$

23,389

Hardware systems

2,580

3,624

4,771

8,088

Services

338

532

573

983

Total revenue

14,496

15,859

28,691

32,460

Cost of goods sold

6,046

7,834

11,352

16,485

Selling, general and administrative

5,349

6,588

10,846

12,708

Research and development

2,798

3,509

5,848

6,997

Total costs and expenses

14,193

17,931

28,046

36,190

Operating income (loss)

303

(2,072)

645

(3,730)

Net interest and other expense

(29)

(153)

(47)

(264)

Income (loss) before income taxes

274

(2,225)

598

(3,994)

Income tax expense (benefit)

98

(178)

103

(278)

Net income (loss)

176

(2,047)

495

(3,716)

Preferred stock dividends and deemed

    dividends

(58)

(56)

(116)

(62)

Net income (loss) to common shareholders

$

118

$

(2,103)

$

379

$

(3,778)

Net income (loss) per common share:

Basic

$

0.01

$

(0.20)

$

0.04

$

(0.35)

Diluted

$

0.01

$

(0.20)

$

0.02

$

(0.35)

Weighted average common and common share equivalents:

Basic

10,827

10,714

10,818

10,695

Diluted

27,602

10,714

27,479

10,695

 

XRS Corporation

Consolidated Balance Sheets

March 31,

September 30,

(In thousands)

2013

2012

(Unaudited)

Current assets

Cash and cash equivalents

$

7,569

$

7,120

Accounts receivable, net

7,272

7,835

Inventories

2,365

3,811

Deferred product costs

753

770

Prepaid expenses and other current assets

1,558

1,406

Total current assets

19,517

20,942

Equipment and leasehold improvements, net

6,452

7,313

Intangible assets, net

5,473

6,487

Goodwill

16,796

17,288

Deferred product costs, net of current portion

303

425

Other assets

642

351

Total assets

$

49,183

$

52,806

Current liabilities

Revolving line of credit

$

$

2,300

Accounts payable

3,193

3,436

Accrued expenses

4,419

4,832

Deferred revenue

1,921

2,314

Total current liabilities

9,533

12,882

Deferred revenue, net of current portion

731

1,077

Deferred tax liabilities

9

Other long-term liabilities

189

314

Total liabilities

10,453

14,282

Shareholders' equity

Preferred stock

44,407

44,292

Common stock

108

108

Additional paid-in capital

50,327

49,979

Accumulated deficit

(56,940)

(57,319)

Accumulated other comprehensive income

828

1,464

Total shareholders' equity

38,730

38,524

Total liabilities and shareholders' equity

$

49,183

$

52,806

 

XRS Corporation

Consolidated Statements of Cash Flows

(Unaudited)

For the Six Months Ended

March 31,

(In thousands)

2013

2012

Operating activities

Net income (loss)

$

495

$

(3,716)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

3,362

3,967

Amortization of deferred financing costs

33

8

Deferred income taxes

(9)

Loss on sale or disposal of equipment and leased equipment

40

64

Stock-based compensation

348

493

Changes in assets and liabilities:

Accounts receivable, net

552

1,583

Inventories, net

1,408

(1,183)

Deferred product costs

138

297

Prepaid expenses and other assets

(205)

(31)

Accounts payable

(642)

(863)

Accrued expenses and other liabilities

(538)

(531)

Deferred revenue

(735)

(994)

Net cash provided by (used in) operating activities

4,247

(906)

Investing activities

Purchase of equipment and leasehold improvements

(1,386)

(1,982)

Capitalized software development

(85)

Proceeds from the sale of equipment

16

2

Net cash used in investing activities

(1,455)

(1,980)

Financing activities

Revolving line of credit

(2,300)

2,953

Payments on debt obligations

(3,624)

Deferred financing costs

(50)

(93)

Net cash used in financing activities

(2,350)

(764)

Effects of exchange rate on cash

7

(18)

Increase (decrease) in cash and cash equivalents

449

(3,668)

Cash and cash equivalents

Beginning

7,120

12,407

Ending

$

7,569

$

8,739

 

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 March 31,

For the Six Months

 Ended March 31,

(In thousands, except per share data)

2013

2012

2013

2012

Net income (loss) to common shareholders

$

118

$

(2,103)

$

379

$

(3,778)

Adjustments:

Depreciation & amortization expense

1,672

2,012

3,362

3,967

Stock-based compensation

188

244

348

493

Net interest expense

25

164

41

273

Preferred stock dividends and deemed dividends

58

56

116

62

Income taxes

98

(178)

103

(278)

Other

50

50

Total adjustments

2,091

2,298

4,020

4,517

Non-GAAP earnings

$

2,209

$

195

$

4,399

$

739

Non-GAAP earnings per diluted share

$

0.08

$

0.01

$

0.16

$

0.03

Shares used in calculating non-GAAP earnings per

    diluted share

27,602

27,271

27,479

27,209

 

Working Capital

March 31,

September 30,

(In thousands)

2013

2012

Current assets

$

19,517

$

20,942

Current liabilities

(9,533)

(12,882)

Net current assets

9,984

8,060

Current portion of deferred revenue net deferred costs

1,168

1,544

Working capital

$

11,152

$

9,604

 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

Free Cash Flow

For the Three Months

Ended March 31,

For the Six Months

Ended March 31,

2013

2012

2013

2012

Net cash provided by (used in) operating activities

$

2,065

$

(1,086)

$

4,247

$

(906)

Net cash used in investing activities:

Purchase of equipment and leasehold

    improvements

(110)

(1,008)

(224)

(1,915)

Purchase of Relay assets

(663)

(67)

(1,162)

(67)

Capitalized software development

(85)

(85)

Proceeds from the sale of equipment

9

16

2

Net cash used in investing activities

(849)

(1,075)

(1,455)

(1,980)

Free cash flow

$

1,216

$

(2,161)

$

2,792

$

(2,886)

 

SOURCE XRS Corporation



RELATED LINKS

http://xrscorp.com