XRS Reports Fiscal 2013 Third Quarter Results

Company records mobile software revenue growth of 21 percent, free cash flow of $1.7 million and third consecutive quarter of profitability

08 Aug, 2013, 07:30 ET from XRS Corporation

MINNEAPOLIS, Aug. 8, 2013 /PRNewswire/ -- XRS Corporation (formerly Xata Corporation, NASDAQ: XRSC) reported results for its fiscal 2013 third quarter ended June 30, 2013.

For a third consecutive quarter, the Company reported net income to common shareholders. Specifically, for the third quarter of fiscal 2013, net income to common shareholders was $0.2 million, or $0.01 per diluted share, an increase of  $6.4 million compared to a fiscal 2012 third quarter net loss to common shareholders of $6.2 million, or $0.58 per diluted share.  The third quarter of fiscal 2012 included impairment and business realignment charges of $5.7 million, or $0.54 per diluted share.

Fiscal 2013 third quarter mobile software revenue grew 21 percent. The Company reported total software revenue and total revenue of $11.3 million and $13.4 million, respectively, for the third quarter of fiscal 2013, compared to total software revenue and total revenue of $11.8 million and $15.6 million, respectively, for the comparable period in fiscal 2012. Further highlights for the quarter include:

  • Fiscal 2013 third quarter software revenue accounted for approximately 84 percent of total revenue, compared to 76 percent for the same period of fiscal 2012, contributing to continuing improvement in overall gross margins.
  • The Company signed 69 new mobile customers in the third quarter of fiscal 2013.
  • Net income of $0.2 million contributed to free cash flow of $1.7 million for the third quarter of fiscal 2013, compared to free cash flow of $29,000 for the same period in fiscal 2012.

"A significant highlight this past quarter was bringing our new XRS mobile solution to market and the high level of interest it has already received," said Jay Coughlan, XRS Corporation chairman and chief executive officer. "At the same time, we were able to achieve three consecutive quarters of profitability and positive cash flow."

For the third quarter of fiscal 2013, selling, general and administrative expenses decreased to $5.1 million, compared to $6.5 million for the comparable period in fiscal 2012. The intangible asset impairment and workforce reduction charges recorded in the third quarter of fiscal 2012 continue to drive favorability in the Company's amortization and personnel expenses.

Research and development expenses were $2.9 million and $4.0 million for the third quarter of fiscal 2013 and 2012, respectively. During the third quarter of fiscal 2013, the Company capitalized $0.1 million in software development costs associated with the Company's XRS mobile solution. Continued investment in the enhancement of the XRS mobile solution's functionality and maintenance releases to the Company's legacy solutions to ensure compliance with continually changing governmental regulations drove the research and development expenses recorded in the third quarter of fiscal 2013.

The Company reported non-GAAP earnings of $2.1 million, or $0.07 per diluted share for the third quarter of fiscal 2013, compared to a non-GAAP loss of $0.3 million, or $0.03 per diluted share for the same period in fiscal 2012. Fiscal 2012 non-GAAP earnings was impacted by $1.8 million of business realignment charges. The improvement in non-GAAP earnings is a reflection of improved overall gross margins and a reduced cost structure.

"Consistent with our strategy, XRS Corporation will continue to invest in mobile revenue growth while continuing to meet the current needs of our existing customers and working with them to transition to the XRS solution," said Coughlan.

For the nine months ended June 30, 2013, mobile software revenue increased 22 percent, while total software revenue remained relatively consistent with the comparable period in fiscal 2012. Total revenue was $42.1 million for the nine months ended June 30, 2013, compared to $48.1 million for the comparable period in fiscal 2012 as a result of decreased hardware revenue as customers continue to adopt mobile solutions with no upfront hardware costs.

For the nine months ended June 30, 2013, the Company reported non-GAAP earnings of $6.5 million, or $0.23 per diluted share, compared to $0.4 million, or $0.01 per diluted share, for the comparable period in fiscal 2012, an increase of $6.1 million. Business realignment charges recorded in fiscal 2012 contributed $1.8 million to the increase in non-GAAP earnings, and the remaining improvement is a reflection of mobile revenue growth, improved overall gross margins and a reduced cost structure.

As of June 30, 2013, the Company maintained a debt-free balance sheet and reported an increase of $2.6 million in working capital to $12.2 million, compared to $9.6 million in working capital as of September 30, 2012. Free cash flow was $4.5 million for the nine months ended June 30, 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 Nine Months Ended

June 30,

June 30,

2013

2012

2013

2012

Revenue:

Software

$

11,266

$

11,833

$

34,613

$

35,222

Hardware systems

1,798

3,480

6,569

11,568

Services

340

329

913

1,312

Total revenue

$

13,404

$

15,642

$

42,095

$

48,102

Gross margins (deficits):

Software

73%

71%

73%

71%

Hardware systems

18%

(14%)

14%

(8%)

Services

(94%)

(74%)

(88%)

(45%)

Total gross margin

61%

49%

61%

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 112,000 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 forward-looking 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)

(In thousands, except per share data)

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

2013

2012

2013

2012

Revenue

Software

$

11,266

$

11,833

$

34,613

$

35,222

Hardware systems

1,798

3,480

6,569

11,568

Services

340

329

913

1,312

Total revenue

13,404

15,642

42,095

48,102

Cost of goods sold

5,225

8,015

16,577

24,500

Selling, general and administrative

5,094

6,463

15,940

19,172

Research and development

2,873

3,983

8,721

10,979

Impairment of intangible asset

3,500

3,500

Total costs and expenses

13,192

21,961

41,238

58,151

Operating income (loss)

212

(6,319)

857

(10,049)

Net interest and other expense

(35)

(33)

(82)

(297)

Income (loss) before income taxes

177

(6,352)

775

(10,346)

Income tax (benefit) expense

(52)

(192)

51

(470)

Net income (loss)

229

(6,160)

724

(9,876)

Preferred stock dividends and deemed dividends

(59)

(57)

(175)

(119)

Net income (loss) to common shareholders

$

170

$

(6,217)

$

549

$

(9,995)

Net income (loss) per common share:

Basic

$

0.02

$

(0.58)

$

0.05

$

(0.93)

Diluted

$

0.01

$

(0.58)

$

0.03

$

(0.93)

Weighted average common and common share equivalents:

Basic

10,858

10,753

10,831

10,714

Diluted

28,345

10,753

27,766

10,714

 

 

XRS Corporation Consolidated Balance Sheets

June 30,

September 30,

(In thousands)

2013

2012

(Unaudited)

Current assets

Cash and cash equivalents

$

9,309

$

7,120

Accounts receivable, net

6,760

7,835

Inventories

2,607

3,811

Deferred product costs

692

770

Prepaid expenses and other current assets

2,004

1,406

     Total current assets

21,372

20,942

Equipment and leasehold improvements, net

6,172

7,313

Intangible assets, net

4,940

6,487

Goodwill

16,386

17,288

Deferred product costs, net of current portion

261

425

Other assets

663

351

     Total assets

$

49,794

$

52,806

Current liabilities

Revolving line of credit

$

$

2,300

Accounts payable

3,523

3,436

Accrued expenses

4,925

4,832

Deferred revenue

1,928

2,314

     Total current liabilities

10,376

12,882

Deferred revenue, net of current portion

619

1,077

Deferred tax liabilities

9

Other long-term liabilities

132

314

Total liabilities

11,127

14,282

Shareholders' equity

Preferred stock

44,524

44,292

Common stock

108

108

Additional paid-in capital

50,490

49,979

Accumulated deficit

(56,770)

(57,319)

Accumulated other comprehensive income

315

1,464

     Total shareholders' equity

38,667

38,524

     Total liabilities and shareholders' equity

$

49,794

$

52,806

 

 

XRS Corporation Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended

June 30,

(In thousands)

2013

2012

Operating activities

Net income (loss)

$

724

$

(9,876)

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

Depreciation and amortization

5,080

6,318

Impairment of intangible asset

3,500

Amortization of deferred financing costs

57

20

Deferred income taxes

(9)

(532)

Loss on sale or disposal of equipment and leased equipment

48

75

Stock-based compensation

498

628

Changes in assets and liabilities:

     Accounts receivable, net

1,056

1,290

     Inventories, net

1,165

(363)

     Deferred product costs

242

661

     Prepaid expenses and other assets

(672)

(403)

     Accounts payable

(162)

(874)

     Accrued expenses and other liabilities

(10)

779

     Deferred revenue

(837)

(1,546)

       Net cash provided by (used in) operating activities

7,180

(323)

Investing activities

Purchase of equipment and leasehold improvements

(2,324)

(2,536)

Capitalized software development

(355)

Proceeds from the sale of equipment

16

2

     Net cash used in investing activities

(2,663)

(2,534)

Financing activities

Revolving line of credit

(2,300)

2,100

Payments on debt obligations

(3,627)

Deferred financing costs

(50)

(97)

Proceeds from exercise of options

13

     Net cash used in financing activities

(2,337)

(1,624)

     Effects of exchange rate on cash

9

(14)

     Increase (decrease) in cash and cash equivalents

2,189

(4,495)

Cash and cash equivalents

Beginning

7,120

12,407

Ending

$

9,309

$

7,912

 

 

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 June 30,

For the Nine Months Ended June 30,

(In thousands, except per share data)

2013

2012

2013

2012

Net income (loss) to common shareholders

$

170

$

(6,217)

$

549

$

(9,995)

Adjustments:

Depreciation & amortization expense

1,718

2,351

5,080

6,318

Impairment of intangible asset

3,500

3,500

Stock-based compensation

150

135

498

628

Net interest expense

27

31

68

304

Preferred stock dividends and deemed dividends

59

57

175

119

Income tax (expense) benefit

(52)

(192)

51

(470)

Other

50

Total adjustments

1,902

5,882

5,922

10,399

Non-GAAP earnings (loss)

$

2,072

$

(335)

$

6,471

$

404

Non-GAAP earnings (loss) per diluted share

$

0.07

$

(0.03)

$

0.23

$

0.01

Shares used in calculating non-GAAP earnings (loss) per diluted share

28,345

10,753

27,766

27,238

 

 

 

Working Capital

June 30,

September 30,

(In thousands)

2013

2012

Current assets

$

21,372

$

20,942

Current liabilities

(10,376)

(12,882)

Net current assets

10,996

8,060

Current portion of deferred revenue net deferred costs

1,236

1,544

Working capital

$

12,232

$

9,604

 

 

XRS Corporation Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

Free Cash Flow

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

2013

2012

2013

2012

Net cash provided by (used in) operating activities

$

2,933

$

583

$

7,180

$

(323)

Net cash used in investing activities:

Purchase of equipment and leasehold improvements

(95)

(62)

(319)

(1,977)

Purchase of Relay assets

(843)

(492)

(2,005)

(559)

Capitalized software development

(270)

(355)

Proceeds from the sale of equipment

16

2

Net cash used in investing activities

(1,208)

(554)

(2,663)

(2,534)

Free cash flow

$

1,725

$

29

$

4,517

$

(2,857)

SOURCE XRS Corporation



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http://www.xrscorp.com